TRIANGLE PHARMACEUTICALS INC, S-1/A, 1996-10-23

TRIANGLE PHARMACEUTICALS INC
S-1/A, 1996-10-23
PHARMACEUTICAL PREPARATIONS

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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 23, 1996

REGISTRATION NO. 333-11793
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 2
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

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TRIANGLE PHARMACEUTICALS, INC.
(Exact name of registrant as specified in its charter)

<TABLE>
<S> <C> <C>
DELAWARE 2834 56-1930728
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer Identification
incorporation or organization) Classification Code Number) Number)
</TABLE>

4 UNIVERSITY PLACE, 4611 UNIVERSITY DRIVE, DURHAM, NORTH CAROLINA 27707 (919)
493-5980
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)

DR. DAVID W. BARRY
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
TRIANGLE PHARMACEUTICALS, INC.
4 UNIVERSITY PLACE, 4611 UNIVERSITY DRIVE
DURHAM, NORTH CAROLINA 27707 (919) 493-5980
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
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WITH COPIES TO:

<TABLE>
<S> <C>
John A. Denniston, Esq. Mary A. Bernard, Esq.
John R. Cook, Esq. KING & SPALDING
BROBECK, PHLEGER & HARRISON LLP 120 West 45th Street
550 West "C" Street, Suite 1300 New York, New York 10036
San Diego, California 92101 (212) 556-2100
(619) 234-1966
</TABLE>

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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.

If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, check the following
box: / /

If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box: / /

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering: / / _________

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: / / _________

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box: / /
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THE REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION ACTING PURSUANT TO SAID SECTION 8(A)
MAY DETERMINE.
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EXPLANATORY NOTE

This Registration Statement contains a Prospectus relating to an initial
public offering in the United States and Canada of an aggregate of 3,200,000
shares of Common Stock, par value $0.001 per share, of Triangle Pharmaceuticals,
Inc. (the "United States Offering"), not including 600,000 shares of Common
Stock that the U.S. Underwriters may purchase under an over-allotment option,
together with two separate Prospectus pages relating to a concurrent offering
outside the United States and Canada of an aggregate of 800,000 shares of Common
Stock, par value $0.001 per share, of Triangle Pharmaceuticals, Inc. (the
"International Offering"). The complete Prospectus for the United States
Offering follows immediately after this Explanatory Note. Following such
Prospectus is an alternate front cover page and an alternate back cover page for
the International Offering. All other pages of the following Prospectus are to
be used both in the United States Offering and the International Offering.
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
SUBJECT TO COMPLETION, DATED OCTOBER 15, 1996
4,000,000 SHARES

[LOGO]
COMMON STOCK

The 4,000,000 shares of Common Stock, par value $0.001 per share (the
"Common Stock"), offered hereby are being offered by Triangle Pharmaceuticals,
Inc. ("Triangle" or the "Company") in concurrent offerings in the United States
and Canada and outside the United States and Canada (collectively, the
"Offerings"). See "Underwriting." Of such shares, 3,200,000 shares are initially
being offered in the United States and Canada by the U.S. Underwriters (the
"United States Offering") and 800,000 shares are initially being offered outside
the United States and Canada by the International Underwriters (the
"International Offering"). The price to public and the aggregate underwriting
discounts and commissions for the Offerings will be identical.

Prior to the Offerings, there has been no public market for the Common
Stock. It is currently estimated that the initial public offering price will be
between $7.50 and $9.50 per share. See "Underwriting" for the factors to be
considered in determining the initial public offering price.

The Common Stock has been approved for listing on the Nasdaq National Market
under the symbol "VIRS."

For a discussion of certain risks of an investment in the shares of Common
Stock offered hereby, see "Risk Factors" on pages 5-16.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
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<TABLE>
<CAPTION>
Underwriting
Price to Discounts and Proceeds to
Public Commissions* Company+
<S> <C> <C> <C>
Per Share..................... $ $ $
Total++....................... $ $ $
</TABLE>

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* The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriting."

+ Before deducting expenses of the Offerings payable by the Company estimated
to be $700,000.

++ The Company has granted to the U.S. Underwriters a 30-day option to
purchase up to 600,000 additional shares of Common Stock on the same terms
per share solely to cover over-allotments, if any. If such option is
exercised in full, the total price to public will be , the total
underwriting discounts and commissions will be and the total proceeds
to Company will be $ . See "Underwriting."
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The Common Stock is being offered by the Underwriters as set forth under
"Underwriting" herein. It is expected that delivery of certificates therefor
will be made at the offices of Dillon, Read & Co. Inc., New York, New York, on
or about , 1996. The Underwriters include:
DILLON, READ & CO. INC. BEAR, STEARNS & CO. INC.

The date of this Prospectus is , 1996
<PAGE>
Triangle Pharmaceuticals, Inc. is a pharmaceutical company engaged in the
development of new drug candidates primarily in the antiviral area. Triangle has
an existing portfolio of five licensed drug candidates and two drug candidates
for which the Company has a right to acquire a license. All of the Company's
drug candidates are in an early phase of development.

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IN CONNECTION WITH THE OFFERINGS, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK AT
LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
TRANSACTIONS MAY BE EFFECTED IN THE OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.

The Company intends to furnish its stockholders annual reports containing
audited financial statements certified by an independent public accounting firm
and quarterly reports containing unaudited interim financial information for the
first three quarters of each fiscal year.

TRIANGLE PHARMACEUTICALS AND THE TRIANGLE LOGO ARE TRADEMARKS OF THE
COMPANY. THIS PROSPECTUS ALSO INCLUDES NAMES AND TRADEMARKS OF COMPANIES OTHER
THAN THE COMPANY.
<PAGE>
[CHART SHOWING THE IDENTITY AND STRUCTURE OF THE COMPANY'S DRUG CANDIDATES
APPEARS HERE]
<PAGE>
PROSPECTUS SUMMARY

THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION AND THE FINANCIAL STATEMENTS AND NOTES THERETO APPEARING ELSEWHERE
IN THIS PROSPECTUS. EXCEPT AS SET FORTH IN THE FINANCIAL STATEMENTS AND NOTES
THERETO AND AS OTHERWISE NOTED, ALL INFORMATION IN THIS PROSPECTUS (I) ASSUMES
THAT THE U.S. UNDERWRITERS' OVER-ALLOTMENT OPTION IS NOT EXERCISED AND (II)
REFLECTS THE CONVERSION OF ALL OF THE COMPANY'S OUTSTANDING SHARES OF SERIES A
AND SERIES B PREFERRED STOCK, PAR VALUE $0.001 PER SHARE (COLLECTIVELY, THE
"PREFERRED STOCK"), INTO SHARES OF COMMON STOCK, WHICH WILL OCCUR UPON THE
CLOSING OF THE OFFERINGS. THIS PROSPECTUS CONTAINS CERTAIN FORWARD-LOOKING
STATEMENTS THAT INVOLVE RISKS AND UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS
AND THE TIMING OF CERTAIN EVENTS COULD DIFFER MATERIALLY FROM THOSE DISCUSSED IN
OR PROJECTED BY THE FORWARD-LOOKING STATEMENTS. FACTORS THAT COULD CAUSE OR
CONTRIBUTE TO SUCH DIFFERENCES INCLUDE THOSE DISCUSSED UNDER "RISK FACTORS" AND
"SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS," AS WELL AS THOSE DISCUSSED
ELSEWHERE IN THIS PROSPECTUS.

The Company

Triangle is a pharmaceutical company engaged in the development of new drug
candidates primarily in the antiviral area, with a particular focus on therapies
for the human immunodeficiency virus ("HIV"), including the acquired
immunodeficiency syndrome ("AIDS"), and the hepatitis B virus ("HBV"). Prior to
their employment with the Company, members of the Company's management team
played instrumental roles in the identification, clinical development and
commercialization of several leading antiviral therapies.

Triangle has an existing portfolio consisting of five licensed drug
candidates and two drug candidates for which the Company has an option to
acquire a license. In laboratory tests, four of the seven drug candidates
inhibit the growth of HIV, and two of these four also inhibit the growth of HBV.
The other three drug candidates have attractive preclinical profiles against
certain cancers, herpes infections and psoriasis. All of the Company's drug
candidates are in an early phase of development. The Company has completed a
Phase Ia clinical trial and is currently conducting a Phase Ib/IIa clinical
trial with one of its anti-HIV drug candidates. The Company expects to commence
Phase I clinical trials for most of its other existing drug candidates by the
end of 1997. The Company believes that some of its drug candidates may meet the
criteria established by the United States Food and Drug Administration ("FDA")
for accelerated approval. If so, the Company may be able to commercialize these
drug candidates in a shorter time period than has historically been required for
drugs that do not meet the criteria for accelerated approval. There can be no
assurance, however, that the Company's drug candidates will qualify for
accelerated approval or be approved in a time period that is shorter than would
be historically expected.

Treatment of HIV using combinations of drugs has recently shown significant
clinical benefits including reducing virus levels and increasing patient
longevity. Prior to joining the Company, the Company's management team was
actively engaged for a number of years in the development of combination therapy
for the treatment of HIV. The Company was founded based in part on the
management team's belief that the prolonged use of combination therapy will
generate demand for new anti-HIV drugs with favorable resistance and tolerance
profiles. The Company believes the use of anti-HIV drugs will increase because
it anticipates that (i) the use of multiple drugs in individual patients on
combination therapy will increase, (ii) large numbers of previously untreated
patients will begin to seek medical care as the benefits of combination therapy
become more widely understood and (iii) patient longevity will increase and thus
lengthen the duration of drug therapy.

Triangle intends to maintain a limited corporate infrastructure that is
focused on drug development. The Company does not intend to engage in drug
discovery, but instead to focus on drug development, thereby avoiding much of
the significant investment of time and capital that is generally required before
a compound is identified and brought to clinical trials. The Company intends to
use its expertise to perform internally what it believes are the most critical
aspects of the development process, such as the design of clinical trials and
the optimization of drug synthesis. The Company plans to out-source the conduct
of clinical trials and many aspects of the manufacture of drug substance to
carefully selected third parties. The Company believes that the high
concentration of major prescribers of anti-HIV therapies in the United States
will enable the Company to promote most drug candidates that are successfully
developed to these prescribers through a small, direct sales force. The Company
does not currently have a sales force.

Triangle is a development stage company, has not received any revenues from
the sale of products, and does not expect any of its drug candidates to be
commercially available for at least the next several years. As of June 30, 1996,
the Company's accumulated deficit was approximately $6.5 million. There can be
no assurance that the Company will ever achieve profitable operations.

The Company was incorporated in Delaware in July 1995. The Company's
principal executive offices are located at 4 University Place, 4611 University
Drive, Durham, North Carolina 27707, and its telephone number is (919) 493-5980.

3
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The Offerings

<TABLE>
<S> <C>
Common Stock offered by the Company............ 4,000,000 shares
Common Stock to be outstanding after the
Offerings...................................... 17,015,238(1)
Use of proceeds................................ For general corporate purposes, including
drug development programs such as
preclinical testing and clinical trials,
the payment of license fees and other
amounts to licensors and working capital.
See "Use of Proceeds."
Nasdaq National Market symbol.................. VIRS
</TABLE>

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(1) Excludes as of October 11, 1996 (i) 1,076,260 shares of Common Stock
issuable upon exercise of outstanding options (at a weighted average
exercise price of $1.87 per share) and (ii) 146,000 shares of Preferred
Stock issuable upon exercise of outstanding warrants (at a weighted average
exercise price of $1.22 per share). See "Management--Benefit Plans,"
"Description of Capital Stock--Preferred Stock, Warrants and Stock Options"
and note 6 of notes to financial statements.

Summary Financial Data
<TABLE>
<CAPTION>
Period from
inception Six Months
(July 12, 1995) to Ended
December 31, 1995 June 30, 1996
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<S> <C> <C>
Statement of Operations Data:
Costs and expenses:
License fees............................................................. -- $ 2,751,829
Development.............................................................. -- 1,342,591
General and administrative............................................... $ 1,004,815 1,490,156
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Loss from operations......................................................... (1,004,815) (5,584,576)
Interest income.............................................................. 37,232 85,158
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Net loss..................................................................... $ (967,583) $ (5,499,418)
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Pro forma net loss per share (1)............................................. $ (0.07) $ (0.39)
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Shares used in computing pro forma net loss per share (1).................... 14,237,498 14,237,498

June 30, 1996
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Actual As Adjusted(2)
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<S> <C> <C>
Balance Sheet Data:
Cash and cash equivalents.................................................... $ 5,825,617 $ 36,745,617
Investments.................................................................. 11,305,549 11,305,549
Working capital.............................................................. 16,339,403 47,259,403
Total assets................................................................. 18,030,241 48,950,241
Accumulated deficit.......................................................... (6,467,001) (6,467,001)
Total stockholders' equity................................................... 16,929,031 47,849,031
</TABLE>

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(1) See note 1 of notes to financial statements for information concerning the
computation of pro forma net loss per share and shares used in computing pro
forma net loss per share.

(2) As adjusted to reflect the sale of the Common Stock offered hereby at an
assumed initial public offering price of $8.50 per share and the application
of the estimated net proceeds therefrom. See "Use of Proceeds."

4
<PAGE>
RISK FACTORS

IN ADDITION TO THE OTHER INFORMATION IN THIS PROSPECTUS, THE FOLLOWING
FACTORS SHOULD BE CONSIDERED CAREFULLY IN EVALUATING AN INVESTMENT IN THE COMMON
STOCK.

Development Stage Company; Uncertainty of Product Development

The Company was incorporated in July 1995 and accordingly has only a limited
operating history upon which an evaluation of the Company's business and
prospects can be based. In addition, the Company's drug candidates are all in
the early developmental stage and require significant, time-consuming and costly
development, testing and regulatory clearances. The Company does not expect any
of its drug candidates to be commercially available for at least the next
several years. The successful development of any new drug, including any of the
Company's drug candidates, is highly uncertain and is subject to a number of
significant risks. These risks include, among others, the possibility that any
or all of the Company's drug candidates will be found to be ineffective or toxic
or otherwise fail to receive necessary regulatory clearances; that the drug
candidates will be uneconomical to manufacture or market or will not achieve
broad market acceptance; that third parties will hold proprietary rights that
will preclude the Company from marketing the drug candidates; or that third
parties will market equivalent or superior products. The failure of the
Company's drug development programs to result in commercially viable products
would have a material adverse effect on the Company. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
"Business--Product Development Programs."

History of Operating Losses; Accumulated Deficit; Uncertainty of Future
Profitability

The Company has incurred losses since its inception. As of June 30, 1996,
the Company's accumulated deficit was approximately $6.5 million. Losses have
resulted principally from costs incurred in the acquisition and development of
the Company's drug candidates and general and administrative costs. These costs
have exceeded the Company's revenues, which to date have been generated
primarily from interest income. The Company has not generated any revenue to
date from the sale of drugs and does not expect to do so for at least the next
several years. The Company expects to incur significant additional operating
losses over the next several years and expects losses to increase as the
Company's drug development efforts expand. The Company's ability to achieve
profitability will depend upon its ability to develop and obtain regulatory
approval for its drug candidates and to develop the capacity (or establish
relationships with third parties) to manufacture, market and sell any drug
candidates it successfully develops. There can be no assurance that the Company
will ever generate significant revenues or achieve profitable operations. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."

Future Capital Needs; Uncertainty of Additional Funding

The Company's drug development programs currently require and will in the
future require substantial capital expenditures, including expenditures for
preclinical testing, chemical synthetic scale-up, clinical trials of drug
candidates and payments to the Company's licensors. The Company's future capital
requirements will depend on many factors, including the progress of the
Company's drug development programs, the magnitude of these programs, the scope
and results of preclinical testing and clinical trials, the cost, timing and
outcome of regulatory reviews, the costs under the license and/or option
agreements relating to the Company's drug candidates, administrative and legal
expenses, the establishment of capacity for sales and marketing functions, the
establishment of relationships with third parties for manufacturing and sales
and marketing functions, and other factors. The Company expects that its capital
requirements will increase significantly in the future.

The Company has incurred negative cash flow from operations since inception
and does not expect to generate positive cash flow to fund its operations for at
least the next several years. As a result, the Company believes that substantial
additional equity or debt financings will be required to fund its operations.
There can be no assurance that the Company will be able to consummate any such
financings at all or on favorable terms, or that such financings will be
adequate to meet the Company's capital requirements. Any additional equity or
convertible debt financings could result in substantial dilution to the
Company's stockholders. If adequate funds are not

5
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available, the Company may be required to delay, reduce the scope of or
eliminate one or more of its drug development programs or attempt to continue
development by entering into arrangements with collaborative partners or others
that may require the Company to relinquish some or all of its rights to certain
technologies or drug candidates that the Company would not otherwise desire to
relinquish. The Company's inability to fund its capital requirements would have
a material adverse effect on the Company. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations."

Uncertainties Related to Clinical Trials

Before obtaining required regulatory approvals for the commercial sale of
any of its drug candidates under development, the Company must demonstrate
through preclinical testing and clinical trials that each product is safe and
effective for use in each target indication. The results from preclinical
testing and early clinical trials may not be predictive of results that will be
obtained in pivotal clinical trials, and there can be no assurance that the
Company's clinical trials will demonstrate sufficient safety and effectiveness
to obtain required regulatory approvals or will result in marketable products. A
number of companies in the pharmaceutical industry have suffered significant
setbacks in advanced clinical trials, even after promising results in earlier
trials. The administration of any drug candidate developed by the Company may
produce undesirable side effects in humans. The occurrence of side effects could
interrupt, delay or halt clinical trials of such drug candidate and could
ultimately prevent its approval by the FDA or foreign regulatory authorities for
any and all targeted indications. The Company or the FDA may suspend or
terminate clinical trials at any time if it is believed that the trial
participants are being exposed to unacceptable health risks. There can be no
assurance that clinical trials will demonstrate that any drug candidate under
development by the Company is safe or effective.

The rate of completion of the Company's clinical trials will depend upon,
among other factors, obtaining adequate clinical supplies and the rate of
patient enrollment. Patient enrollment is a function of many factors, including
the size of the patient population, the nature of the protocol, the proximity of
patients to clinical sites and the eligibility criteria for the study. Delays in
planned patient enrollment can result in increased costs or delays or both,
which could have a material adverse effect on the Company. There can be no
assurance that if clinical trials are successfully completed, the Company will
be able to submit a New Drug Application ("NDA") in a timely manner or that any
such application will be approved by the FDA. Any failure of the Company to
complete successfully its clinical trials and obtain approvals of corresponding
NDAs would have a material adverse effect on the Company. See "Business--Product
Development Programs" and "Business--Government Regulation."

Uncertainty of Patents; Dependence on Patents, Licenses and Proprietary Rights

The Company's success will depend in large part on the ability of the
Company and its licensors to obtain patent protection with respect to its drug
candidates, defend patents once obtained, maintain trade secrets and operate
without infringing upon the patents and proprietary rights of others and to
obtain appropriate licenses to patents or proprietary rights held by third
parties, both in the United States and in foreign countries. The Company has no
patents in its own name or patent applications of its own pending, but has
obtained licenses to patents and other proprietary rights from third parties
with respect to each of the Company's seven drug candidates.

The patent positions of pharmaceutical companies, including those of the
Company, are uncertain and involve complex legal and factual questions for which
important legal principles are unresolved. There can be no assurance that the
Company or its licensors have or will develop or obtain the rights to products
or processes that are patentable, that patents will issue from any of the
pending applications or that claims allowed will be sufficient to protect the
technology licensed to the Company. In addition, no assurance can be given that
any patents issued to or licensed by the Company will not be challenged,
invalidated, infringed or circumvented, or that the rights granted thereunder
will provide competitive advantages to the Company. The Company's success will
also depend in large part on the Company not breaching the licenses pursuant to
which the Company obtained its technology and drug candidates.

6
<PAGE>
A number of pharmaceutical companies, biotechnology companies, universities
and research institutions have filed patent applications or received patents to
technologies that cover or are similar to the technologies licensed by the
Company. The Company is aware of certain patent applications previously filed by
and patents already issued to others that conflict with patents or patent
applications licensed to the Company either by claiming the same methods or
compounds or by claiming methods or compounds that could dominate those licensed
to the Company. In addition, there can be no assurance that the Company is aware
of all patents or patent applications that may materially affect the Company's
ability to make, use or sell any products. United States patent applications are
confidential while pending in the United States Patent and Trademark Office
("PTO"), and patent applications filed in foreign countries are often first
published six months or more after filing. Any conflicts resulting from third
party patent applications and patents could significantly reduce the coverage of
the patents licensed to the Company and limit the ability of the Company or its
licensors to obtain meaningful patent protection. If patents are issued to other
companies that contain competitive or conflicting claims, the Company may be
required to obtain licenses to these patents or to develop or obtain alternative
technology. There can be no assurance that the Company will be able to obtain
any such license on acceptable terms or at all. If such licenses are not
obtained, the Company could be delayed in or prevented from pursuing the
development or commercialization of its drug candidates, which would have a
material adverse effect on the Company.

The Company is aware of significant risks regarding the patent rights
licensed by the Company relating to three of the seven compounds comprising the
Company's existing drug candidate portfolio. The Company may not be able to
commercialize FTC, DAPD or CS-92 for HIV and/or HBV due to patent rights held by
third parties other than the Company's licensors. The Company is aware of
numerous patent applications and issued patents in the United States and
numerous foreign countries held by third parties other than the Company's
licensors that relate to these compounds and their use alone or with other
compounds to treat HIV and HBV. As a result, the positions of the Company and
its licensors with respect to the use of FTC, DAPD and CS-92 to treat HIV and/or
HBV are highly uncertain and involve numerous complex legal and factual
questions that are unknown or unresolved. If any of these questions is resolved
in a manner that is not favorable to the Company's licensors or the Company, the
Company would not have the right to commercialize FTC, DAPD and/or CS-92 in the
absence of a license from one or more third parties, which may not be available
on acceptable terms or at all. The Company's inability to commercialize any of
these compounds would have a material adverse effect on the Company.

FTC

The Company obtained its rights to purified forms of FTC under a license
from Emory University ("Emory"). In 1990 and 1991, Emory filed in the United
States and thereafter in numerous foreign countries patent applications with
claims to composition of matter and methods to treat HIV and HBV with FTC. Yale
University ("Yale") filed patent applications on FTC and its use to treat HBV in
1991 in the United States, and subsequently licensed its rights under those
patent applications to Emory. The Company's license arrangement with Emory
includes all rights under the Yale patent applications. FTC belongs to the same
general class of nucleosides as 3TC, which was recently approved in the United
States by the FDA for use in combination with AZT for the treatment of HIV. 3TC
is currently being sold by Glaxo Wellcome plc ("Glaxo") for the treatment of HIV
under a license agreement with BioChem Pharma, Inc. ("BioChem Pharma").

HIV. Emory received a United States patent in 1993 covering a method to
treat HIV infection with FTC. BioChem Pharma filed a patent application in the
United States in 1989 and was issued a patent in 1991 covering a group of
nucleosides in the same general class as FTC, but which did not include FTC.
BioChem Pharma filed foreign patent applications in 1990 based upon its 1989
United States patent application, and in those foreign applications included FTC
among a large class of nucleosides. The foreign patent applications are pending
in a large number of countries, and have issued in a number of countries with
claims directed to FTC and its use to treat HIV. In addition, BioChem Pharma
filed a United States patent application in 1991 specifically directed to a
purified form of FTC that exhibits advantageous properties for the treatment of
HIV. BioChem Pharma filed patent

7
<PAGE>
applications in a large number of foreign countries based upon its 1991 United
States patent application, and patents have issued in certain countries. BioChem
Pharma may have additional patent applications pending in the United States.

In the United States, the first to invent a subject matter is entitled to
patent protection on that invention. With respect to patent applications filed
prior to January 1, 1996, United States patent law provides that if a party
invented a technology outside the United States, then for purposes of
determining the first to invent the technology, that party is deemed to have
invented the technology on the earlier of the date it introduced the invention
in the United States or the date it filed its patent application. In a
registration statement recently filed with the United States Securities and
Exchange Commission, BioChem Pharma stated that since it conducts substantially
all of its research activities outside the United States, it is at a disavantage
as to inventions made prior to January 1, 1996 with respect to obtaining United
States patents as compared to companies that maintain research facilities in the
United States. The Company does not know whether Emory or BioChem Pharma was the
first to invent the subject matter claimed in their respective United States
patent applications or patents, or whether BioChem Pharma invented the
technology disclosed in its patent applications in the United States or
introduced that technology in the United States before the date of its patent
applications. In foreign countries, the first party to file a patent application
on an invention, not the first to invent the subject matter, is entitled to
patent protection on that invention. While the Company believes that Emory's
patent applications that disclosed FTC as a useful anti-HIV agent were filed in
foreign countries before BioChem Pharma filed its foreign patent applications on
that subject matter, BioChem Pharma has been issued patents in several foreign
countries. There can be no assurance that Emory will initiate or be successful
in any foreign proceeding attempting to revoke patents issued to BioChem Pharma
or addressing the relative rights of BioChem Pharma and Emory. BioChem Pharma
has opposed patent claims on FTC recently granted to Emory in Japan and
Australia. There can be no assurance that BioChem Pharma will not make
additional challenges to any Emory patents or patent applications, or that Emory
will succeed in defending any such challenges. There can be no assurance that
the sale of FTC by the Company for the treatment of HIV would not be held to
infringe United States and foreign patent rights of BioChem Pharma. Under the
patent laws of most countries, a product can be found to infringe a third party
patent either if the third party patent expressly covers the product or method
of treatment using the product, or in certain circumstances, if the third party
patent, while not expressly covering the product or method, covers subject
matter that is substantially equivalent in nature to the product or method. If
it is determined that the sale of FTC for the treatment of HIV infringes a
BioChem Pharma patent, the Company would not have the right to make, use or sell
FTC for the treatment of HIV in one or more countries in the absence of a
license from BioChem Pharma. There can be no assurance that the Company could
obtain a license from BioChem Pharma on acceptable terms or at all.

HBV. Burroughs Wellcome Co. ("Burroughs Wellcome") filed patent
applications in March and May 1991 in Great Britain on a method to treat HBV
with FTC. Burroughs Wellcome filed similar patent applications in other
countries, which the Company believes includes the United States. Glaxo
subsequently acquired Burroughs Wellcome's rights under those patent
applications. Those applications were filed in foreign countries prior to the
date Emory filed its patent application on the use of FTC to treat HBV, and
therefore, the foreign patent applications filed by Burroughs Wellcome have
priority over those filed by Emory. In July 1996, Emory instituted litigation
against Glaxo in the United States District Court to obtain ownership of the
patent applications filed by Burroughs Wellcome, alleging that Burroughs
Wellcome converted and misappropriated Emory's invention and property, and that
an Emory employee is the inventor or a co-inventor of the subject matter covered
by the Burroughs Wellcome patent applications. There can be no assurance that
Emory will succeed in its efforts to establish ownership rights. If Emory fails
to establish ownership rights, the Company could not make, use or sell FTC for
the treatment of HBV in countries in which patents are issued to Glaxo without a
license from Glaxo. If Emory establishes only co-ownership rights (and not sole
ownership) to these patents and patent applications, laws in Europe, Korea and
perhaps other countries could prohibit Emory from licensing any co-owned patent
rights without Glaxo's consent. If the Company is required to obtain a license
from Glaxo to sell FTC for the treatment of HBV, there can be no assurance that
the Company would be able to obtain such a license on acceptable terms or at
all.

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BioChem Pharma filed a patent application in May 1991 in Great Britain also
directed to a method to treat HBV with FTC. BioChem Pharma filed similar patent
applications in other countries and in January 1996, was issued a patent in the
United States. Emory has informed the Company that Emory intends to challenge
BioChem Pharma's issued United States patent. There can be no assurance that
Emory will pursue or succeed in any such proceeding. The Company cannot sell FTC
for the treatment of HBV in the United States unless the BioChem Pharma patent
is held invalid by a United States court or administrative body or unless the
Company obtains a license from Biochem Pharma. There can be no assurance that
the Company would be able to obtain such a license on acceptable terms or at
all. In July 1991, BioChem Pharma was issued a United States patent on the use
of 3TC to treat HBV and has corresponding applications pending or issued in
foreign countries. If it is determined that the use of FTC to treat HBV is not
substantially different from the use of 3TC to treat HBV, a court could hold
that the use of FTC to treat HBV infringes these BioChem Pharma 3TC patents.

In addition, BioChem Pharma has filed in the United States and foreign
countries several patent applications on manufacturing methods relating to a
class of nucleosides that includes FTC. If the Company uses a manufacturing
method that is covered by patents issuing on any of these applications, the
Company would not be able to manufacture FTC without a license from BioChem
Pharma. There can be no assurance that the Company would be able to obtain such
a license on acceptable terms or at all.

DAPD

The Company obtained its rights to DAPD under a license from Emory and the
University of Georgia Research Foundation, Inc. ("UGARF"). The DAPD portfolio
licensed to the Company consists of two issued United States patents and several
United States and foreign patent applications that cover a method for the
synthesis of DAPD and its use to treat HIV and HBV. Emory and UGARF filed patent
applications claiming these inventions in the United States in 1990, 1992 and
1993, respectively. BioChem Pharma filed a patent application in the United
States in 1988 on a group of nucleosides in the same general class as DAPD and
their use to treat HIV, and has filed corresponding patent applications in
foreign countries. The PTO issued a patent to BioChem Pharma in 1993 covering a
class of nucleosides that includes DAPD and its use to treat HIV. Corresponding
patents have been issued to BioChem Pharma in many foreign countries. Emory has
filed an opposition to BioChem Pharma's granted patent application in the
European Patent Office based, in part, upon Emory's assertion that BioChem
Pharma's patent does not disclose how to make DAPD, and Emory has informed the
Company that Emory intends to challenge BioChem Pharma's patents and patent
applications in other countries. However, there can be no assurance that a court
or administrative body would invalidate BioChem Pharma's patent claims or that a
sale of DAPD by the Company would not infringe BioChem Pharma's patents. If
Emory, UGARF and the Company do not challenge, or are not successful in any
challenge to, BioChem Pharma's issued patents or pending patent applications (or
patents that may issue as a result of such applications), the Company will not
be able to manufacture, use or sell DAPD in the United States and any foreign
countries in which BioChem Pharma receives a patent without a license from
BioChem Pharma. There can be no assurance that the Company would be able to
obtain a license from BioChem Pharma on acceptable terms or at all.

CS-92

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in the earlier filed Burroughs Wellcome patent applications. In addition, CS-92
is metabolized to AZT in cell lines IN VITRO, and based on that, the Company
believes that it may likewise be converted to AZT IN VIVO. A court could hold
that United States and foreign patents owned by Glaxo covering the use of AZT to
treat HIV infection would be infringed by the sale of CS-92 to treat HIV
infection. If the use of CS-92 is found to infringe the patents owned by Glaxo,
then the Company would not have the right to sell CS-92 in one or more countries
without a license from Glaxo. There can be no assurance that the Company would
be able to obtain a license from Glaxo on acceptable terms or at all.

Litigation, which could result in substantial cost to the Company, may also
be necessary to enforce any patents to which the Company has rights or to
determine the scope, validity and enforceability of other parties' proprietary
rights, which may affect the Company's drug candidates and technology. United
States patents carry a presumption of validity and generally can be invalidated
only through clear and convincing evidence. The Company's licensors may also
have to participate in interference proceedings declared by the PTO to determine
the priority of an invention, which could result in substantial cost to the
Company. There can be no assurance that the Company's licensed patents would be
held valid by a court or administrative body or that an alleged infringer would
be found to be infringing. Further, with respect to the drug candidates licensed
or optioned by the Company from Emory, UGARF and The Regents of the University
of California (the "Regents"), Emory, UGARF and the Regents are primarily
responsible for any litigation, interference, opposition or other action
pertaining to patents or patent applications related to the licensed technology
and the Company is required to reimburse them for the costs they incur in
performing these activities. As a result, the Company generally does not have
the ability to institute or determine the conduct of any such patent proceedings
unless Emory, UGARF and/or the Regents do not elect to institute or elect to
abandon such proceedings. In cases where Emory, UGARF and/or the Regents elect
to institute and prosecute patent proceedings, the Company's rights will be
dependent in part upon the manner in which Emory, UGARF and/or the Regents
conduct the proceedings. Emory, UGARF and/or the Regents could, in any of these
proceedings they elect to initiate and maintain, elect not to vigorously pursue
or defend or to settle such proceedings on terms that are not favorable to the
Company. An adverse outcome in any patent litigation or interference proceeding
could subject the Company to significant liabilities to third parties, require
disputed rights to be licensed from third parties or require the Company to
cease using such technology, any of which could have a material adverse effect
on the Company. Moreover, the mere uncertainty resulting from the institution
and continuation of any technology-related litigation or interference proceeding
could have a material adverse effect on the Company pending resolution of the
disputed matters.

The Company also relies on unpatented trade secrets and know-how to maintain
its competitive position, which it seeks to protect, in part, by confidentiality
agreements with employees, consultants and others. There can be no assurance
that these agreements will not be breached or terminated, that the Company will
have adequate remedies for any breach, or that the Company's trade secrets will
not otherwise become known or be independently discovered by competitors. The
Company relies on certain technologies to which it does not have exclusive
rights or which may not be patentable or proprietary and thus may be available
to competitors. The Company has filed an application for but has not obtained a
trademark registration with respect to its corporate name and its logo. Another
company has filed an application to obtain a trademark registration for the name
"Triangle Coordinated Care," and the Company is aware that several other
companies use trade names that are similar to the Company's for their
businesses. If the Company is not able to obtain any licenses that may be
necessary for the Company to use its corporate name, it may be required to
change its corporate name. The Company's management personnel were previously
employed by other pharmaceutical companies. In many cases, these individuals are
conducting drug development activities for the Company in areas similar to those
in which they were involved prior to joining the Company. As a result, the
Company, as well as these individuals, could be subject to allegations of
violation of trade secrets and other similar claims. See "Business--Patents and
Proprietary Rights."

Extensive Government Regulation; No Assurance of Regulatory Approval

Human pharmaceutical products are subject to rigorous preclinical testing
and clinical trials and other approval procedures mandated by the FDA and
foreign regulatory authorities. Various federal and foreign statutes

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<PAGE>
and regulations also govern or influence the manufacturing, safety, labeling,
storage, record keeping and marketing of pharmaceutical products. The process of
obtaining these approvals and the subsequent compliance with appropriate United
States and foreign statutes and regulations are time-consuming and require the
expenditure of substantial resources. In addition, these requirements and
processes vary widely from country to country. The time required for completing
preclinical testing and clinical trials and obtaining regulatory approvals is
uncertain. The Company may decide to replace a drug candidate in preclinical
testing and/or clinical trials with a modified drug candidate, thus extending
the development period. In addition, the FDA or similar foreign regulatory
authorities may require additional clinical trials, which could result in
increased costs and significant development delays. Delays or rejections may
also be encountered based upon changes in FDA policy during the period of
product development and FDA review. Similar delays or rejections may be
encountered in other countries. The Company's drug candidates may not qualify
for accelerated development and/or approval under FDA regulations and, even if
some of the Company's drug candidates qualify for accelerated development and/or
approval, they may not be approved for marketing sooner than would be
historically expected or at all. There can be no assurance that even after
substantial time and expenditures, any of the Company's drug candidates under
development will receive marketing approval in any country on a timely basis or
at all. If the Company is unable to demonstrate the safety and effectiveness of
its drug candidates to the satisfaction of the FDA or foreign regulatory
authorities, the Company will be unable to commercialize its drug candidates and
would be materially and adversely affected. Further, even if regulatory approval
of a drug candidate is obtained, the approval may entail limitations on the
indicated uses for which the drug candidate may be marketed. A marketed product,
its manufacturer and the manufacturer's facilities are subject to continual
review and periodic inspections, and subsequent discovery of previously unknown
problems with a product, manufacturer or facility may result in restrictions on
such product or manufacturer, including withdrawal of the product from the
market. The failure to comply with applicable regulatory requirements can, among
other things, result in fines, suspension of regulatory approvals, refusal to
approve pending applications, refusal to permit exports from the United States,
product recalls, seizure of products, operating restrictions and criminal
prosecutions. Further, FDA policy may change and additional government
regulations may be established that could prevent or delay regulatory approval
of the Company's drug candidates.

The effect of governmental regulation may be to delay the marketing of new
products for a considerable period of time, to impose costly requirements on the
Company's activities or to provide a competitive advantage to other companies
that compete with the Company. Adverse clinical results by others could have a
negative impact on the regulatory process and timing with respect to the
development and approval of the Company's drug candidates. A delay in obtaining
or failure to obtain regulatory approvals could have a material adverse effect
on the Company. The extent and character of potentially adverse governmental
regulation that may arise from future legislation or administrative action
cannot be predicted.

The Company is 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, used in connection with its development work. See
"Business--Government Regulation."

Intense Competition; Risk of Technological Change

The Company is engaged in segments of the pharmaceutical industry that are
highly competitive and rapidly changing. If successfully developed and approved,
the drug candidates that the Company is currently developing will compete with
numerous existing therapies. In addition, a number of companies are pursuing the
development of novel pharmaceuticals that target the same diseases the Company
is targeting. The Company believes that a significant number of drugs are
currently under development and will become available in the future for the
treatment of HIV. The Company anticipates that it will face intense and
increasing competition in the future as new products enter the market and
advanced technologies become available. There can be no assurance that existing
products or new products developed by the Company's competitors will not be more
effective, or more effectively marketed and sold, than any that may be developed
by the Company. Competitive products may render the Company's licensed
technology and products obsolete or noncompetitive prior to the Company's
recovery of

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development or commercialization expenses incurred with respect to any such
products. The development by others of a cure or new treatment methods for the
indications for which the Company is developing drug candidates could render the
Company's drug candidates noncompetitive, obsolete or uneconomical. Many of the
Company's competitors have significantly greater financial, technical and human
resources than the Company and may be better equipped to develop, manufacture
and market products. In addition, many of these companies have extensive
experience in preclinical testing and clinical trials, obtaining FDA and other
regulatory approvals and manufacturing and marketing pharmaceutical products.
Many of these competitors also have products that have been approved or are in
late-stage development and operate large, well-funded research and development
programs. 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 commercial value of their inventions and are more
actively seeking to commercialize the technology they have developed.

If the Company's drug candidates are successfully developed and approved,
the Company will face competition based on the safety and effectiveness of its
products, the timing and scope of regulatory approvals, availability of supply,
marketing and sales capability, reimbursement coverage, price and patent
position. There can be no assurance that the Company's competitors will not
develop more effective or more affordable technology or products, or achieve
earlier patent protection, product development or product commercialization than
the Company. Accordingly, the Company's competitors may succeed in
commercializing products more rapidly or effectively than the Company, which
could have a material adverse effect on the Company. See "Business--
Competition."

Risks Related to License and Option Agreements

The agreements pursuant to which the Company has in-licensed or obtained an
option to in-license its drug candidates permit the Company's licensors to
terminate the agreements under certain circumstances, such as the failure by the
Company to achieve certain development milestones or the occurrence of an
uncured material breach by the Company. The termination of any of these
agreements could have a material adverse effect on the Company. Upon termination
of the license agreements with Emory and UGARF, the Company is required to grant
to Emory and UGARF a non-exclusive, royalty-free license to all of the Company's
interest in the licensed technology (including any improvements to the
technology developed by the Company). In addition, the license agreements with
Emory, UGARF and the Regents provide that Emory, UGARF and the Regents are
primarily responsible for any litigation, interference, opposition or other
action pertaining to the patents related to the technology licensed to the
Company, and the Company is required to reimburse them for the costs they incur
in performing these activities. The Company believes that these costs as well as
other costs under the license and option agreements relating to the Company's
drug candidates will be substantial, and any inability or failure of the Company
to pay these costs with respect to any drug candidate could result in the
termination of the license or option agreement for such drug candidate. See
"Business--License and Option Agreements."

Lack of Manufacturing Capabilities

The Company does not have any manufacturing capacity and currently plans to
seek to establish relationships with third party manufacturers for the
manufacture of clinical trial material and the commercial production of any
products it may develop. There can be no assurance that the Company will be able
to establish relationships with third party manufacturers on commercially
acceptable terms or that third party manufacturers will be able to manufacture
products in commercial quantities under good manufacturing practices mandated by
the FDA on a cost-effective basis. The Company's dependence upon third parties
for the manufacture of its products may adversely affect the Company's profit
margins and its ability to develop and commercialize products on a timely and
competitive basis. Further, there can be no assurance that manufacturing or
quality control problems will not arise in connection with the manufacture of
the Company's products or that third party manufacturers will be able to
maintain the necessary governmental licenses and approvals to continue
manufacturing the Company's products.

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Any failure to establish relationships with third parties for its manufacturing
requirements on commercially acceptable terms would have a material adverse
effect on the Company. See "Business--Manufacturing" and "Business--Government
Regulation."

Lack of Sales and Marketing Capabilities

The Company currently has only one marketing employee and no sales
personnel. The Company will have to develop a sales force or rely on marketing
partners or other arrangements with third parties for the marketing,
distribution and sale of any products it develops. The Company currently intends
to market in the United States most of the drug candidates that it successfully
develops primarily through a direct sales force and outside the United States
through a combination of a direct sales force and arrangements with third
parties. There can be no assurance that the Company will be able to establish
marketing, distribution or sales capabilities or make arrangements with third
parties to perform those activities on terms satisfactory to the Company or that
any internal capabilities or third party arrangements will be cost-effective.

In addition, any third parties with which the Company establishes marketing,
distribution or sales arrangements may have significant control over important
aspects of the commercialization of the Company's products, including market
identification, marketing methods, pricing, composition of sales force and
promotional activities. There can be no assurance that the Company will be able
to control the amount and timing of resources that any third party may devote to
the Company's products or prevent any third party from pursuing alternative
technologies or products that could result in the development of products that
compete with the Company's products and the withdrawal of support for the
Company's programs. See "Business--Sales and Marketing."

Dependence on Third Parties for Development, Manufacturing and In-Licensing

The Company intends to engage third party contract research organizations
("CROs") to perform certain functions in connection with the development of the
Company's drug candidates and third parties to perform many aspects of the
manufacture of drug substance. The Company intends to design clinical trials,
but have CROs conduct the clinical trials. The Company will rely on the CROs to
perform many important aspects of clinical trials. As a result, these aspects of
the Company's drug development programs will be outside the direct control of
the Company. In addition, there can be no assurance that the CROs or third
parties will perform all of their obligations under arrangements with the
Company. In the event that the CROs or third parties do not perform clinical
trials or manufacture drug substance in a satisfactory manner or breach their
obligations to the Company, the commercialization of any drug candidate may be
delayed or precluded, which would have a material adverse effect on the Company.
The Company does not intend to engage in drug discovery. The Company's strategy
for obtaining additional drug candidates is to utilize the relationships of its
management team and Scientific Advisory Board to identify compounds for
in-licensing from companies, universities, research institutions and other
organizations. There can be no assurance that the Company will succeed in
in-licensing additional drug candidates on acceptable terms or at all.

No Assurance of Market Acceptance

The Company's success will depend in substantial part on the extent to which
any product it develops achieves market acceptance. The degree of market
acceptance will depend upon a number of factors, including the receipt and scope
of regulatory approvals, the establishment and demonstration in the medical
community of the safety and effectiveness of the Company's products and their
potential advantages over existing treatment methods, and reimbursement policies
of government and third party payors. There can be no assurance that physicians,
patients, payors or the medical community in general will accept or utilize any
product that the Company may develop.

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Risks Relating to Combination Therapy

The Company's success will also depend in large part on the extent to which
combination therapy for the treatment of HIV in the United States and Europe and
for the treatment of HBV in developing areas of the world, particularly Asia,
achieves market acceptance. Present combination treatment regimens for the
treatment of HIV are expensive (published reports indicate the cost per patient
per year can exceed $13,000), and may increase as new combinations are
developed. These costs have resulted in a limitation of reimbursement available
from third party payors for the treatment of HIV infection, and the Company
expects that reimbursement pressures will continue in the future. If combination
therapy is accepted as a method to treat HBV, treatment regimens are also likely
to be expensive. The Company expects that even the cost of monotherapy for HBV
will be considered expensive in developing countries. Any failure of combination
therapy to achieve significant market acceptance for the treatment of HIV or
potentially HBV could have a material adverse effect on the Company. See
"Business-- Product Development Programs."

Dependence on Key Employees

The Company is highly dependent on its senior management and scientific
staff, including Dr. David Barry, the Company's Chairman and Chief Executive
Officer. The Company has not entered into employment agreements with any of its
personnel. The loss of the services of any member of its senior management or
scientific staff may significantly delay or prevent the achievement of product
development and other business objectives. Retaining and attracting qualified
personnel, consultants and advisors is critical to the Company's success. In
order to pursue its drug development programs and marketing plans, the Company
will be required to hire additional qualified scientific and management
personnel. Competition for qualified individuals is intense and the Company
faces competition from numerous pharmaceutical and biotechnology companies,
universities and other research institutions. There can be no assurance that the
Company will be able to attract and retain such individuals on acceptable terms
or at all, and the failure to do so would have a material adverse effect on the
Company. In addition, the Company relies on members of its Scientific Advisory
Board to assist the Company in formulating its drug development strategy. All of
the members of the Scientific Advisory Board are employed by other employers and
each such member may have commitments to or consulting or advisory contracts
with other entities that may limit his availability to the Company. See
"Business--Human Resources" and "Management."

Uncertainty of Health Care Reform Measures and Third Party Reimbursement

The business and financial condition of pharmaceutical companies will
continue to be affected by the efforts of governments and third party payors to
contain or reduce the cost of health care through various means. A number of
legislative and regulatory proposals aimed at changing the health care system
have been proposed in recent years. In addition, an increasing emphasis on
managed care in the United States has and will continue to increase the pressure
on pharmaceutical pricing. While the Company cannot predict whether legislative
or regulatory proposals will be adopted or the effect those proposals or managed
care efforts may have on its business, the announcement and/or adoption of such
proposals or efforts could have a material adverse effect on the Company. In the
United States and elsewhere, sales of prescription pharmaceuticals are dependent
in part on the availability of reimbursement to the consumer from third party
payors, such as government and private insurance plans that mandate
predetermined discounts from list prices. Third party payors are increasingly
challenging the prices charged for medical products and services. If the Company
succeeds in bringing one or more products to the market, there can be no
assurance that these products will be considered cost effective or that
reimbursement to the consumer will be available or will be sufficient to allow
the Company to sell its products on a competitive basis. See "Business-- Health
Care Reform Measures and Third Party Reimbursement."

Absence of Product Liability Insurance; Insurance Risks

The Company's business will expose it to potential product liability risks
that are inherent in the testing, manufacturing and marketing of pharmaceutical
products. There can be no assurance that product liability claims will not be
asserted against the Company. The Company does not currently have any product
liability insurance.

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The Company intends to obtain limited product liability insurance for its
clinical trials when they begin in the United States and to expand its insurance
coverage if and when the Company begins marketing commercial products. However,
there can be no assurance that the Company will be able to obtain product
liability insurance on commercially acceptable terms or that the Company will be
able to maintain such insurance at a reasonable cost or in sufficient amounts to
protect the Company against potential losses. A successful product liability
claim or series of claims brought against the Company could have a material
adverse effect on the Company.

Hazardous Materials

The Company's drug development programs involve the controlled use of
hazardous materials, chemicals, viruses and various radioactive compounds.
Although the Company believes that its handling and disposing of such materials
comply with the standards prescribed by state and federal regulations, the risk
of accidental contamination or injury from these materials cannot be completely
eliminated. In the event of such an accident, the Company could be held liable
for any damages or fines that result and any such liability could exceed the
resources of the Company.

Concentration of Stock Ownership; Control by Management and Existing
Stockholders

Upon completion of the Offerings, the Company's directors, executive
officers and their respective affiliates will beneficially own approximately 67%
of the outstanding Common Stock (approximately 64% if the U.S. Underwriters'
over-allotment option is exercised in full). As a result, these stockholders
will be able to exercise significant influence over all matters requiring
stockholder approval, including the election of directors and approval of
significant corporate transactions. Such concentration of ownership may also
have the effect of delaying or preventing a change in control of the Company
that may be favored by other stockholders. See "Management" and "Principal
Stockholders."

Potential Adverse Market Impact of Shares Eligible For Future Sale; Registration
Rights

Sales of a substantial number of shares of Common Stock in the public market
following the Offerings could adversely affect the market price of the Common
Stock. In addition, holders of approximately 9,800,000 shares of Common Stock
(including shares issuable upon the exercise of outstanding warrants) are
entitled to certain rights with respect to registration of such shares of Common
Stock for offer or sale to the public. Any such sales may have an adverse effect
on the Company's ability to raise needed capital through an offering of its
equity or convertible debt securities and may adversely affect the prevailing
market price of the Common Stock. See "Shares Eligible for Future Sale" and
"Description of Capital Stock--Registration Rights."

No Prior Market For Common Stock

Prior to the Offerings, there has been no public market for the Company's
Common Stock, and there can be no assurance that an active trading market will
develop or be sustained after the Offerings or that investors will be able to
sell the Common Stock should they desire to do so. The initial public offering
price will be determined by negotiations between the Company and the
representatives of the Underwriters and may bear no relationship to the price at
which the Common Stock will trade upon completion of the Offerings. See
"Underwriting" for a discussion of the factors to be considered in determining
the initial public offering price.

Volatility of Stock Price

The market price of the Common Stock is likely to be highly volatile and
could be subject to wide fluctuations in response to factors such as
announcements of the results of clinical trials, developments with respect to
patents or proprietary rights, announcements of technological innovations, new
products or new contracts by the Company or its competitors, actual or
anticipated variations in the Company's operating results due to a number of
factors including, among others, the level of development expenses, changes in
financial estimates by securities analysts, conditions and trends in the
pharmaceutical and other industries, adoption of new accounting standards
affecting

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the industry, general market conditions and other factors. As a result, it is
possible that the Company's operating results will be below the expectations of
market analysts and investors, which would likely have a material adverse effect
on the prevailing market price of the Common Stock.

Further, the stock market has experienced extreme price and volume
fluctuations that have particularly affected the market prices of equity
securities of many pharmaceutical and biotechnology companies and that often
have been unrelated or disproportionate to the operating performance of such
companies. These market fluctuations, as well as general economic, political and
market conditions such as recessions or international currency fluctuations, may
adversely affect the market price of the Common Stock. In the past, following
periods of volatility in the market price of the securities of companies in the
pharmaceutical and biotechnology industries, securities class action litigation
has often been instituted against those companies. Such litigation, if
instituted against the Company, could result in substantial costs and a
diversion of management attention and resources, which would have a material
adverse effect on the Company. The realization of any of the risks described in
these "Risk Factors" could have a dramatic and adverse impact on the market
price of the Common Stock.

Broad Discretion in Use of Proceeds

The net proceeds of the Offerings will be added to the Company's working
capital and will be available for general corporate purposes, including the
Company's drug development programs. As of the date of this Prospectus, the
Company cannot specify with certainty the particular uses for the net proceeds
to be added to its working capital. Accordingly, management will have broad
discretion in the application of the net proceeds. See "Use of Proceeds" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."

Antitakeover Effects of Charter, Bylaws and Delaware Law

The Company's Second Restated Certificate of Incorporation authorizes the
Company's Board of Directors (the "Board") to issue shares of undesignated
preferred stock without stockholder approval on such terms as the Board may
determine. The rights of the holders of Common Stock will be subject to, and may
be adversely affected by, the rights of the holders of any such preferred stock
that may be issued in the future. Moreover, the issuance of preferred stock may
make it more difficult for a third party to acquire, or may discourage a third
party from acquiring, a majority of the voting stock of the Company. The
Company's Restated Bylaws provide that the Company's Board will be classified
into three classes of directors beginning at the 1997 annual meeting of
stockholders. With a classified Board, one class of directors is elected each
year with each class serving a three-year term. These and other provisions of
the Second Restated Certificate of Incorporation and the Restated Bylaws, as
well as certain provisions of Delaware law, could delay or impede the removal of
incumbent directors and could make more difficult a merger, tender offer or
proxy contest involving the Company, even if such events could be beneficial to
the interest of the stockholders. Such provisions could limit the price that
certain investors might be willing to pay in the future for the Common Stock.
See "Description of Capital Stock--New Preferred Stock" and "Description of
Capital Stock--Antitakeover Effects of Charter, Bylaws and Delaware Law."

Immediate and Substantial Dilution

Purchasers of the Common Stock in the Offerings will suffer immediate and
substantial dilution of $5.71 per share in the net tangible book value of the
Common Stock from the initial public offering price. To the extent that
outstanding options and warrants to purchase the Company's Common Stock are
exercised, there will be further dilution. See "Dilution."

No Dividends

The Company has never declared or paid any cash dividends on its capital
stock. The Company currently does not intend to pay any cash dividends in the
foreseeable future and intends to retain its earnings, if any, for the operation
of its business. See "Dividend Policy."

16
<PAGE>
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

Statements herein regarding the dates on which the Company anticipates
commencing clinical trials with respect to its drug candidates constitute
forward-looking statements under the federal securities laws. Such statements
are subject to certain risks and uncertainties that could cause the actual
timing of such clinical trials to differ materially from those projected. With
respect to such dates, the Company's management team has made certain
assumptions regarding, among other things, the successful and timely completion
of preclinical tests, the approval of an Investigational New Drug Exemption
Application ("IND") for each of the Company's drug candidates by the FDA, the
availability of adequate clinical supplies, the absence of delays in patient
enrollment and the availability of the capital resources necessary to complete
the preclinical tests and conduct the clinical trials. The Company's ability to
commence clinical trials on the dates anticipated is subject to certain risks,
including the risks discussed under the caption "Risk Factors" contained herein.
Undue reliance should not be placed on the dates on which the Company
anticipates commencing clinical trials with respect to any of its drug
candidates. These estimates are based on the current expectations of the
Company's management team, which may change in the future due to a large number
of potential events, including unanticipated future developments.

USE OF PROCEEDS

The net proceeds to the Company from the sale of the 4,000,000 shares of
Common Stock offered hereby are estimated to be approximately $30,920,000
($35,660,000 if the U.S. Underwriters' over-allotment option is exercised in
full), assuming an initial public offering price of $8.50 per share and after
deducting the estimated underwriting discounts and commissions and estimated
expenses of the Offerings payable by the Company.

The Company intends to use the net proceeds of the Offerings, including the
interest thereon, for general corporate purposes, including drug development
programs such as preclinical testing and clinical trials, the payment of license
fees and other amounts to licensors and working capital. The amounts actually
expended for each purpose may vary significantly depending upon numerous
factors, including the progress of the Company's drug development programs, the
magnitude of these programs, the scope and results of preclinical testing and
clinical trials, the cost, timing and outcome of regulatory reviews, the costs
under the license and/or option agreements relating to the Company's drug
candidates, administrative and legal expenses, the establishment of capacity for
sales and marketing functions, the establishment of relationships with third
parties for manufacturing and sales and marketing functions, and other factors.
The Company believes that the net proceeds of the Offerings together with its
existing cash and short-term investments will be adequate to satisfy its
anticipated capital requirements through 1997.

Pending application of the net proceeds of the Offerings as described above,
the Company intends to invest such net proceeds in interest-bearing,
investment-grade debt securities.

DIVIDEND POLICY

17
<PAGE>
CAPITALIZATION

The following table sets forth the capitalization of the Company (i) at June
30, 1996, (ii) at June 30, 1996, pro forma to give effect to the conversion of
all of the outstanding shares of Preferred Stock into 8,937,905 shares of Common
Stock (the "Conversion") and (iii) at June 30, 1996, pro forma to give effect to
the Conversion and as adjusted to give effect to the sale by the Company of the
4,000,000 shares of Common Stock offered hereby at an assumed initial public
offering price of $8.50 per share, after deducting the estimated underwriting
discounts and commissions and estimated expenses of the Offerings payable by the
Company and the application of the net proceeds therefrom. See "Use of
Proceeds." This table should be read in conjunction with the Company's financial
statements and the notes thereto included elsewhere herein.

<TABLE>
<CAPTION>
June 30, 1996
-------------------------------------------
<S> <C> <C> <C>
Pro Forma
Actual Pro Forma As Adjusted
------------- ------------- -------------
Stockholders' equity:
Preferred Stock, $0.001 par value; 10,000,000 shares authorized
and 8,937,905 shares issued and outstanding on an actual basis;
no shares issued and outstanding on a pro forma basis; and
5,000,000 shares authorized and no shares issued and outstanding
on a pro forma as adjusted basis................................ $ 8,938 -- --
Warrants (1)...................................................... 54,280 $ 54,280 $ 54,280
Common Stock, $0.001 par value; 30,000,000 shares authorized and
4,211,833 shares issued and outstanding on an actual basis;
13,149,738 shares issued and outstanding on a pro forma basis;
and 75,000,000 shares authorized and 17,149,738 shares issued
and outstanding on a pro forma as adjusted basis (2)............ 4,212 13,150 17,150
Additional paid-in capital........................................ 23,540,791 23,540,791 54,456,791
Accumulated deficit............................................... (6,467,001) (6,467,001) (6,467,001)
Deferred compensation............................................. (212,189) (212,189) (212,189)
------------- ------------- -------------
Total stockholders' equity...................................... 16,929,031 16,929,031 47,849,031
------------- ------------- -------------
Total capitalization............................................ $ 16,929,031 $ 16,929,031 $ 47,849,031
------------- ------------- -------------
------------- ------------- -------------
</TABLE>

- ------------

(1) Excludes as of October 11, 1996 16,000 shares of Series B Preferred Stock
issuable upon exercise of outstanding warrants (at an exercise price of
$5.00 per share). See "Description of Capital Stock--Preferred Stock,
Warrants and Stock Options" and note 6 of notes to financial statements.

(2) Excludes as of October 11, 1996 (i) 1,076,260 shares of Common Stock
issuable upon exercise of outstanding options (at a weighted average
exercise price of $1.87 per share) and (ii) 1,126,407 shares of Common Stock
reserved for future option grants or stock issuances under the Company's
benefit plans. See "Management-- Benefit Plans," "Description of Capital
Stock--Preferred Stock, Warrants and Stock Options" and note 6 of notes to
financial statements.

18
<PAGE>
DILUTION

The net tangible book value of the Company at June 30, 1996 was $16,929,031
or $1.29 per share, pro forma. Pro forma net tangible book value per share
represents the amount of total tangible assets of the Company less total
liabilities divided by the number of shares of Common Stock outstanding, after
giving effect to the Conversion. After giving effect to the sale by the Company
of the 4,000,000 shares of Common Stock offered hereby at an assumed initial
public offering price of $8.50 per share and after deducting underwriting
discounts and commissions and estimated expenses of the Offerings payable by the
Company, the Company's net tangible book value as of June 30, 1996 would have
been approximately $47,849,031, or approximately $2.79 per share, pro forma.
This represents an immediate increase in pro forma net tangible book value per
share of $1.50 to existing holders of the Company's capital stock and immediate
dilution in pro forma net tangible book value per share of $5.71 to new
investors purchasing Common Stock in the Offerings. The following table
illustrates the per share dilution:

<TABLE>
<S> <C> <C>
Assumed public offering price per share............................... $ 8.50
Pro forma net tangible book value per share of Common Stock
as of June 30, 1996................................................. $ 1.29
Increase per share attributable to new investors...................... 1.50
---------
Pro forma net tangible book value per share of Common Stock
as adjusted as of June 30, 1996..................................... 2.79
---------
Dilution per share to new investors................................... $ 5.71
---------
---------
</TABLE>

The following table summarizes, as of June 30, 1996, the number of shares of
Common Stock purchased from the Company, the total consideration paid and the
average price per share paid by the existing stockholders and by new investors
(after giving effect to the Conversion and before deduction of underwriting
discounts and commissions and estimated expenses of the Offerings):

<TABLE>
<CAPTION>
Shares Purchased Total Consideration
------------------------- -------------------------- Average Price
Number Percent Amount Percent per Share
------------ ----------- ------------- ----------- ---------------
<S> <C> <C> <C> <C> <C>
Existing stockholders..................... 13,149,738 77% $ 23,396,032 41% $ 1.78
New investors............................ 4,000,000 23 34,000,000 59 8.50
-- --
------------ -------------
Total................................ 17,149,738 100% $ 57,396,032 100%
-- --
-- --
------------ -------------
------------ -------------
</TABLE>

The foregoing table excludes as of October 11, 1996 (i) 1,076,260 shares of
Common Stock issuable upon exercise of outstanding options (at a weighted
average exercise price of $1.87 per share), (ii) 146,000 shares of Preferred
Stock issuable upon exercise of outstanding warrants (at a weighted average
exercise price of $1.22 per share) and (iii) 1,126,407 shares of Common Stock
reserved for future option grants and stock issuances under the Company's
benefit plans. See "Management--Benefit Plans," "Description of Capital
Stock--Preferred Stock, Warrants and Stock Options" and note 6 of notes to
financial statements.

19
<PAGE>
SELECTED FINANCIAL DATA

The selected statement of operations data with respect to the period from
inception (July 12, 1995) to December 31, 1995 and the balance sheet data at
December 31, 1995 set forth below are derived from the financial statements of
the Company included elsewhere in this Prospectus, which have been audited by
Price Waterhouse LLP, independent accountants. The statement of operations data
for the six months ended June 30, 1996 and for the period from inception (July
12, 1995) through June 30, 1996 and the balance sheet data at June 30, 1996 set
forth below are derived from unaudited financial statements of the Company,
which have been prepared on the same basis as the audited financial statements
of the Company and, in the opinion of the management of the Company, contain all
adjustments, consisting of only normal recurring adjustments, necessary for a
fair presentation of the results of operations for such period and the financial
position at such date. Results of operations for interim periods are not
necessarily indicative of results to be expected for the full year. The selected
financial data set forth below should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the Company's financial statements and the notes thereto included elsewhere in
this Prospectus.

<TABLE>
<CAPTION>
Period from
Period from Inception
inception Six Months (July 12, 1995)
(July 12, 1995) to Ended through
December 31, 1995 June 30, 1996 June 30, 1996
------------------- -------------- ----------------
<S> <C> <C> <C>
Statement of Operations Data:
Costs and expenses:
License fees......................................... -- $ 2,751,829 $ 2,751,829
Development.......................................... -- 1,342,591 1,342,591
General and administrative........................... $ 1,004,815 1,490,156 2,494,971
---------- -------------- ----------------
Loss from operations....................................... (1,004,815) (5,584,576) (6,589,391)
Interest income............................................ 37,232 85,158 122,390
---------- -------------- ----------------
Net loss................................................... $ (967,583) $ (5,499,418) $ (6,467,001)
---------- -------------- ----------------
---------- -------------- ----------------
Pro forma net loss per share (1)........................... $ (0.07) $ (0.39)
---------- --------------
---------- --------------
Shares used in computing pro forma net loss per share
(1)...................................................... 14,237,498 14,237,498

December 31, 1995 June 30, 1996
------------------- --------------
<S> <C> <C> <C>
Balance Sheet Data:
Cash and cash equivalents.................................. $ 3,081,586 $ 5,825,617
Working capital............................................ 2,867,117 16,339,403
Total assets............................................... 3,101,985 18,030,241
Accumulated deficit........................................ (967,583) (6,467,001)
Total stockholders' equity................................. 2,887,516 16,929,031
</TABLE>

- ------------

(1) See note 1 of notes to financial statements for information concerning the
computation of pro forma net loss per share and shares used in computing pro
forma net loss per share.

20
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

THE FOLLOWING SHOULD BE READ IN CONJUNCTION WITH "SELECTED FINANCIAL DATA"
AND THE COMPANY'S FINANCIAL STATEMENTS AND NOTES THERETO APPEARING ELSEWHERE IN
THIS PROSPECTUS.

Overview

Triangle is a pharmaceutical company engaged in the development of new drug
candidates primarily in the antiviral area. Since its inception on July 12,
1995, the Company's operating activities related primarily to recruiting
personnel, negotiating the license and option arrangements for its drug
candidates, raising capital and developing the Company's drug candidates. The
Company has not received any revenues from the sale of products, and does not
expect any of its drug candidates to be commercially available for at least the
next several years. As of June 30, 1996, the Company's accumulated deficit was
approximately $6,500,000.

The Company's drug development programs will require substantial capital
expenditures, including expenditures for preclinical testing, chemical synthetic
scale-up, clinical trials of drug candidates and payments to the Company's
licensors. The Company has been unprofitable since its inception and expects to
incur substantial and increasing losses for at least the next several years, due
primarily to the expansion of its drug development programs. The Company expects
that losses will fluctuate from quarter to quarter and that such fluctuations
may be substantial. See "Risk Factors--History of Operating Losses; Accumulated
Deficit; Uncertainty of Future Profitability."

The Company has only a limited operating history upon which an evaluation of
the Company and its prospects can be based. The risks, expenses and difficulties
encountered by companies at an early stage of development must be considered
when evaluating the Company's prospects. To address these risks, the Company
must, among other things, successfully develop and commercialize its drug
candidates, secure all necessary proprietary rights, respond to competitive
developments, and continue to attract, retain and motivate qualified persons.
There can be no assurance that the Company will be successful in addressing
these risks. See "Risk Factors--Development Stage Company; Uncertainty of
Product Development."

The operating expenses of the Company will depend on several factors,
including the level of development expenses. Development expenses will depend on
the progress and results of the Company's drug development efforts, which the
Company cannot predict. Management may in some cases be able to control the
timing of development expenses in part by accelerating or decelerating
preclinical testing and clinical trial activities. As a result of these factors,
the Company believes that period to period comparisons in the future are not
necessarily meaningful and should not be relied upon as an indication of future
performance. Due to all of the foregoing factors, it is possible that the
Company's operating results will be below the expectations of market analysts
and investors. In such event, the prevailing market price of the Common Stock
would likely be materially adversely affected. See "Risk Factors--Volatility of
Stock Price."

Results of Operations

SIX MONTHS ENDED JUNE 30, 1996

The Company had total interest income of $85,158 in the six months ended
June 30, 1996.

License fees totaled $2,751,829 for the six months ended June 30, 1996. Of
this amount, $1,100,000 related to payments due upon execution of certain
license agreements and $1,000,000 related to license fees paid. License fees
also included non-cash charges of $636,000 based on the fair value of Common
Stock issued to licensors in connection with the execution of certain of these
agreements. Future license fees may also consist of milestone payments under
licensing arrangements, the amount of which could be substantial and the timing
of which will depend on a number of factors that the Company cannot predict.
These factors include, among others, the success of the Company's drug
development programs and the extent to which the Company in-licenses additional
drug candidates.

Development expenses totaled $1,342,591 for the six months ended June 30,
1996. Development expenses consisted primarily of expenses for the preclinical
testing of certain of the Company's drug candidates. Development expenses for
the six months ended June 30, 1996 included non-cash charges of $313,327 related
to the

21
<PAGE>
amortization of deferred consulting expenses. The Company expects its
development expenses to increase substantially in the future due to continued
expansion of drug development activities, including preclinical testing and
clinical trials. In addition, if the Company in-licenses additional drug
candidates, development expenses would increase as a result.

General and administrative expenses totalled $1,490,156 for the six months
ended June 30, 1996. General and administrative expenses consisted primarily of
compensation expenses, rent expense and amounts paid for patent prosecution and
other activities under certain licensing agreements. General and administrative
expenses for the six months ended June 30, 1996 included non-cash charges of
$71,529 related to the amortization of deferred compensation expenses. The
increase in general and administrative expenses compared to the period from July
12, 1995 to December 31, 1995 is comprised primarily of increases in rent
expenses associated with office and laboratory facilities and increases in
professional fees. The Company expects that its general and administrative
expenses will increase in future periods.

PERIOD FROM INCEPTION (JULY 12, 1995) TO DECEMBER 31, 1995 (THE "INCEPTION
PERIOD")

The Company had total interest income of $37,232 for the Inception Period.
General and administrative expenses totaled $1,004,815 during the Inception
Period, and consisted primarily of compensation paid to employees and
professional fees.

Liquidity and Capital Resources

The Company has financed its operations since inception primarily with the
net proceeds received from private placements of equity securities. As of June
30, 1996 the Company had received aggregate proceeds of approximately
$22,400,000 from these transactions. From July 1995 through May 1996, the
Company raised approximately $3,900,000 from the sale of its Series A Preferred
Stock to 26 investors. In June 1996, the Company raised approximately
$18,500,000 from the sale of its Series B Preferred Stock to 15 investors.

At June 30, 1996, the Company's principal source of liquidity was $5,825,617
in cash and cash equivalents and $11,305,549 in short-term investments. On
August 8, 1996 the Company obtained a $1,000,000 secured equipment lease line
facility with an option to increase the facility to $2,000,000. The facility had
not been utilized as of September 1, 1996, and expires on August 9, 1997.

The Company expects that its capital requirements will increase
substantially in future periods as the Company funds its drug development
programs. The Company's future capital requirements will depend on many factors,
including the progress of the Company's drug development programs, the magnitude
of these programs, the scope and results of preclinical testing and clinical
trials, the cost, timing and outcome of regulatory reviews, the costs under the
license and/or option agreements relating to the Company's drug candidates,
administrative and legal expenses, the establishment of capacity for sales and
marketing functions, the establishment of relationships with third parties for
manufacturing and sales and marketing functions, and other factors. Amounts
payable by the Company in the future under its existing license agreements are
uncertain due to a number of factors, including the progress of the Company's
drug development programs, the Company's ability to obtain approval to
commercialize any drug candidate and the commercial success of any approved
drug. The Company's existing license agreements require future payments of up to
$17,750,000 contingent upon the achievement of certain development milestones.
Additionally, the Company will pay royalties based on a percentage of net sales
of each licensed product incorporating these drug candidates. Most of the
Company's license agreements require minimum royalty payments after regulatory
approval. Depending on the Company's success and timing in obtaining regulatory
approval, aggregate annual minimum royalties could range from $2,000,000 to
$46,000,000 under the Company's existing license agreements. One of the
Company's license agreements requires an additional payment of $500,000 at the
earlier of eighteen months after execution or upon certain financing activities,
such as the completion of the Offerings.

The Company believes that the net proceeds of the Offerings together with
its existing cash and short-term investments will be adequate to satisfy its
anticipated capital requirements through 1997. The Company expects that it will
be required to raise substantial additional funds through equity or debt
financings, collaborative arrangements with corporate partners or from other
sources. There can be no assurance that additional funding will be available on
favorable terms from any of these sources or at all. See "Risk Factors--Future
Capital Needs; Uncertainty of Additional Funding."

22
<PAGE>
Net Operating Loss Carryforwards

As of December 31, 1995, the Company had a net operating loss carryforward
of approximately $961,000. For the Inception Period, the Company recognized a
valuation allowance equal to the deferred asset represented by its net operating
loss carryforward and therefore recognized no tax benefit. The Company's ability
to utilize its net operating loss carryforwards may be subject to an annual
limitation in future periods pursuant to the "change in ownership rules" under
Section 382 of the Internal Revenue Code of 1986, as amended. See note 5 of
notes to financial statements.

Recent Accounting Pronouncements

In 1995, the Financial Accounting Standards Board issued two new standards,
which the Company will adopt in the year ending December 31, 1996, related to
long-lived assets (SFAS 121, "ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS
AND FOR LONG-LIVED ASSETS TO BE DISPOSED OF") and stock compensation (SFAS 123,
"ACCOUNTING FOR STOCK-BASED COMPENSATION"). The Company intends to adopt the
disclosure alternative for stock compensation and does not expect the adoption
of either standard to have a material impact on the Company's financial position
or results of operations. See note 1 of notes to financial statements.

23
<PAGE>
BUSINESS

Overview

Triangle is a pharmaceutical company engaged in the development of new drug
candidates primarily in the antiviral area, with a particular focus on therapies
for HIV, including AIDS, and HBV. Prior to their employment with the Company,
members of the Company's management team played instrumental roles in the
identification, clinical development and commercialization of several leading
antiviral therapies.

Triangle has an existing portfolio consisting of five licensed drug
candidates and two drug candidates for which the Company has an option to
acquire a license. In laboratory tests, four of the seven drug candidates
inhibit the growth of HIV, and two of these four also inhibit the growth of HBV.
The other three drug candidates have attractive preclinical profiles against
certain cancers, herpes infections and psoriasis. All the Company's drug
candidates are in an early phase of development. The Company has completed a
Phase Ia clinical trial and is currently conducting a Phase Ib/IIa clinical
trial with one of its anti-HIV drug candidates. The Company expects to commence
Phase I clinical trials for most of its other existing drug candidates by the
end of 1997. The Company believes that some of its drug candidates may meet the
criteria established by the FDA for accelerated approval. If so, the Company may
be able to commercialize these drug candidates in a shorter time period than has
historically been required for drugs that do not meet the criteria for
accelerated approval. There can be no assurance, however, that the Company's
drug candidates will qualify for accelerated approval or be approved in a time
period that is shorter than would be historically expected.

Treatment of HIV using combinations of drugs has recently shown significant
clinical benefits including reducing virus levels and increasing patient
longevity. Prior to joining the Company, the Company's management team was
actively engaged for a number of years in the development of combination therapy
for the treatment of HIV. The Company was founded based in part on the
management team's belief that the prolonged use of combination thereapy will
generate demand for new anti-HIV drugs with favorable resistance and tolerance
profiles. The Company believes the use of anti-HIV drugs will increase because
it anticipates that (i) the use of multiple drugs in individual patients on
combination therapy will increase, (ii) large numbers of previously untreated
patients will begin to seek medical care as the benefits of combination therapy
become more widely understood and (iii) patient longevity will increase and thus
lengthen the duration of drug therapy.

Strategy

Triangle's goal is to create a portfolio of commercialized drugs primarily
for antiviral and anticancer therapies. The Company seeks to achieve its goal
through the following strategies:

FOCUS ON VIRAL DISEASES AND CANCER. The expertise of Triangle's management
team lies in identifying, developing and commercializing drugs for the treatment
of viral diseases and cancer. The Company is targeting the viral

24
<PAGE>
disease and cancer markets because the Company believes the significant unmet
medical need and the rapid pace of scientific advances occurring in the
treatment of these diseases give these markets attractive growth potential. In
addition, the relatively high concentration of prescribers that treat HIV and
cancer may lend itself to the use of a small, specialized direct sales force in
the United States.

APPLY SELECTIVE CRITERIA TO DRUG CANDIDATES. The Company has in-licensed
drug candidates for which the Company believes there is a higher than average
probability of obtaining regulatory approval. The Company uses its expertise to
identify drug candidates that it judges to have attractive preclinical profiles.
In addition, the Company prefers, where practical, to in-license drug candidates
that have either undergone some testing in humans (E.G., FTC and alanosine) or
share characteristics with drugs that are currently approved for use in humans
(E.G., CS-92, acyclovir monophosphate and 2-CdAP). The Company intends to apply
these selection standards where feasible in evaluating drug candidates for
potential in-licensing.

LEVERAGE RELATIONSHIPS. As a result of their instrumental roles in the
identification, clinical development and commercialization of antiviral and
anticancer therapies, members of the Company's management team and Scientific
Advisory Board have extensive contacts in academia and industry. These contacts
were instrumental to the Company's acquisition of its existing drug candidates,
and the Company believes they will be valuable in its efforts to develop and
commercialize its existing and future drug candidates.

DEVELOP DRUGS FOR USE IN COMBINATION THERAPY. Combination therapy is
currently a common method to treat certain cancers and the Company believes that
it is becoming an increasingly accepted method to treat viral diseases such as
HIV infection. The Company seeks to identify and develop drug candidates for use
in combination therapy that have resistance and tolerance profiles that are
different from but complementary to the profiles of existing drugs. In addition,
in contrast to single drug therapy where drugs are competitively promoted, the
Company believes that the marketing of any drug it successfully develops as part
of an established combination regimen with drugs produced by major
pharmaceutical companies will be enhanced by the promotion of the other drugs
used as part of the combination regimen.

FOCUS ON SMALL MOLECULE DRUGS. Members of the Company's management are well
known for their successful development of and expertise in small molecule drugs
generally, and nucleosides in particular. Small molecule drugs have several
advantages over large molecule drugs, such as proteins and polynucleotides. For
example, they are often simpler and easier to scale-up and manufacture than
large molecule drugs. Furthermore, small molecule drugs are more likely to be
orally bioavailable, a significant advantage in treating long-term chronic
illnesses where patients prefer not to be subjected to injections over extended
periods of time.

STRATEGICALLY OUT-SOURCE ROUTINE ASPECTS OF DRUG DEVELOPMENT. Triangle
intends to maintain a limited corporate infrastructure that is focused on drug
development. Much of the drug development process consists of routine elements
that can be out-sourced to high quality, high capacity contractors. As a result,
the Company intends to focus on the aspects of drug development that require
particular expertise. For example, the Company intends to concentrate on the
design of clinical trials and the optimization of drug synthesis and to
out-source the conduct of clinical trials and many aspects of the manufacture of
drug substance. The Company believes this strategy will enable it to respond
rapidly to certain changing events, such as clinical trial results and the
availability of funds, by increasing or decreasing expenditures on particular
drug development projects or by shifting the Company's emphasis among projects.

Product Development Programs

The Company is currently focused on the development of drugs for the
treatment of viral diseases to take advantage of the opportunities presented by
the emergence of combination therapy. The Company believes that combination
therapy will become the standard of treatment for HIV over the course of the
next several years. The Company also believes that HBV, due to its complexity
and demonstrated ability to develop resistance to a number

25
<PAGE>
of therapeutic agents, may also be more effectively treated with combination
therapy. Additionally, the Company believes that there is a significant
opportunity to develop drugs for the treatment of cancer because of the limited
clinical benefits offered by many of the current treatments.

In evaluating drug candidates for its product development programs, the
Company seeks to in-license drug candidates for which favorable preclinical, and
where possible, clinical data already exist. The Company was able to evaluate
preclinical, and in some cases clinical, data for each of the drug candidates it
is currently developing. Unless otherwise stated, all preclinical tests and
clinical trials discussed below refer to tests and trials conducted by third
parties prior to the time the Company obtained rights to the applicable drug
candidate. In some cases, in its drug development efforts the Company has access
to and will be able to use certain results of these preclinical tests and
clinical trials. The Company will not, however, be able to use or rely on all
data from all preclinical tests and clinical trials conducted by third parties,
and will have to conduct its own preclinical tests and clinical trials for its
drug candidates.

The Company also performs a variety of tests when evaluating a drug
candidate that are designed to evaluate the potential activity, resistance
profile and toxicity of the drug candidate. For example, anti-HIV drug
candidates are tested in the Company's laboratories against both laboratory and
clinical strains of HIV in several cell lines, individually and in combination
with other compounds. In addition, other resistance and toxicity tests are
sometimes performed on behalf of the Company by carefully selected third
parties.

The following table summarizes the current status of Triangle's drug
candidates in its three product development programs: viral disease, cancer and
psoriasis.

<TABLE>
<CAPTION>
Drug Candidate(1) Indication Status(2) Territory(3)
<S> <C> <C> <C>

MKC-442 HIV Phase Ib/IIa Worldwide, except
certain East Asian
countries
FTC HIV and HBV Preclinical(4) Worldwide
DAPD HIV and HBV Preclinical Worldwide
CS-92 HIV Preclinical Worldwide
Acyclovir Monophosphate Resistant Herpes and Preclinical Worldwide
Herpes Labialis
Alanosine Brain, Lung and Preclinical(5) Worldwide
other Cancers
2-CdAP Psoriasis Preclinical Worldwide
</TABLE>

(1) Triangle has licensed all drug candidates except MKC-442 and alanosine, for
which the Company has acquired options to obtain licenses. See "--License
and Option Agreements."
(2) For a discussion of the terms used in this column, see "--Government
Regulation."
(3) Indicates the geographic territory in which the Company has the right to
commercialize products under the applicable license or option agreement.
(4) Phase Ia single dose clinical trials with FTC were completed by Burroughs
Wellcome prior to the date Triangle obtained its rights to FTC from Emory.
The Company currently does not have access to all of the data from those
clinical trials, and plans to initiate its own Phase Ib/IIa clinical trials
that will be based in part on the published results of the Burroughs
Wellcome Phase Ia clinical trials. See "--Viral Disease Program--HIV--
Development Status--FTC."
(5) Phase I and Phase II clinical trials with alanosine were completed by the
National Cancer Institute prior to the date Triangle obtained its rights to
alanosine from the Regents. The Company is funding Phase II pilot efficacy
studies that are being conducted by the University of California, San Diego
and are currently scheduled to begin before the end of 1996. See "--Cancer
Program--Development Status of Alanosine."

26
<PAGE>
VIRAL DISEASE PROGRAM

HIV

BACKGROUND. The World Health Organization ("WHO") estimates that, as of
June 30, 1995, approximately one million people were infected with HIV in the
United States and approximately 500,000 people were infected with HIV in Europe.
It is generally believed that, in the absence of therapeutic intervention, the
vast majority of individuals infected with HIV will ultimately develop AIDS,
which currently has a fatality rate approaching 100%.

It is currently believed that a key factor in whether a person infected with
HIV develops AIDS is the amount of HIV in the body at any one time (the "viral
load" or "viral burden"). The failure of vaccines and other immunotherapy to
control the virus has led current researchers to focus on halting HIV
replication and reducing viral load by blocking one or both of two key enzymes
required for viral replication.

The first enzyme, reverse transcriptase, is active early in the replication
cycle and allows the virus, which is made of RNA, to transform to its DNA form
necessary for continued replication. This enzyme can be inhibited by two general
classes of drugs defined both by their structure as well as their mechanism of
action. The first general class, nucleoside analogue reverse transcriptase
inhibitors such as AZT, ddI, ddC, d4T and 3TC, bears a strong chemical
resemblance to the natural building blocks (nucleosides) of DNA and interfere
with the function of the enzyme by displacing the natural nucleosides used by
the enzyme. The second general class, non-nucleoside reverse transcriptase
inhibitors such as nevirapine, is composed of an extremely diverse group of
chemicals that act by attaching to the enzyme and modifying it so that it
functions less efficiently. The second enzyme, protease, is required to permit
full virus maturation.

The genetic material responsible for the production of both enzymes is
extremely prone to mutations that can produce resistance to drugs targeted at
the enzymes. If antiviral therapy does not halt all viral replication, natural
selection allows the mutant strains of virus that are resistant to the drug the
patient is receiving to continue to replicate. Depending upon the particular
mutations that occur, these virus strains may be resistant to only one of the
drugs used in therapy or may be resistant to some or all of the drugs in the
same chemical or functional class. This latter phenomenon is known as
cross-resistance.

Initially, HIV was treated only with AZT, a nucleoside analogue reverse
transcriptase inhibitor, first introduced in 1987. Three other nucleoside
analogues--ddI, ddC and d4T--were introduced to the market in the late 1980's.
These drugs, when used alone, provided only short-term clinical benefit, could
be toxic and were often considered expensive relative to their clinical
benefits. As a result, the use of anti-HIV therapy was limited and market
penetration was low (less than 25% of the infected population in the United
States).

More recently, clinical research in HIV has dramatically improved with the
introduction in the mid-1990's of diagnostic tests that can reliably determine
the viral load in the blood at any given time. As a result, it is now possible
to rapidly evaluate potential therapeutic agents and combinations of agents and
to accurately determine the potency and resistance profiles of these agents.
This has led to the accelerated development of a number of new therapeutic
agents and their use in combination therapy.

Combination therapy has recently demonstrated improved therapeutic benefits
for the treatment of HIV. It has been shown, for example, that the use of 3TC, a
nucleoside analogue reverse transcriptase inhibitor, in combination with AZT
reduces viral load by 92% to 97% and reverses or limits viral resistance to
either drug. The use of protease inhibitors, such as saquinavir, ritonavir or
indinavir, in combination with one or two nucleoside analogue reverse
transcriptase inhibitors has provided even more benefit, sometimes rendering the
virus undetectable in the blood for as long as six months to a year in certain
patients. Additional combinations may be possible as new compounds are
developed.

In spite of these significant advances, numerous challenges remain in the
treatment of HIV. In the absence of a cure, the disease is lifelong and
significant benefits of combination therapy have been demonstrated for only a
year at most. Although combination therapy has demonstrated the ability to
markedly slow resistance development,

27
<PAGE>
resistant mutants are already being identified to several of the drugs currently
used during the course of combination therapy studies, and cross-resistance
among many agents, including protease inhibitors, is being increasingly
recognized. Present combination treatments are also often complex and expensive
(published reports indicate the cost per patient per year can exceed $13,000).
Adverse reactions to many of the drugs used in combination therapy are common
and may limit compliance or even preclude use in some patients. Even brief
instances of non-compliance can reduce or eliminate the ability of the
combination therapy to suppress the virus, and may thus accelerate the
development of resistance. The Company believes that these challenges present an
opportunity to develop additional drugs that offer attractive combinations of
tolerance, pharmacokinetic and resistance profiles.

DEVELOPMENT STATUS. The Company is developing four compounds for the
treatment of HIV: MKC-442, FTC, CS-92 and DAPD. All four are reverse
transcriptase inhibitors.

MKC-442. The Company is currently conducting a Phase Ib/IIa clinical trial
in Europe with MKC-442 in HIV-infected patients to determine safety, optimal
dosing and early indications of efficacy as measured by viral load. MKC-442,
although a nucleoside analogue, functions as a non-nucleoside reverse
transcriptase inhibitor. Triangle has obtained an option, which expires in
December 1997, to acquire a license to this compound from Mitsubishi Chemical
Corporation ("Mitsubishi") for the treatment of HIV. If Triangle exercises its
option, it will obtain rights to MKC-442 worldwide except in certain East Asian
countries, including Japan, China and Taiwan. Mitsubishi has agreed to fund up
to $1.6 million of initial development expenses.

Preclinical tests suggest that MKC-442 may possess characteristics that
address several of the therapeutic challenges of HIV, including the ability of
HIV to develop resistance that limits the duration of the effectiveness of many
currently marketed anti-HIV drugs. When tested in cell culture assay systems
against wild-type and several mutant strains of HIV known to be resistant to
established non-nucleoside reverse transcriptase inhibitors, MKC-442 retained
much of its ability to inhibit HIV replication. In these studies, MKC-442
displayed greater potency than nevirapine against wild-type and mutant strains
of HIV. Preclinical studies of MKC-442 in two drug combinations with AZT and ddI
and in three drug combinations with AZT and saquinavir suggest that MKC-442 may
work well in combination therapy, allowing for more effective inhibition of HIV
replication than with any of the single agents alone.

Studies in animals suggest a favorable safety and pharmacokinetic profile.
Animal pharmacokinetic analyses showed good oral bioavailability and excellent
penetration into the central nervous system. The brain is a significant site of
HIV replication that is poorly penetrated by many currently marketed anti-HIV
drugs. In rats, for example, the concentration of MKC-442 in the brain was 100%
of the penetration seen in the plasma.

A recently completed Phase Ia study conducted by the Company evaluated the
pharmacokinetics and tolerance of single escalating doses of MKC-442 in
HIV-infected volunteers. The compound was well tolerated, with only a few
participants experiencing minor adverse effects at the higher dose levels. In
the groups receiving higher doses, concentrations of the drug in the plasma
reached levels much higher than the concentration levels required to kill 90% of
the virus in culture. Pharmacokinetic data from the study suggest that the
compound could be given twice daily, which generally leads to significantly
better patient compliance than is the case with drugs that must be taken three
or four times daily.

FTC. Triangle currently intends to initiate Phase Ib/IIa clinical trials
with FTC for the treatment of HIV in 1997. FTC is a member of the same
nucleoside series as 3TC. Triangle has licensed its worldwide rights to FTC for
the treatment of HIV and HBV from Emory.

IN VITRO studies have demonstrated that FTC is three to ten times more
potent than 3TC against HIV and is a potent antiviral agent against HIV strains
obtained from a geographically diverse set of HIV-infected patients. IN VITRO
studies have also shown that FTC shares cross-resistance patterns with 3TC. The
most common resistance mutation to these two agents also increases sensitivity
of the virus to AZT.

28
<PAGE>
The pharmacokinetics and metabolism of FTC have been investigated in animal
studies that demonstrated that FTC was cleared rapidly from the blood stream
over all doses studied and had good oral bioavailability. FTC was also well
tolerated. Mild anemia in mice was seen only at extremely high doses (3000
mg/kg/day).

A Phase Ia single dose study evaluated the pharmacokinetics and tolerance of
FTC in 12 HIV-infected volunteers. The volunteers received six single oral doses
of FTC at six day intervals ranging from 100 to 1200 milligrams. FTC was well
tolerated by all subjects in the dose range studied. FTC was absorbed rapidly
into the blood stream following oral administration and was excreted primarily
through the kidneys. Its half-life suggests that it could be given twice daily.
While food intake slightly decreased the rate of absorption, it did not affect
overall oral bioavailability. The absorption, metabolism and excretion of FTC
were generally consistent among the subjects.

DAPD. The Company currently intends to initiate Phase I clinical trials
with DAPD for the treatment of HIV in late 1997 or early 1998. DAPD is a member
of a different nucleoside series from FTC and CS-92. The Company believes that
DAPD is currently the only member of the nucleoside series to which it belongs
in development for the treatment of viral diseases and may offer advantages over
several nucleosides from other series that are already on the market because of
its unique resistance profile and pharmacological properties. Triangle has
licensed worldwide rights to DAPD for the treatment of HIV and HBV from Emory
and UGARF.

Laboratory studies indicate that DAPD inhibits the growth of HIV at
submicromolar levels and is synergistic in combination with AZT, 3TC and FTC.
HIV strains that are resistant to AZT, 3TC and FTC are not cross-resistant to
DAPD. Pharmacokinetic studies have been completed in animals and demonstrated
that DAPD is rapidly converted to dioxolane guanosine ("DXG"). Preliminary
analyses of these pharmacokinetic studies indicate that DXG serum concentrations
decline with a terminal half-life ranging from approximately two to eight hours.
The analysis of several urine samples from this study indicate the presence of
DXG with no other metabolites detected.

CS-92. Triangle currently intends to initiate Phase I clinical trials with
CS-92 in 1997. CS-92 is a member of the same nucleoside series as AZT. Triangle
has licensed worldwide rights to CS-92 for the treatment of HIV from Emory and
UGARF.

CS-92 has been extensively studied IN VITRO in various cell culture systems.
CS-92 demonstrated significant antiviral activity IN VITRO against HIV and
appears to be significantly less toxic than AZT. The levels needed to inhibit
the virus are a thousand times less than the toxic levels in cell cultures.
CS-92 is also active in HIV-infected human macrophages, a significant reservoir
of HIV infection in humans. CS-92 is 50 to 100 times less toxic to human bone
marrow cell cultures than AZT. However, CS-92 has a resistance profile similar
to AZT.

In animal studies, CS-92 demonstrated low bone marrow toxicity, lack of
systemic toxicity, reasonable oral bioavailability and a long half-life that
suggest a favorable potential for use in humans. Animal studies of continuous
oral treatment with CS-92 for 145 days produced no apparent toxicity. A similar
treatment with AZT produced preliminary evidence of red blood cell toxicity as
early as 34 days after treatment commenced. In a separate study conducted by the
Company, when animals were given identical daily doses of either AZT or CS-92,
the animals given AZT developed anemia by day 14 while the animals given CS-92
did not. Pharmacokinetic studies have also been conducted with CS-92 in animals.
Oral bioavailability in rats readily yielded viral inhibitory levels in plasma
for a number of hours after dosing. CS-92 also displayed favorable
pharmacokinetic parameters with good oral bioavailability and a longer half-life
than AZT. More detailed animal studies are currently underway.

HBV

BACKGROUND. HBV is the causative agent of both the acute and chronic forms
of hepatitis B, a liver disease that is a major cause of illness and death
throughout the world. HBV can lead to cirrhosis and cancer of the liver. In the
United States approximately 300,000 people become acutely infected each year and
approximately one million people currently are chronic hepatitis B carriers. Of
these, as many as 5,000 die each year as a result of the consequences of this
liver damage. Worldwide, over 300 million people are chronically infected.
Presently, there are over 120 million carriers of hepatitis B in China, of whom
one-fourth may develop chronic illnesses such as cirrhosis and liver cancer.

29
<PAGE>
A vaccine is currently available that can prevent the transmission of HBV;
however, it has no activity in those already infected with the virus. Alpha
interferon, approved for the treatment of HBV, is administered by injection, is
not always successful in controlling the virus and is associated with
significant side-effects, the most common being severe flu-like symptoms. While
a few compounds under development may have some activity in the treatment of HBV
infection, the Company believes it is likely that additional drugs will be
necessary to effectively treat the disease. For example, clinical trials with
3TC to date have shown good tolerance and effective suppression of HBV
replication during the course of treatment. However, virus replication usually
returns after a six month course of therapy has been completed. Studies of more
prolonged therapy are in progress, but antiviral resistance has already been
observed with certain patients.

The Company believes that HBV, like HIV, may be treated more effectively
with combination therapy. Therefore, even if other drugs are approved for the
treatment of HBV, the Company believes there will still be a need for additional
safe and effective oral therapies for chronic HBV that can be used in
combination therapies.

DEVELOPMENT STATUS. Two of the compounds that the Company is developing for
the treatment of HIV, FTC and DAPD, are also being developed for the treatment
of HBV.

FTC. The Company currently intends to initiate Phase I clinical trials with
FTC for the treatment of HBV in 1997. Some of the development activities the
Company plans to undertake with FTC for the treatment of HIV will also be used
by the Company in its development of FTC for the treatment of HBV. See
"--HIV--Development Status--FTC."

FTC has been shown to be a potent inhibitor IN VITRO of HBV replication, and
is synergistic IN VITRO in combination with several types of interferons
approved for the treatment of HBV. The anti-hepatitis activity of FTC has been
demonstrated in a chimeric mouse model and against woodchuck hepatitis virus
("WHV") in naturally infected woodchucks. The infection of the woodchuck results
in a disease state closely resembling that found in humans infected with HBV. In
the woodchuck model, all treated animals had significantly reduced levels of WHV
DNA in their blood. One week after treatment was stopped, WHV levels returned to
pretreatment levels, as is seen with 3TC.

DAPD. The Company currently intends to initiate Phase I clinical trials
with DAPD for the treatment of HBV in late 1997 or early 1998. Some of the
development activities the Company plans to undertake with DAPD for the
treatment of HIV will also be used by the Company in its development of DAPD for
the treatment of HBV. See "--HIV--Development Status--DAPD."

DAPD has been shown to be a potent inhibitor IN VITRO of HBV replication. In
a woodchuck model, DAPD was found to be as active as 3TC when administered for
12 weeks in reducing serum levels of circulating viral DNA.

HERPES SIMPLEX VIRUS

BACKGROUND. Herpes labialis (cold sores), caused by Herpes Simplex Virus
Type-1 ("HSV-1"), is a latent viral infection that is found in approximately 90%
of adults over 30. Once a person is infected, the virus may remain in the body
indefinitely, evading attempts by the immune system to destroy it. In a
recurrent outbreak characterized as "cold sores," the virus reactivates from its
latent state spontaneously or in response to a variety of unpredictable and
unavoidable stimuli, including hormonal changes, stress and exposure to
sunlight. There is no effective cure for HSV-1.

In the United States, there are no prescription or over-the-counter
antiviral products available to treat cold sores for the general population.
Drugs active specifically against HSV-1, such as acyclovir, foscarnet and
gancyclovir, are approved for the treatment of oral cold sores in the United
States only in patients with severely weakened immune systems. In Europe,
topical acyclovir is approved for the treatment of cold sores in the general
population. In addition, penciclovir cream for the topical treatment of cold
sores was recently launched in the United Kingdom. The recommended application
schedule, every two hours, may present a challenge to patient compliance and the
Company believes there is an opportunity for medications with improved
compliance profiles.

30
<PAGE>
Genital herpes, caused by Herpes Simplex Virus Type 2 ("HSV-2"), is one of
the most common sexually transmitted diseases. In the United States, it is
estimated that there are between 500,000 and one million new cases annually and
that as many as 60 million individuals show evidence of prior infection of
HSV-2. About one-third of patients infected with HSV-2 have recurring episodes
of painful genital ulcerations, which in most cases heal in three to ten days.
Systemic treatment with acyclovir and, more recently, famciclovir and
valacyclovir, is effective against most strains of HSV-2. However, in patients
with weakened immune systems, such as AIDS patients, the healing of genital
ulcerations may be prolonged, persisting for weeks or even months. Resistance to
acyclovir is common in these patients because the virus has mutated to avoid the
required biochemical step needed to activate the drug. Approved and experimental
therapies to treat these resistant viruses are either inconvenient to administer
or are associated with potentially significant toxicologic profiles.

DEVELOPMENT STATUS OF ACYCLOVIR MONOPHOSPHATE. The Company is developing a
topical formulation of acyclovir monophosphate ("ACVMP") for acyclovir-resistant
herpes virus infections and for herpes labialis. ACVMP is a monophosphate
derivative of the nucleoside acyclovir. The Company currently intends to begin
Phase I clinical trials with a topical formulation of ACVMP for
acyclovir-resistant herpes virus infections and for herpes labialis in 1997.
Triangle has licensed worldwide rights to ACVMP from Dr. Karl Hostetler, a
director of the Company and a member of its Scientific Advisory Board.

Acyclovir requires the addition of three phosphates to produce the form
active against herpes viruses. Normally, the first phosphate is added
("phosphorylation") by a virus-specific enzyme known as thymidine kinase, which
produces ACVMP. Once ACVMP is produced, non-viral host cell enzymes add two
additional phosphate groups to the molecule to produce acyclovir triphosphate,
which is the active antiviral. Mutations in some herpes viruses, particularly
those in patients with weakened immune systems, result in a virus that either
lacks or has deficient levels of the enzyme thymidine kinase. These viruses do
not perform the critical first phosphorylation and are therefore resistant to
acyclovir. The administration of ACVMP overcomes this resistance because ACVMP
is provided to the cell in an activated form.

Previously conducted IN VITRO studies suggested that nucleotides like ACVMP
were not able to penetrate cell membranes Dr. Hostetler discovered, however,
that ACVMP applied topically was effective in treating experimental infections
with acyclovir-resistant herpes viruses in mice and guinea pigs, thus
demonstrating that preformed monophosphates could be useful topical agents.
Efficacy was superior to that of topically administered acyclovir in mouse
models of acyclovir-resistant infection. ACVMP significantly reduced viral
replication when applied vaginally and topically to the perigenital skin in the
guinea pig genital herpes model, and ACVMP was also effective against a
cutaneous model of human herpes virus infections when applied topically to mice.
Efficacy was also superior to that of topical acyclovir for several strains of
HSV-1, including strains of acyclovir-resistant virus. In both the mouse and
guinea pig studies, ACVMP was well tolerated when applied three times a day for
three to seven days.

CANCER PROGRAM

BACKGROUND. Cancer, which can occur in almost any part of the body, is a
major cause of death in developed countries. In the United States, approximately
1.3 million new cases of cancer are diagnosed annually, and more than 1,500
people die of cancer each day. Colorectal, breast, prostate and lung cancer
account for approximately half of all diagnoses.

Treatments currently approved for cancer vary greatly depending on where the
disease originates in the body and the extent of the disease at the time of
treatment. The three conventional modes of treatment are radiation therapy,
chemotherapy and surgery. Radiation therapy and chemotherapy often have
significant negative side effects that may include nausea, hair loss, liver
toxicity, extreme fatigue and lowered resistance to infection. Both forms of
therapy generally require repeated treatments over extended periods of time. If
the disease recurs in a patient following these therapies, it is frequently
impossible to repeat the treatment because the recurring cancer will have
developed resistance to the form of treatment used (either drug or radiation),
or the patient will have received maximum levels of radiation. Surgery does not
cause the same side effects as radiation therapy or

31
<PAGE>
chemotherapy and is considered the treatment of choice for many cancers;
however, many patients are not eligible for surgery because of the location of
the cancerous tissue or their physical condition. Even for those patients who
are not subject to these limits, surgery can be traumatic and can require long
recovery periods. For most advanced stages of cancer, current therapies provide
only short-term benefit and the majority of patients die of their disease within
a few months to a few years.

Non-small cell lung cancer ("NSCLC") is a highly fatal disease caused
predominately by smoking. Approximately 100,000 people are diagnosed with the
disease in the United States each year and their prognoses are typically very
poor. Surgery and radiation are the treatments of choice for NSCLC, but result
in only about ten percent five-year survival rates. For the 70% of patients
whose tumors are not amenable to surgical removal, median survival rates are
measured in months. Chemotherapeutic agents are marginally effective in
extending survival in the early stages of the disease and are used primarily to
relieve symptoms and sometimes shrink tumors to provide short-term benefit.
Antitumor agents generally do not provide significantly prolonged benefit to
NSCLC patients during their later stages of disease.

The drug options for treating brain cancer are also limited. Approximately
13,500 patients in the United States develop primary brain tumors each year, and
the currently approved chemotherapeutic agents lack specificity, resulting in
dose-limiting toxicities.

DEVELOPMENT STATUS OF ALANOSINE. The Company is funding Phase II pilot
efficacy studies with alanosine that will be conducted by the University of
California, San Diego for the treatment of NSCLC and brain cancers that lack the
enzyme methylthioadenosine phosphorylase ("MTAP"). These clinical trials are
currently scheduled to begin before the end of 1996.

Alanosine is an amino acid analogue derived from STREPTOMYCES ALANOSINICUS.
Triangle has obtained an option from the Regents that expires in September 1998
(with an option for Triangle to extend the exercise period for one year) for a
worldwide license to use alanosine in treating various cancers lacking the
enzyme MTAP.

Alanosine has antitumor activity based upon its ability to interfere with
the synthesis of adenosine, a molecule necessary for cellular growth and
activity. Cells have only two methods of making adenosine: by DE NOVO synthesis
and by the "salvage pathway." Alanosine interferes with the DE NOVO synthesis of
adenosine in both malignant and normal cells. In cancer cells that lack the
enzyme MTAP (a required enzyme in the salvage pathway), alanosine will deprive
such cancer cells but not normal cells of all means to make adenosine.

Alanosine was evaluated in Phase I and Phase II clinical trials at the
National Cancer Institute ("NCI") during the early 1980's. The trials were
discontinued because alanosine caused toxicity typically associated with
chemotherapy and did not produce significant response rates in common tumors
such as breast or colon cancers. Recently, investigators at the University of
California, San Diego discovered that malignant cells from certain cancer
patients lack MTAP. The enzyme deficiency occurs in up to 30% of NSCLCs and up
to 75% of primary brain tumors. It is absent in a lower percentage of patients
with leukemias, lymphomas, melanomas, breast cancer and renal adenocarcinomas.
The Company believes that the growth of these MTAP-deficient tumors should be
inhibited by alanosine.

A laboratory test has been developed to identify in tumor biopsy tissue
those cancers that lack MTAP and therefore are most likely to respond to therapy
with alanosine. The NCI has already conducted dose-escalating studies and
established dose-limiting toxicities. Triangle intends to attempt to
recharacterize alanosine by using advanced molecular biological techniques to
select the patients most likely to respond to alanosine: those with malignant
cancer cells that lack MTAP.

PSORIASIS PROGRAM

BACKGROUND. Psoriasis is a chronic condition of the skin manifested by
scaly patches, which may cause itching. The disease affects an estimated two
percent of the world's population, including approximately five million people
in the United States. It is characterized by spontaneous remissions, but
relapses are common. Although it is not

32
<PAGE>
usually a life-threatening condition, psoriasis causes significant psychological
distress to those affected who may feel ostracized because of their physical
appearance. In severe cases, patients suffer from extensive skin damage and, in
some cases, arthritis. There is no known cure for psoriasis and sufferers are
often treated for each recurrent episode.

Treatments for psoriasis, though varied, are generally of only short-term
benefit. They range from topical therapy for milder symptoms, including
steroids, Vitamin D derivatives, coal tars and emollients, to phototherapy and
more toxic systemic treatments for more severe cases, such as cyclosporine,
tretinoin and methotrexate.

DEVELOPMENT STATUS OF 2-CDAP. The Company currently intends to initiate
Phase I clinical trials with a topical formulation of 2-CdAP for the treatment
of psoriasis in the second half of 1997. 2-CdAP is a derivative of 2-CdA
(cladribine), a potent immunosuppressive and anti-proliferative agent that is
currently an approved drug and the treatment of choice for hairy cell leukemia.
Triangle has licensed worldwide rights to the topical administration of 2-CdAP
from Dr. Karl Hostetler and Dr. Dennis Carson.

In a recent clinical trial, seven patients with psoriasis enrolled in a
three month study of oral 2-CdA. Of six patients completing therapy, skin
lesions improved in five (two dramatic responses) and joint disease improved in
four. However, immunosuppression occurred in all patients and an opportunistic
infection occurred in one patient.

Recent experiments have shown that complex polynucleotides administered
topically are absorbed by cells such as keratinocytes and macrophages within the
superficial skin. Based on these findings, the Company believes that topical
mononucleotides such as 2-CdAP will also penetrate the skin. If this occurs, the
Company believes that the therapeutic utility of 2-CdAP in psoriasis would
result from its ability to gain direct access to hyperproliferating
keratinocytes in a form that would be rapidly effective. The Company believes
that 2-CdAP should also penetrate lymphocytes found in the psoriatic skin,
killing them without producing systemic toxicity. The Company believes that
systemic toxicity is unlikely to occur because of the small amount of drug that
would enter the bloodstream.

License and Option Agreements

The Company has entered into an option agreement with Mitsubishi with
respect to the acquisition of certain license rights to MKC-442. The Company has
licensed FTC from Emory and DAPD and CS-92 from Emory and UGARF. The Company has
licensed ACVMP from Dr. Karl Hostetler and 2-CdAP from Dr. Karl Hostetler and
Dr. Dennis Carson. The Company has entered into an option agreement with the
Regents with respect to the acquisition of certain license rights to alanosine.
See "Risk Factors--Risks Relating to License and Option Agreements."

MITSUBISHI CHEMICAL CORPORATION

In December 1995, the Company entered into an option agreement with
Mitsubishi pursuant to which Mitsubishi granted the Company an option through
December 1997 to obtain an exclusive license to MKC-442. If the option is
exercised by the Company, the license will include all countries of the world
except certain countries in East Asia, including China, Japan and Korea. Under
the option agreement, Triangle has agreed to perform preclinical testing and
initial Phase I and Phase IIa clinical trials with MKC-442. Mitsubishi has
agreed to fund up to $1.6 million of the development costs incurred by Triangle
in connection with engaging an authorized CRO and to supply certain preclinical
testing and clinical trial material used by Triangle at Mitsubishi's expense.
The Company is obligated to hold Mitsubishi harmless against any claims or
losses incurred as a result of the Company's conducting such preclinical testing
and clinical trials. Mitsubishi has the right to terminate the option agreement
upon three months' notice for scientific or clinical reasons after consultation
with the Company. Additional termination events include an uncured breach of the
option agreement by the Company. The termination of the option agreement could
have a material adverse effect on the Company.

If the Company exercises its option, the Company will be required to pay a
license initiation fee and make certain milestone and royalty payments,
including minimum annual royalty payments, to Mitsubishi. At Mitsubishi's
option, certain of these payments may be made in the form of the Company's
capital stock. The Company will also be required to meet certain milestone
obligations and conduct certain development work with respect to

33
<PAGE>
MKC-442. Upon the Company's request, Mitsubishi will supply the Company with
MKC-442 for formulation of drug substance under the terms of a separate supply
and purchase agreement to be separately negotiated, and any purchases of MKC-442
by the Company will be credited to the Company's minimum annual royalty
obligation. Mitsubishi would have the right to terminate the license agreement
if the Company does not satisfy certain milestone obligations or does not cure
any material breach of the license agreement. The failure of the Company to
enter into the license agreement or the termination of the license agreement
could have a material adverse effect on the Company.

EMORY UNIVERSITY AND UNIVERSITY OF GEORGIA RESEARCH FOUNDATION, INC.

FTC. In April 1996, the Company entered into a license agreement with Emory
pursuant to which the Company received an exclusive worldwide license to all of
Emory's rights to purified forms of FTC (the "FTC Technology") for use in the
HIV and HBV fields. As consideration for the exclusive license of the FTC
Technology, the Company issued shares of Common Stock and agreed to pay certain
license fees, several installments of which have already been paid. In addition,
the Company agreed to make certain milestone and royalty payments to Emory.
Beginning the third year after the first FDA registration is granted for an
anti-HIV product incorporating the FTC Technology in the United States and after
the first registration is granted for an anti-HBV product incorporating the FTC
Technology in certain major market countries, the Company will be required to
pay Emory minimum annual royalties for the HIV and HBV indications,
respectively. Under the license agreement, Emory is primarily responsible for
prosecuting all patents related to the FTC Technology. The Company agreed to
reimburse Emory for the patent prosecution costs it incurs after December 1996.
The Company has the right to pursue any actions against third parties for
infringement of the FTC Technology at the Company's expense. Upon the conclusion
of any such infringement action, the Company is entitled to offset its
unrecovered expenses incurred in connection with the infringement action against
any milestone payments and royalties that were owing to Emory during the time
the infringement action was pending. In addition, the Company is obligated to
defend, indemnify and hold harmless Emory and certain of its representatives
against any claims or losses incurred as a result of the Company's
manufacturing, testing, design, use and sale of products utilizing the FTC
Technology. Emory has the right to terminate the license agreement or to convert
the exclusive license to a nonexclusive license in the event the Company does
not satisfy certain milestone obligations. Emory may also terminate the license
agreement upon an uncured breach of the agreement by the Company. In the event
of such termination or conversion, the Company will grant Emory certain
nonexclusive, royalty-free license rights in all intellectual property under the
Company's control relating to the FTC Technology necessary for the marketing of
products incorporating the FTC Technology. The termination of the license
agreement or the conversion from an exclusive to a nonexclusive agreement could
have a material adverse effect on the Company.

DAPD. In March 1996, the Company entered into a license agreement with
Emory and UGARF pursuant to which the Company received an exclusive worldwide
license to all of Emory's and UGARF's rights to a series of nucleoside analogues
including DAPD and DXG (the "DAPD Technology") for use in the HIV and HBV
fields. As consideration for the exclusive license of the DAPD Technology, the
Company issued shares of Common Stock to Emory and UGARF. In addition, the
Company agreed to make certain milestone and royalty payments to Emory and
UGARF. The Company is required to pay license maintenance fees beginning March
1999 in the event certain development milestones have not been achieved.
Beginning the third year after the first FDA registration is granted for an
FDA-approved product incorporating the DAPD Technology, the Company will be
required to pay Emory and UGARF a minimum annual royalty. Under the license
agreement, Emory and UGARF are primarily responsible for prosecuting all patents
related to the DAPD Technology. The Company agreed to reimburse Emory and UGARF
for the patent prosecution costs they incur after the date of the license
agreement. The Company has the right to pursue any actions against third parties
for infringement of the DAPD Technology at the Company's expense. Upon the
conclusion of any such infringement action, the Company is entitled to offset
its unrecovered expenses incurred in connection with the infringement action
against any milestone payments and royalties that were owing to Emory and UGARF
during the time the infringement action was pending. In addition, the Company is
obligated to defend, indemnify and hold harmless Emory, UGARF and certain of
their representatives against any claims or losses incurred as a result of the
Company's manufacturing, testing, design, use and sale of products utilizing the
DAPD

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Technology. Emory and UGARF have the right to terminate the license agreement or
to convert the exclusive license to a nonexclusive license in the event the
Company does not satisfy certain milestone obligations. Emory and UGARF may also
terminate the license agreement upon an uncured breach of the agreement by the
Company. In the event of such termination or conversion, the Company will grant
Emory and UGARF certain nonexclusive, royalty-free license rights in all
intellectual property under the Company's control relating to the DAPD
Technology necessary for the marketing of products incorporating the DAPD
Technology. The termination of the license agreement or the conversion from an
exclusive to a nonexclusive agreement could have a material adverse effect on
the Company.

CS-92. In March 1996, the Company entered into a license agreement with
Emory and UGARF pursuant to which the Company received an exclusive worldwide
license to all of Emory's and UGARF's rights to CS-92 (the "CS-92 Technology")
for use in the HIV field. As consideration for the exclusive license of the
CS-92 Technology, the Company issued shares of Common Stock to Emory and UGARF.
In addition, the Company agreed to make certain milestone and royalty payments
to Emory and UGARF. The Company is required to pay license maintenance fees
beginning March 1999 in the event certain development milestones have not been
achieved. Beginning the third year after the first FDA registration is granted
for an FDA-approved product incorporating the CS-92 Technology, the Company will
be required to pay Emory and UGARF a minimum annual royalty. Under the license
agreement, Emory and UGARF are primarily responsible for prosecuting all patents
related to the CS-92 Technology. The Company agreed to reimburse Emory and UGARF
for the patent prosecution costs they incur after the date of the license
agreement. The Company has the right to pursue any actions against third parties
for infringement of the CS-92 Technology at the Company's expense. Upon the
conclusion of any such infringement action, the Company is entitled to offset
its unrecovered expenses incurred in connection with the infringement action
against any milestone payments and royalties that were owing to Emory and UGARF
during the time the infringement action was pending. In addition, the Company is
obligated to defend, indemnify and hold harmless Emory, UGARF and certain of
their representatives against any claims or losses incurred as a result of the
Company's manufacturing, testing, design, use and sale of products utilizing the
CS-92 Technology. Emory and UGARF have the right to terminate the license
agreement or to convert the exclusive license to a nonexclusive license in the
event the Company does not satisfy certain milestone obligations. Emory and
UGARF may also terminate the license agreement upon an uncured breach of the
agreement by the Company. In the event of such termination or conversion, the
Company will grant Emory and UGARF certain nonexclusive, royalty-free license
rights in all intellectual property under the Company's control relating to the
CS-92 Technology necessary for the marketing of products incorporating the CS-92
Technology. The termination of the license agreement or the conversion from an
exclusive to a nonexclusive agreement could have a material adverse effect on
the Company.

DRS. HOSTETLER AND CARSON

In November 1995, the Company entered into a license agreement with Dr. Karl
Hostetler and Dr. Dennis Carson pursuant to which Dr. Hostetler granted the
Company an exclusive worldwide license to his rights to ACVMP and Drs. Hostetler
and Carson granted the Company an exclusive worldwide license to their rights to
2-CdAP (the "ACVMP and 2-CdAP Technologies"). As consideration for the exclusive
license of the ACVMP and 2-CdAP Technologies, the Company sold shares of Common
Stock to Drs. Hostetler and Carson. The interests of Drs. Hostetler and Carson
in the shares of Common Stock vest over time as they continue to serve as
consultants to the Company. The Company also agreed to make certain milestone
and royalty payments to Drs. Hostetler and Carson. The Company is obligated to
hold harmless Drs. Hostetler and Carson against any claims or losses caused by
or arising out of the Company's use of the ACVMP and 2-CdAP Technologies. Drs.
Hostetler and Carson have the right to terminate the license agreement or
convert the exclusive license to a nonexclusive license in the event that the
Company does not satisfy certain development, marketing and milestone
obligations. Additional termination events include the failure of the Company to
pay royalties to Drs. Hostetler and Carson when due. The termination of the
license agreement or the conversion from an exclusive to a nonexclusive
agreement could have a material adverse effect on the Company.

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THE REGENTS OF THE UNIVERSITY OF CALIFORNIA

In September 1996, the Company entered into an option agreement with the
Regents pursuant to which the Regents granted the Company an option through
September 1, 1998 (with an option to extend the exercise period for one year),
to obtain an exclusive worldwide license to all of the Regents' rights to
alanosine and related technologies (the "Alanosine Technology") for use in the
treatment of various cancers lacking the enzyme MTAP. As consideration for the
grant of the option, the Company agreed to pay the Regents certain option fees.
In the event the Company exercises the option, the Company will be required to
pay a license initiation fee and annual license maintenance fees. The Company
will also be required to make certain milestone and royalty payments to the
Regents, including minimum annual royalties. The Regents are primarily
responsible for prosecuting all patents and initiating infringement actions
related to the Alanosine Technology (and will remain primarily responsible for
patent prosecution and infringement actions if the Company exercises the
option). The Company has agreed to reimburse the Regents for all patent
prosecution costs they incur. In addition, the Company is obligated to defend,
indemnify and hold harmless the Regents and certain of their representatives
against any claims or losses incurred as a result of the Company's exercise of
its rights under the option agreement.

The Company also entered into a sponsored research agreement (the "Research
Agreement") with the Regents whereby the Company has agreed to provide
approximately $450,000 to fund two clinical trials to be conducted by the
University of California, San Diego. The clinical trials will be pilot Phase II
clinical studies to assess the efficacy of alanosine in the treatment of NSCLC
and brain cancers. Either the Regents or the Company may terminate a study upon
the uncured breach of the Research Agreement by the other party. In the event
both studies are terminated under the Research Agreement (other than for reasons
of the uncured breach on the part of the Regents), the Company's rights under
the option agreement would be terminated. The termination of the Company's
rights under the option agreement, the failure of the Company to enter into the
related license agreement or the termination of the license agreement could have
a material adverse effect on the Company.

Patents and Proprietary Rights

The Company's success will depend in large part on the ability of the
Company and its licensors to obtain patent protection with respect to its drug
candidates, defend patents once obtained, maintain trade secrets and operate
without infringing upon the patents and proprietary rights of others and to
obtain appropriate licenses to patents or proprietary rights held by third
parties, with respect to its drug candidates, both in the United States and in
foreign countries. The Company has no patents in its own name or patent
applications of its own pending, but has obtained licenses to patents and other
proprietary rights from third parties with respect to each of the Company's
seven drug candidates.

A number of pharmaceutical companies, biotechnology companies, universities
and research institutions have filed patent applications or received patents to
technologies that cover or are similar to the technologies licensed by the
Company. The Company is aware of certain patent applications previously filed by
and patents already issued to others that conflict with patents or patent
applications licensed to the Company either by claiming the same methods or
compounds or by claiming methods or compounds that could dominate those licensed
to the Company. In addition, there can be no assurance that the Company is aware
of all patents or patent applications that may materially affect the Company's
ability to make, use or sell any products. United States patent applications are

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confidential while pending in the PTO, and patent applications filed in foreign
countries are often first published six months or more after filing. Any
conflicts resulting from third party patent applications and patents could
significantly reduce the coverage of the patents licensed to the Company and
limit the ability of the Company or its licensors to obtain meaningful patent
protection. If patents are issued to other companies that contain competitive or
conflicting claims, the Company may be required to obtain licenses to these
patents or to develop or obtain alternative technology. There can be no
assurance that the Company will be able to obtain any such license on acceptable
terms or at all. If such licenses are not obtained, the Company could be delayed
in or prevented from pursuing the development or commercialization of its drug
candidates, which would have a material adverse effect on the Company.

FTC

The Company obtained its rights to purified forms of FTC under a license
from Emory. In 1990 and 1991, Emory filed in the United States and thereafter in
numerous foreign countries patent applications with claims to composition of
matter and methods to treat HIV and HBV with FTC. Yale filed patent applications
on FTC and its use to treat HBV in 1991 in the United States, and subsequently
licensed its rights under those patent applications to Emory. The Company's
license arrangement with Emory includes all rights under the Yale patent
applications. FTC belongs to the same general class of nucleosides as 3TC, which
was recently approved in the United States by the FDA for use in combination
with AZT for the treatment of HIV. 3TC is currently being sold by Glaxo for the
treatment of HIV under a license agreement with BioChem Pharma.

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to January 1, 1996 with respect to obtaining United States patents as compared
to companies that maintain research facilities in the United States. The Company
does not know whether Emory or BioChem Pharma was the first to invent the
subject matter claimed in their respective United States patent applications or
patents, or whether BioChem Pharma invented the technology disclosed in its
patent applications in the United States or introduced that technology in the
United States before the date of its patent applications. In foreign countries,
the first party to file a patent application on an invention, not the first to
invent the subject matter, is entitled to patent protection on that invention.
While the Company believes that Emory's patent applications that disclosed FTC
as a useful anti-HIV agent were filed in foreign countries before BioChem Pharma
filed its foreign patent applications on that subject matter, BioChem Pharma has
been issued patents in several foreign countries. There can be no assurance that
Emory will initiate or be successful in any foreign proceeding attempting to
revoke patents issued to BioChem Pharma or addressing the relative rights of
BioChem Pharma and Emory. BioChem Pharma has opposed patent claims on FTC
recently granted to Emory in Japan and Australia. There can be no assurance that
BioChem Pharma will not make additional challenges to any Emory patents or
patent applications, or that Emory will succeed in defending any such
challenges. There can be no assurance that the sale of FTC by the Company for
the treatment of HIV would not be held to infringe United States and foreign
patent rights of BioChem Pharma. Under the patent laws of most countries, a
product can be found to infringe a third party patent either if the third party
patent expressly covers the product or method of treatment using the product, or
in certain circumstances, if the third party patent, while not expressly
covering the product or method, covers subject matter that is substantially
equivalent in nature to the product or method. If it is determined that the sale
of FTC for the treatment of HIV infringes a BioChem Pharma patent, the Company
would not have the right to make, use or sell FTC for the treatment of HIV in
one or more countries in the absence of a license from BioChem Pharma. There can
be no assurance that the Company could obtain a license from BioChem Pharma on
acceptable terms or at all.

HBV. Burroughs Wellcome filed patent applications in March and May 1991 in
Great Britain on a method to treat HBV with FTC. Burroughs Wellcome filed
similar patent applications in other countries, which the Company believes
includes the United States. Glaxo subsequently acquired Burroughs Wellcome's
rights under those patent applications. Those applications were filed in foreign
countries prior to the date Emory filed its patent application on the use of FTC
to treat HBV, and therefore, the foreign patent applications filed by Burroughs
Wellcome have priority over those filed by Emory. In July 1996, Emory instituted
litigation against Glaxo in the United States District Court to obtain ownership
of the patent applications filed by Burroughs Wellcome, alleging that Burroughs
Wellcome converted and misappropriated Emory's invention and property, and that
an Emory employee is the inventor or a co-inventor of the subject matter covered
by the Burroughs Wellcome patent applications. There can be no assurance that
Emory will succeed in its efforts to establish ownership rights. If Emory fails
to establish ownership rights, the Company could not make, use or sell FTC for
the treatment of HBV in countries in which patents are issued to Glaxo without a
license from Glaxo. If Emory establishes only co-ownership rights (and not sole
ownership) to these patents and patent applications, laws in Europe, Korea and
perhaps other countries could prohibit Emory from licensing any co-owned patent
rights without Glaxo's consent. If the Company is required to obtain a license
from Glaxo to sell FTC for the treatment of HBV, there can be no assurance that
the Company would be able to obtain such a license on acceptable terms or at
all.

BioChem Pharma filed a patent application in May 1991 in Great Britain also
directed to a method to treat HBV with FTC. BioChem Pharma filed similar patent
applications in other countries and in January 1996, was issued a patent in the
United States. Emory has informed the Company that Emory intends to challenge
BioChem Pharma's issued United States patent. There can be no assurance that
Emory will pursue or succeed in any such proceeding. The Company cannot sell FTC
for the treatment of HBV in the United States unless the BioChem Pharma patent
is held invalid by a United States court or administrative body or unless the
Company obtains a license from Biochem Pharma. There can be no assurance that
the Company would be able to obtain such a license on acceptable terms or at
all. In July 1991, BioChem Pharma was issued a United States patent on the use
of 3TC to treat HBV and has corresponding applications pending or issued in
foreign countries. If it is determined that the use of FTC to treat HBV is not
substantially different from the use of 3TC to treat HBV, a court could hold
that the use of FTC to treat HBV infringes these BioChem Pharma 3TC patents.

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In addition, BioChem Pharma has filed in the United States and foreign
countries several patent applications on manufacturing methods relating to a
class of nucleosides that includes FTC. If the Company uses a manufacturing
method that is covered by patents issuing on any of these applications, the
Company would not be able to manufacture FTC without a license from BioChem
Pharma. There can be no assurance that the Company would be able to obtain such
a license on acceptable terms or at all.

DAPD

The Company obtained its rights to DAPD under a license from Emory and
UGARF. The DAPD portfolio licensed to the Company consists of two issued United
States patents and several United States and foreign patent applications that
cover a method for the synthesis of DAPD and its use to treat HIV and HBV. Emory
and UGARF filed patent applications claiming these inventions in the United
States in 1990, 1992 and 1993, respectively. BioChem Pharma filed a patent
application in the United States in 1988 on a group of nucleosides in the same
general class as DAPD and their use to treat HIV, and has filed corresponding
patent applications in foreign countries. The PTO issued a patent to BioChem
Pharma in 1993 covering a class of nucleosides that includes DAPD and its use to
treat HIV. Corresponding patents have been issued to BioChem Pharma in many
foreign countries. Emory has filed an opposition to BioChem Pharma's granted
patent application in the European Patent Office based, in part, upon Emory's
assertion that BioChem Pharma's patent does not disclose how to make DAPD, and
Emory has informed the Company that Emory intends to challenge BioChem Pharma's
patents and patent applications in other countries. However, there can be no
assurance that a court or administrative body would invalidate BioChem Pharma's
patent claims or that a sale of DAPD by the Company would not infringe BioChem
Pharma's patents. If Emory, UGARF and the Company do not challenge, or are not
successful in any challenge to, BioChem Pharma's issued patents or pending
patent applications (or patents that may issue as a result of such
applications), the Company will not be able to manufacture, use or sell DAPD in
the United States and any foreign countries in which BioChem Pharma receives a
patent without a license from BioChem Pharma. There can be no assurance that the
Company would be able to obtain a license from BioChem Pharma on acceptable
terms or at all.

CS-92

The Company obtained its rights to CS-92 under a license from Emory and
UGARF. Emory and UGARF have obtained two United States patents that cover CS-92
and its use to treat HIV, and have filed a European patent application and a
Japanese patent application with claims limited to the use of CS-92 as a method
for administering AZT, which includes the administration of CS-92 as a precursor
form of AZT, to treat HIV infection. Burroughs Wellcome filed an application
with the European Patent Office in September 1986 directed to a broad group of
nucleosides that includes CS-92, and their use to treat HIV infection. Burroughs
Wellcome subsequently filed similar applications in other countries, and the
Company believes Burroughs Wellcome filed a similar patent application in the
United States. Patents have been issued to Burroughs Wellcome in certain
countries based upon these patent applications. Glaxo now has the rights to
these patents and patent applications. There can be no assurance that, if
challenged, a court would uphold the Emory/UGARF patents in light of the
disclosures contained in the earlier filed Burroughs Wellcome patent
applications. In addition, CS-92 is metabolized to AZT in cell lines IN VITRO,
and based on that, the Company believes that it may likewise be converted to AZT
IN VIVO. A court could hold that United States and foreign patents owned by
Glaxo covering the use of AZT to treat HIV infection would be infringed by the
sale of CS-92 to treat HIV infection. If the use of CS-92 is found to infringe
the patents owned by Glaxo, then the Company would not have the right to sell
CS-92 in one or more countries without a license from Glaxo. There can be no
assurance that the Company would be able to obtain a license from Glaxo on
acceptable terms or at all.

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Litigation, which could result in substantial cost to the Company, may be
necessary to enforce any patents to which the Company has rights or to determine
the scope, validity and enforceability of other parties' proprietary rights,
which may affect the Company's drug candidates and technology. United States
patents carry a presumption of validity and generally can be invalidated only
through clear and convincing evidence. The Company's licensors may also have to
participate in interference proceedings declared by the PTO to determine the
priority of an invention, which could result in substantial cost to the Company.
There can be no assurance that the Company's licensed patents would be held
valid by a court or administrative body or that an alleged infringer would be
found to be infringing. Further, with respect to the drug candidates licensed or
optioned by the Company from Emory, UGARF and the Regents, Emory, UGARF and the
Regents are primarily responsible for any litigation, interference, opposition
or other action pertaining to patents or patent applications related to the
licensed technology and the Company is required to reimburse them for the costs
they incur in performing these activities. As a result, the Company generally
does not have the ability to institute or determine the conduct of any such
patent proceedings unless Emory, UGARF and/or the Regents do not elect to
institute or elect to abandon such proceedings. In cases where Emory, UGARF
and/or the Regents elect to institute and prosecute patent proceedings, the
Company's rights will be dependent in part upon the manner in which Emory, UGARF
and/or the Regents conduct the proceedings. Emory, UGARF and/or the Regents
could, in any of these proceedings they elect to initiate and maintain, elect
not to vigorously pursue or defend or to settle such proceedings on terms that
are not favorable to the Company. An adverse outcome in any patent litigation or
interference proceeding could subject the Company to significant liabilities to
third parties, require disputed rights to be licensed from third parties or
require the Company to cease using such technology, any of which could have a
material adverse effect on the Company. Moreover, the mere uncertainty resulting
from the institution and continuation of any technology-related litigation or
interference proceeding could have a material adverse effect on the Company
pending resolution of the disputed matters.

Government Regulation

The manufacturing and marketing of Triangle's products and its ongoing
development activities are subject to extensive regulation by numerous
governmental authorities in the United States and other countries. See "Risk
Factors--Extensive Government Regulation; No Assurance of Regulatory Approval."

FDA APPROVAL

In the United States, pharmaceuticals are subject to rigorous FDA
regulation. The Federal Food, Drug and Cosmetic Act governs the testing,
manufacture, approval, labeling, storage, record keeping, advertising and

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promotion of Triangle's drug candidates and any products that Triangle may
successfully develop. Product development and approval within this regulatory
framework takes a number of years and involves the expenditure of substantial
resources.

The steps required before a new prescription drug may be marketed in the
United States include (i) preclinical laboratory and animal tests, (ii) the
submission to the FDA of an IND, which must be evaluated and found acceptable by
the FDA before human clinical trials may commence, (iii) adequate and
well-controlled human clinical trials to establish the safety and effectiveness
of the drug, (iv) the submission of an NDA to the FDA and (v) FDA approval of
the NDA. Prior to obtaining FDA approval of an NDA, the facilities that will be
used to manufacture the drug must undergo a preapproval inspection to ensure
compliance with the FDA's Good Manufacturing Practices ("GMP") regulations. A
company must also pay a one-time user fee for NDA submissions and pay annual
user fees for each approved product and manufacturing establishment.

Preclinical tests include laboratory evaluation of product chemistry and
animal studies to assess the safety and effectiveness of the product and its
formulation. The results of the preclinical tests are submitted to the FDA as
part of an IND, and unless the FDA objects, the IND will become effective 30
days following its receipt by the FDA. If the FDA has concerns about the
proposed clinical trial, it may delay the trial and require modifications to the
trial protocol prior to permitting the trial to begin. As a result, there can be
no assurance that the FDA will permit a proposed IND to become effective.

Clinical trials involve the administration of the pharmaceutical product to
healthy volunteers or to patients identified as having the condition for which
the pharmaceutical is being tested. The pharmaceutical is administered under the
supervision of a qualified principal investigator. Clinical trials are conducted
in accordance with protocols previously submitted to the FDA as part of the IND
that detail the objectives of the trial, the parameters used to monitor safety
and the efficacy criteria that are being evaluated. Each clinical trial is
conducted under the auspices of an Institutional Review Board ("IRB") at the
institution at which the trial is conducted. The IRB considers, among other
things, ethical factors, the safety of the human subjects and the possible
liability risk for the institution.

Clinical trials are typically conducted in three sequential phases that may
overlap. In Phase I, the initial introduction of the pharmaceutical into healthy
human volunteers, the emphasis is on testing for safety (adverse effects),
dosage tolerance, metabolism, distribution, excretion and clinical pharmacology.
Phase II involves trials in a limited patient population to determine the
effectiveness of the pharmaceutical for specific targeted indications, to
determine dosage tolerance and optimal dosage and to identify possible adverse
side effects and safety risks. In serious diseases such as AIDS or cancer,
patients suffering from the disease rather than healthy volunteers are used in
Phase I trials. In addition, Phase I trials may be divided between Phase Ia, in
which single doses of the drug are given, and Phase Ib, in which multiple doses
are given. In the latter instance, some efficacy data may be obtained if the
subjects are patients suffering from the disease rather than healthy volunteers,
and these trials are referred to as "Phase Ib/IIa." After a compound has been
shown in Phase II trials to have an acceptable safety profile and probable
effectiveness, Phase III trials are undertaken to evaluate clinical
effectiveness further and to further test for safety within an expanded patient
population at multiple clinical study sites. The FDA reviews both the clinical
trial plans and the results of the trials at each phase and may discontinue the
trials at any time if there are significant safety issues.

The results of the preclinical tests and clinical trials are submitted to
the FDA in the form of an NDA for marketing approval. The testing and approval
process is likely to require substantial time and effort and there can be no
assurance that any approval will be granted on a timely basis or at all. The
approval process is affected by a number of factors, including the severity of
the disease, the availability of alternative treatments and the risks and
benefits demonstrated in clinical trials. Additional animal studies or clinical
trials may be requested during the FDA review process and may delay marketing
approval. Upon approval, a drug may be marketed only for the approved
indications in the approved dosage forms. Further clinical trials would be
necessary to gain approval for the use of the product for any additional
indications or dosage forms. The FDA may also require post-marketing testing to
monitor for adverse effects, which can involve significant expense.

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A company may conduct clinical trials outside of the United States, using a
product manufactured outside the country, and in some circumstances manufactured
within the United States, without an IND. The FDA will accept data from foreign
clinical trials to support clinical investigations in the United States and/or
approval of an NDA only if the agency determines that the trials are
well-designed, well-conducted, performed by qualified investigators, and
conducted in accordance with internationally recognized ethical principles. The
Company is currently conducting a Phase Ib/IIa clinical trial in Europe for
MKC-442, for which an IND has not been submitted to FDA. Triangle intends to
conduct clinical trials with some of its other drug candidates in Europe as
well. There can be no assurance that clinical trials conducted in either the
United States or foreign countries will demonstrate that any potential products
under development by the Company are safe and effective, or that the FDA will
not require additional clinical trials to support approval of an NDA.

The FDA has developed several regulatory procedures to accelerate the
clinical testing and approval of drugs intended to treat serious or
life-threatening illnesses under certain circumstances. For example, in 1988,
the FDA issued regulations to expedite the development, evaluation and marketing
of drugs for life-threatening and severely debilitating illnesses, especially
where no alternative therapy exists (the "1988 Regulations"). These procedures
encourage early consultation between the IND sponsors and the FDA in the
preclinical testing and clinical trial phases to determine what evidence will be
necessary for marketing approval and to assist the sponsors in designing
clinical trials. Under this program, the FDA works closely with the IND sponsors
to accelerate and condense Phase II clinical trials, which may, in some cases,
eliminate the need to conduct Phase III trials or limit the scope of Phase III
trials. Under the 1988 Regulations, the FDA may require postmarketing clinical
trials (Phase IV trials) to obtain additional information on the drug's risks,
benefits and optimal use.

In 1992, the FDA issued regulations establishing an accelerated NDA approval
procedure for certain drugs under Subpart H of the agency's NDA approval
regulations ("Subpart H Regulations"). The Subpart H Regulations provide for
accelerated NDA approval for new drugs intended to treat serious or
life-threatening diseases where the drugs provide a meaningful therapeutic
advantage over existing treatment. Under this accelerated approval procedure,
the FDA may approve a drug based on evidence from adequate and well-controlled
studies of the drug's effect on a surrogate endpoint that reasonably suggest
clinical benefits, or on evidence of the drug's effect on a clinical endpoint
other than survival or irreversible morbidity. This approval is conditional on
the favorable completion of trials to establish and define the degree of
clinical benefits to the patient. Such postmarketing clinical trials would
usually be underway when the product obtains this accelerated approval. If,
after approval, a post-marketing clinical study establishes that the drug does
not perform as expected, or if post-marketing restrictions are not adhered to or
are not adequate to ensure the safe use of the drug, or other evidence
demonstrates that the product is not safe and/or effective under its conditions
of use, the FDA may withdraw approval. The Subpart H accelerated approval
regulation can complement the 1988 Regulations for expediting the development,
evaluation and marketing of drugs. These two procedures for expediting the
clinical evaluation and approval of certain drugs may shorten the drug
development process by as much as two to three years.

The Company believes that MKC-442, FTC, CS-92, DAPD, ACVMP and alanosine may
be candidates for accelerated development and/or approval under the 1988
Regulations and/or the Subpart H Regulations. However, there can be no assurance
that any of these drug candidates or any future drug candidates the Company may
develop ultimately will be eligible for development and/or approval under these
regulations. In addition, there can be no assurance that these drug candidates
or any future drug candidates (if eligible for development and/or approval under
these regulations) will be approved by the FDA for marketing at all or, if
approved for marketing, will be approved for marketing sooner than would be
traditionally expected.

Once the sale of a product is approved, the FDA regulates the manufacturing,
marketing and other activities under the Federal Food, Drug, and Cosmetic Act
and the FDA's implementing regulations. The FDA periodically inspects both
domestic and foreign drug manufacturing facilities to ensure compliance with
applicable GMP regulations and other requirements. In addition, manufacturers in
the United States must register with the FDA and submit a list of every drug in
commercial distribution. Foreign manufacturers are subject only to the drug
listing requirement. The Company does not have or currently intend to develop
the facilities to manufacture its drug candidates in commercial quantities, and
intends to establish relationships with contract manufacturers for the

42
<PAGE>
commercial manufacture of its products. Some of these contract manufacturers may
be located outside the United States. There can be no assurance that the
Company's contract manufacturers will be able to attain or maintain compliance
with GMP regulations. Post-marketing reports are also required to monitor the
product's usage and effects. Product approvals may be withdrawn, or other
actions may be ordered, or sanctions imposed if compliance with regulatory
requirements is not maintained.

Under the Orphan Drug Act, the FDA may grant orphan drug designation to
drugs intended to treat a "rare disease or condition," which generally is a
disease or condition that affects populations of fewer than 200,000 individuals
in the United States. Orphan drug designation must be requested before
submitting an NDA, and after the FDA grants orphan drug designation, the generic
identity of the therapeutic agent and its potential orphan use are publicly
disclosed by the FDA. Under current law, approval of the first NDA for a drug
with orphan drug designation confers United States marketing exclusivity to
market such designated drug for the designated indication for a period of seven
years following approval of the NDA, subject to certain limitations. Orphan drug
designation does not convey any advantage in, or shorten the duration of, the
regulatory approval process.

The Company believes that alanosine, if successfully developed for the
treatment of NSCLC and/or brain cancers, may qualify for orphan drug
designation. There can be no assurance, however, that alanosine or any future
products the Company may develop will be designated as an orphan drug. In
addition, there can be no assurance that alanosine or any future products will
be approved for marketing at all.

FOREIGN REGULATORY APPROVAL AND SALE

Many foreign countries also regulate the clinical testing, manufacturing,
marketing and use of pharmaceutical products. The requirements relating to the
conduct of clinical trials, product approval, manufacturing, marketing, pricing
and reimbursement vary widely from country to country and there can be no
assurance that the Company or any third parties with which the Company may
establish collaborative relationships will be able to attain or maintain
compliance with such requirements.

In addition to the import requirements of foreign countries, a company must
also comply with United States laws governing the export of FDA regulated
products. Pursuant to the FDA Export Reform and Enhancement Act of 1996, a drug
that has not obtained FDA approval may be exported to any country in the world
without FDA authorization if the product both complies with the laws of the
importing country and has obtained valid marketing authorization in one of the
following countries: Australia, Canada, Israel, Japan, New Zealand, Switzerland,
South Africa, the European Union, or a country in the European Economic Area.
The FDA is authorized to add countries to this list in the future. Among other
restrictions, a drug that has not obtained FDA approval may be exported under
the new law only if it is not adulterated, accords to the specifications of the
foreign purchaser, complies with the laws of the importing country, is labeled
for export, is manufactured in substantial compliance with GMP regulations and
is not sold in the United States.

OTHER REGULATIONS

In addition to regulations enforced by the FDA, the Company also is subject
to regulation under the Occupational Safety and Health Act, the Controlled
Substances Act, the Toxic Substances Control Act, the Resource Conservation and
Recovery Act and other similar federal, state and local regulations governing
permissible laboratory activities, waste disposal, handling of toxic, dangerous
or radioactive materials and other matters. The Company believes that it is in
substantial compliance, in all material respects, with applicable regulations.
These regulations are subject to change, however, and may, in the future,
require substantial effort and cost to the Company to comply with each of the
regulations, and may possibly restrict the Company's business activities. See
"Risk Factors--Hazardous Materials."

Competition

43
<PAGE>
will compete with numerous existing therapies. In addition, a number of
companies are pursuing the development of novel pharmaceuticals that target the
same diseases the Company is targeting. The Company believes that a significant
number of drugs are currently under development and will become available in the
future for the treatment of HIV. The Company anticipates that it will face
intense and increasing competition in the future as new products enter the
market and advanced technologies become available. There can be no assurance
that existing products or new products developed by the Company's competitors
will not be more effective, or more effectively marketed and sold, than any that
may be developed by the Company. Competitive products may render the Company's
licensed technology and products obsolete or noncompetitive prior to the
Company's recovery of development or commercialization expenses incurred with
respect to any such products. The development by others of a cure or new
treatment methods for the indications for which the Company is developing drug
candidates could render the Company's drug candidates noncompetitive, obsolete
or uneconomical. Many of the Company's competitors have significantly greater
financial, technical and human resources than the Company and may be better
equipped to develop, manufacture and market products. In addition, many of these
companies have extensive experience in preclinical testing and clinical trials,
obtaining FDA and other regulatory approvals and manufacturing and marketing
pharmaceutical products. Many of these competitors also have products that have
been approved or are in late-stage development and operate large, well-funded
research and development programs. 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 commercial value of their
inventions and are more actively seeking to commercialize the technology they
have developed.

Manufacturing

Sales and Marketing

44
<PAGE>
United States through a combination of a direct sales force and arrangements
with third parties. There can be no assurance that the Company will be able to
establish marketing, distribution or sales capabilities or make arrangements
with third parties to perform those activities on terms satisfactory to the
Company or that any internal capabilities or third party arrangements will be
cost-effective.

Health Care Reform Measures and Third Party Reimbursement

The business and financial condition of pharmaceutical companies will
continue to be affected by the efforts of governments and third party payors to
contain or reduce the cost of health care through various means. A number of
legislative and regulatory proposals aimed at changing the health care system
have been proposed in recent years. In addition, an increasing emphasis on
managed care in the United States has and will continue to increase the pressure
on pharmaceutical pricing. While the Company cannot predict whether legislative
or regulatory proposals will be adopted or the effect such proposals or managed
care efforts may have on its business, the announcement and/or adoption of such
proposals or efforts could have a material adverse effect on the Company. In the
United States and elsewhere, sales of prescription pharmaceuticals are dependent
in part on the availability of reimbursement to the consumer from third party
payors, such as government and private insurance plans that mandate
predetermined discounts from list prices. Third party payors are increasingly
challenging the prices charged for medical products and services. If the Company
succeeds in bringing one or more products to the market, there can be no
assurance that these products will be considered cost effective or that
reimbursement to the consumer will be available or will be sufficient to allow
the Company to sell its products on a competitive basis. See "Risk Factors--
Uncertainty of Health Care Reform Measures and Third Party Reimbursement."

Human Resources

As of September 10, 1996, Triangle had 20 employees, including 10 in
development and 10 in finance and administration. Of these employees, 10 hold
advanced degrees, of which eight are M.D.s or Ph.D.s. The Company's future
success will depend in large part upon its ability to attract and retain highly
qualified personnel. The Company's employees are not represented by any
collective bargaining agreements, and the Company has never experienced a work
stoppage. The Company believes that its employee relations are good.

Facilities

The Company currently leases and occupies an approximately 26,000 square
foot administrative office, laboratory and pilot manufacturing facility in
Durham, North Carolina pursuant to a lease that continues through September
2003. Under the terms of the lease the Company will occupy approximately an
additional 26,000 square feet beginning in August 1998. The Company believes its
facilities will be adequate to meet its needs for the foreseeable future.

Legal Proceedings

From time to time, Triangle may be involved in litigation relating to claims
arising out of its operations in the normal course of business. As of the date
of this Prospectus, the Company is not a party to any legal proceedings. See
"Risk Factors--Uncertainty of Patents; Dependence on Patents, Licenses and
Proprietary Rights."

45
<PAGE>
MANAGEMENT

Executive Officers, Key Employees and Directors

The executive officers, key employees and directors of the Company are as
follows:

<TABLE>
<CAPTION>
Name Age Position
- --------------------------------------------- --- ------------------------------------------------------------
<S> <C> <C>
David W. Barry, M.D. ........................ 53 Chairman of the Board and Chief Executive Officer
M. Nixon Ellis, Ph.D. ....................... 46 Director, President and Chief Operating Officer
Phillip A. Furman, Ph.D. .................... 51 Vice President, Research and Chief Scientific Officer
James A. Klein, Jr. ......................... 34 Chief Financial Officer and Treasurer
George R. Painter, III, Ph.D. ............... 46 Vice President, Chemistry and Technical Development
Chris A. Rallis, J.D. ....................... 42 Vice President, Business Development, General Counsel and
Secretary
Carolyn S. Underwood......................... 39 Vice President, Marketing
John Delehanty, Ph.D. ....................... 48 Director of Clinical Research
Cary P. Moxham, Ph.D......................... 37 Director of Project Development
George M. Szczech, D.V.M., Ph.D. ............ 54 Director of Toxicology and Pharmacology
Anthony B. Evnin, Ph.D.(1)................... 55 Director
Standish M. Fleming(2)....................... 49 Director
Karl Y. Hostetler, M.D. ..................... 56 Director and Member of the Scientific Advisory Board
George McFadden(1)........................... 55 Director
Peter McPartland(2).......................... 42 Director
</TABLE>

- ------------

(1) Member of the Compensation Committee.

(2) Member of the Audit Committee.

David W. Barry, M.D. has served as Chairman of the Board and Chief
Executive Officer since July 1995 and served as the Company's President from
July through September 1995. Prior to joining the Company, Dr. Barry served as a
member of the Board of Directors and as the Director of Research, Development
and Medical Affairs of Wellcome plc ("Wellcome"), a pharmaceutical company, from
May 1994 through May 1995. From May 1989 through May 1994, Dr. Barry served as
Vice President, Research, Development and Medical Affairs of Burroughs Wellcome,
a pharmaceutical company and an indirect, wholly-owned subsidiary of Wellcome.
Dr. Barry is considered a leader in the field of antiviral therapy and is one of
the named co-inventors of the first anti-HIV drug, AZT. Dr. Barry also directed
the clinical development of the first selective anti-herpes drug, acyclovir.
Before joining Burroughs Wellcome in 1977, Dr. Barry spent five years at the FDA
in various capacities, including Director of the Influenza Task Force of the
Bureau of Biologics and Acting Deputy Director of the Division of Virology at
the Bureau of Biologics. Dr. Barry received a B.A. in French literature from
Yale College and an M.D. from Yale University. Dr. Barry is currently a director
of Family Health International, a not-for-profit company engaged in the business
of family planning, and Molecular Biosystems, Inc., a publicly-held medical
diagnostics company.

M. Nixon Ellis, Ph.D. has served as a director of the Company since July
1995 and as President and Chief Operating Officer since September 1995. Prior to
joining the Company, Dr. Ellis served as Global Brand Director, HIV/Retrovir of
Wellcome, from January through June 1995, where he was responsible for managing
a $300 million worldwide business. From April 1993 through December 1994, Dr.
Ellis served as Assistant Director, Group Licensing of Wellcome. Prior to that,
Dr. Ellis served as Assistant Division Director, Virology of Burroughs Wellcome
from March 1991 to March 1993. Prior to assuming his management responsibilities
at Wellcome, Dr. Ellis' research focused on the disease producing potential of
drug resistant viral mutants. Dr. Ellis received a B.S. in biology from the
University of South Carolina, an M.B.A. from the University of North Carolina,
and an M.S. in medical microbiology and a Ph.D. in microbiology from the
University of Georgia.

46
<PAGE>
Phillip A. Furman, Ph.D. has served as Vice President, Research and Chief
Scientific Officer of the Company since September 1995. Prior to joining the
Company, Dr. Furman served as Director, Virology of Burroughs Wellcome from July
1989 through June 1995, where he played a significant role in the development of
both AZT and acyclovir. Dr. Furman's research while at Burroughs Wellcome
focused on the structure and function of nucleic acid polymerizing enzymes. He
is a named co-inventor of the use of AZT for HIV therapy as well as a
co-inventor of the use of FTC to treat HBV infections. Dr. Furman received a
B.S. in biology from Piedmont College, an M.A. in microbiology from the
University of Southern Florida and a Ph.D. in microbiology from Tulane
University.

James A. Klein, Jr. has served as Chief Financial Officer and Treasurer of
the Company since November 1995, and served as Secretary and Treasurer from July
through November 1995. Prior to joining the Company, Mr. Klein served as
International Research, Development and Medical Financial Controller of Wellcome
from May 1994 through June 1995. From June 1992 through May 1994, Mr. Klein
served as Senior Financial Analyst of Burroughs Wellcome. Prior to that, Mr.
Klein held various management positions in finance at Burroughs Wellcome. Mr.
Klein received a B.A. in accounting from the University of Mississippi and is a
certified public accountant.

George R. Painter, III, Ph.D. has served as Vice President, Chemistry and
Technical Development of the Company since January 1996. From July 1995 through
January 1996, Dr. Painter served as Director of Research Process for Glaxo and
from June 1993 through July 1995, Dr. Painter served as Assistant Director of
Virology for Burroughs Wellcome. While at Burroughs Wellcome, Dr. Painter led
the international development of both an HIV protease inhibitor and FTC. He is
also a co-inventor of the use of FTC to treat HBV infections. Dr. Painter
received a B.S. in chemistry, an M.S. in physical chemistry and a Ph.D. in
organic chemistry from Emory.

Chris A. Rallis, J.D. has served as Vice President, Business Development,
General Counsel and Secretary of the Company since November 1995. Prior to
joining the Company, Mr. Rallis served in the following positions with Burroughs
Wellcome: Vice President, Planning and Business Development from February 1994
to June 1995; Director, Planning and Business Development from June 1993 through
February 1994; and Assistant General Counsel from June 1991 through June 1993.
During Mr. Rallis' tenure at Burroughs Wellcome, his department was responsible
for finalizing licensing agreements with Emory and Vertex Pharmaceuticals
Incorporated and a consumer healthcare joint venture with Warner-Lambert
Company. Mr. Rallis received an A.B. degree in economics from Harvard College
and a J.D. from Duke University.

Carolyn S. Underwood has served as Vice President, Marketing of the Company
since January 1996. Prior to joining the Company, Ms. Underwood served as
Director, CNS Marketing of Glaxo from June through December 1995. Prior to that,
Ms. Underwood served as Director, Marketing Division of Nippon Wellcome KK, a
pharmaceutical company of which Wellcome was one of the joint venture partners,
from February 1994 through June 1995. Ms. Underwood also served as Senior
Director of Marketing of Burroughs Wellcome from July 1991 through January 1994.
Ms. Underwood received a B.S. in nursing from the University of North Carolina,
Chapel Hill.

John Delehanty, Ph.D. has served as the Director of Clinical Research of
the Company since September 1996. Prior to joining the Company, Dr. Delehanty
served as Associate Director of Infectious Diseases with Burroughs Wellcome (and
later with Glaxo) since 1983. While at Burroughs Wellcome, Dr. Delehanty led the
development of several topical antiviral drugs. Dr. Delehanty has also worked at
the National Research Council and World Health Organization. Dr. Delehanty
received a B.S. in biology from Villanova University and a Ph.D. in genetics
from Florida State University/Oak Ridge National Laboratory.

Cary P. Moxham, Ph.D. has served as Director of Project Development since
February 1996. Prior to joining the Company, Dr. Moxham served as Research
Scientist with Burroughs Wellcome (and later with Glaxo) since 1986. From
September 1994 to February 1996, Dr. Moxham served as International Project
Leader for Burroughs Wellcome (and later as Product Development Leader with
Glaxo), where he led the international development of two humanized monoclonal
antibodies for the treatment of solid tumors. Dr. Moxham received a B.S. in
biology and chemistry from Union College and a Ph.D. in biochemical pharmacology
from the State University of New York at Stony Brook.

47
<PAGE>
George M. Szczech, D.V.M., Ph.D. has served as the Director of Toxicology
and Pharmacology of the Company since January 1996. Prior to joining the
Company, Dr. Szczech served as Associate Director of the Division of Toxicology
and Pathology at Burroughs Wellcome from 1992 to 1995, and as Senior Toxicologic
Pathologist from 1985 to 1992. Dr. Szczech has over 20 years experience in
pharmaceutical development with specialization in all aspects of product safety
assessment. In positions at Burroughs Wellcome, the Mead Johnson Company (now a
subsidiary of Bristol-Myers Squibb) and Upjohn Company (now Pharmacia & Upjohn),
he performed and published research dealing with the safety of a wide variety of
pharmaceuticals. Much of his work involved establishing laboratories and
procedures in the area of reproductive and developmental toxicology. Dr Szczech
earned his D.V.M. at the University of Minnesota and his Ph.D. at Purdue
University and is board certified in veterinary pathology and in toxicology.

Anthony B. Evnin, Ph.D. has served as a director of the Company since
November 1995. Since 1975, Dr. Evnin has been a general partner of Venrock
Associates, a venture capital firm. Dr. Evnin received an A.B. in chemistry from
Princeton University and a Ph.D. in chemistry from Massachusetts Institute of
Technology. Dr. Evnin is currently a director of several privately-held
companies and the following publicly-held companies: Arris Pharmaceutical
Corporation, Centocor, Inc., Genetics Institute, Inc. (where he serves as
Chairman of the Board), Ribozyme Pharmaceuticals, Inc. and SUGEN, Inc., all of
which are biopharmaceutical companies, Escalon Medical Corp. (formerly
Intelligent Surgical Lasers, Inc.), an ophthalmic company, Kopin Corporation, a
semiconductor device company, and Opta Food Ingredients, Inc., a food
ingredients company.

Standish M. Fleming has served as a director of the Company since July
1995. Since April 1993, Mr. Fleming has been a general partner of Forward
Ventures, a venture capital firm. Mr. Fleming also served in an advisory
position with Forward Ventures from February 1992 through April 1993. Prior to
that, Mr. Fleming joined Ventana, a venture capital firm, in 1986 and served as
a fund manager from January 1990 through January 1992. Mr. Fleming received a
B.A. in English from Amherst College and an M.B.A. from the University of
California, Los Angeles. Mr. Fleming currently serves as a director of three
privately-held companies.

Karl Y. Hostetler, M.D. has served as a director of the Company since July
1995. Dr. Hostetler has served as a professor of medicine at the University of
California, San Diego and has practiced medicine at the Veterans Affairs Medical
Center in San Diego since January 1973. From June 1987 through June 1992, Dr.
Hostetler served as a director and as Vice President of Research and Development
of Vical Incorporated, a gene therapy company. Dr. Hostetler received a B.A. in
chemistry from DePauw University and an M.D. from Western Reserve University.

George McFadden has served as a director of the Company since November
1995. Since 1979, Mr. McFadden has served as a general partner of McFadden
Brothers, an investment company. Mr. McFadden received a B.A. in history from
Vanderbilt University and an M.B.A. from Columbia University. Mr. McFadden is
currently a director of three privately-held companies, Washington, Inc. (where
he serves as Chairman of the Board), Chemical Leaman and Squaw Valley Corp., and
of one publicly-held packaging company, Ball Corp.

Peter McPartland has served as a director of the Company since June 1996.
Mr. McPartland has served as a director of Schroder Ventures Life Sciences
Advisers (UK) Ltd., a venture capital firm, since July 1995. He served as a
principal of Schroder Venture Advisers from April 1988 through July 1995. Mr.
McPartland received a B.Sc. in pharmacology from University College, London. Mr.
McPartland currently serves as Chairman of the Board of Cerebrus Limited (a
private, United Kingdom company).

Members of the Board currently hold office and serve until the next annual
meeting of the stockholders of the Company or until their respective successors
have been elected and qualified. The Board is currently comprised of seven
directors. Under the Company's Restated Bylaws, beginning with the 1997 annual
meeting of stockholders the Company's Board will be classified into three
classes of directors serving staggered three-year terms, with one class of
directors to be elected at each annual meeting of stockholders. The
classification of directors has the effect of making it more difficult to change
the composition of the Board. See "Description of Capital Stock--Antitakeover
Effects of Charter, Bylaws and Delaware Law."

All executive officers are elected annually by and serve at the discretion
of the Board. All of the Company's executive officers are employed by the
Company at will.

48
<PAGE>
Pursuant to the Company's 1996 Stock Incentive Plan, which was adopted by
the Board in August 1996 and approved by the Company's stockholders in September
1996, directors who are not officers or employees of the Company will receive
periodic option grants beginning with the 1997 annual meeting of stockholders.
See "-- Benefit Plans."

Committees of the Board of Directors

In June 1996, the Board established a Compensation Committee and an Audit
Committee. The Compensation Committee, currently consisting of Dr. Evnin and Mr.
McFadden, is responsible for recommending salaries and incentive compensation
for executive officers and key personnel, including stock options. The Audit
Committee, currently consisting of Messrs. Fleming and McPartland, is
responsible for recommending the Company's independent auditors and reviewing
the results and scope of audit and other services provided by such auditors.
Prior to June 1996, the functions of the Compensation Committee and the Audit
Committee were performed by the entire Board. Dr. Barry, the Chairman of the
Board and the Company's Chief Executive Officer, and Dr. Ellis, a director and
the Company's President and Chief Operating Officer, each participated in the
deliberations of the Board regarding executive compensation from July 1995 to
June 1996, but neither participated in the deliberations regarding his own
compensation.

Scientific Advisory Board

The Company relies upon its Scientific Advisory Board for strategic and
analytic support in developing and expanding the scope of its technologies. The
Scientific Advisory Board is composed of leading scientists who meet several
times each year to review the Company's research and development activities. The
following individuals are members of the Scientific Advisory Board:

<TABLE>
<S> <C>
Dennis Carson, M.D. ...... Professor of Medicine, University of California,
San Diego School of Medicine
Chung K. Chu, Ph.D. ...... Professor of Medicinal Chemistry and Director of
Drug Discovery Group, College of Pharmacy and
Department of Medicinal Chemistry, University of
Georgia Research Foundation, Inc.
Eriq De Clercq, M.D., Director of Rega Institute for Medical Research,
Ph.D. .................... Professor of Biochemistry and Microbiology at the
School of Medicine, Katholieke Universiteit Leuven,
Belgium
Karl Y. Hostetler, Professor of Medicine, University of California,
M.D. ..................... San Diego School of Medicine
Earl R. Kern, Ph.D. ...... Research Professor, Department of Pediatrics,
Division of Clinical Virology, University of
Alabama School of Medicine
Dennis Liotta, Ph.D. ..... Professor of Chemistry, Vice President of Research,
Emory University
Douglas Richman, M.D. .... Professor of Pathology and Medicine, University of
California, San Diego School of Medicine
Raymond Schinazi, Professor of Pediatrics, Emory University School of
Ph.D. .................... Medicine
Robert T. Schooley, Professor of Medicine, Head of the Infectious
M.D. ..................... Disease Department, University of Colorado School
of Medicine
Daniel D. Von Hoff, Chief Executive Officer and Director of the
M.D. ..................... Institute for Drug Development, a division of the
Cancer Therapy Research Center of the University of
Texas
</TABLE>

49
<PAGE>
Each member of the Scientific Advisory Board has entered into a scientific
advisor agreement, or similar consulting agreement, with Triangle in the fields
of interest to the Company, whereby the member agrees to provide advice and
occasional scientific counsel to the Company. Each member receives cash
compensation for attending the Scientific Advisory Board meetings. In addition,
most of the Scientific Advisory Board members purchased shares of Common Stock
at a price of $0.01 per share that in general are subject to a four year vesting
schedule. The scientific advisors are also employed by employers other than the
Company and may have commitments to, or consulting contracts with, other
entities that may limit their availability to the Company. Although generally
each scientific advisor has agreed not to perform services for another entity
that would create a conflict of interest with the scientific advisor's services
for the Company, there can be no assurance that such a conflict will not arise.
Inventions or processes discovered by a scientific advisor while serving in the
capacity as a member of the Scientific Advisory Board will become the property
of the Company; however, any inventions or processes discovered by a scientific
advisor at any other time will not become the property of the Company. The
scientific advisor and consulting agreements contain confidentiality and non-use
provisions. See "Risk Factors--Dependence on Key Employees."

Executive Compensation

SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION

The following table sets forth information concerning the aggregate
compensation paid by the Company to the Company's Chief Executive Officer and to
the four additional most highly compensated executive officers (the "Named
Executive Officers") for services rendered in all capacities to the Company for
the period from inception (July 12, 1995) to December 31, 1995:

Summary Compensation Table

<TABLE>
<CAPTION>
Annual
Compensation(1)(2)
------------------------
<S> <C> <C> <C>
Name and Principal Position Year(2) Salary($) Bonus($)
- ------------------------------------------------------------------------------ ----------- ----------- -----------
David W. Barry, M.D.
Chairman and Chief Executive Officer........................................ 1995 100,000 8,000
M. Nixon Ellis, Ph.D.
Director, President and Chief
Operating Officer........................................................... 1995 87,500 2,000
Phillip A. Furman, Ph.D.
Vice President, Research and
Chief Scientific Officer.................................................... 1995 75,000 1,500
Sandra N. Lehrman, M.D.(3)
Vice President, Drug Development............................................ 1995 72,917 1,500
James A. Klein, Jr.
Chief Financial Officer and Treasurer....................................... 1995 62,500 1,000
</TABLE>

- ------------

(1) The aggregate amount of perquisites and other personal benefits, if any, did
not exceed the lesser of $50,000 or 10% of the total annual salary and bonus
reported for each Named Executive Officer and has therefore been omitted.

(2) This table sets forth information for the period from the Company's
inception (July 12, 1995) to December 31, 1995.

(3) Dr. Lehrman served as Vice President, Drug Development until July 1996 and
is no longer employed by the Company.

50
<PAGE>
STOCK OPTIONS

The Company granted no stock options or stock appreciation rights during the
period from inception (July 12, 1995) to December 31, 1995. In February 1996,
the Company adopted a 1996 Stock Option/Stock Issuance Plan and as of September
10, 1996 had granted incentive stock options to the Named Executive Officers to
purchase up to an aggregate of 563,670 shares of Common Stock (of which options
to purchase 171,833 shares of Common Stock had been exercised and options to
purchase 37,407 shares of Common Stock had expired unexercised as of September
10, 1996) at prices ranging from $0.075 to $7.00 per share. See "--Benefit
Plans."

Director Compensation

The Company reimburses its directors for all reasonable and necessary travel
and other incidental expenses incurred in connection with their attendance at
meetings of the Board. Directors are not currently compensated for serving on
the Board. However, the 1996 Stock Incentive Plan that will be effective upon
the closing of the Offerings provides that, beginning with the 1997 annual
meeting of stockholders all eligible non-employee directors will automatically
receive an option to purchase 1,334 shares of Common Stock for the first year of
the director's Board term and 1,333 shares of Common Stock for each additional
year remaining on the director's Board term following the automatic option
grant. These options will have an exercise price equal to 100% of the fair
market value of the Common Stock on the grant date and will become exercisable
in annual installments after the completion of each year of service following
such grant. See "--Benefit Plans--1996 Stock Incentive Plan." Dr. Hostetler is a
member of the Company's Scientific Advisory Board and is a party to a consulting
agreement with the Company. See "--Scientific Advisory Board" and "Certain
Transactions."

51
<PAGE>
Benefit Plans

1996 STOCK INCENTIVE PLAN

The Company's 1996 Stock Incentive Plan (the "1996 Plan") will serve as the
successor equity incentive program to the Company's 1996 Stock Option/Stock
Issuance Plan (the "Predecessor Plan"). The 1996 Plan became effective on August
30, 1996 upon adoption by the Board and was subsequently approved by the
stockholders on September 5, 1996. 2,200,000 shares of Common Stock have
initially been authorized for issuance under the 1996 Plan. This initial share
reserve is comprised of (i) the shares that remain available for issuance under
the Predecessor Plan, including the shares subject to outstanding options
thereunder, plus (ii) an additional increase of 500,000 shares. However, in no
event may any one participant in the 1996 Plan receive option grants or direct
stock issuances for more than 500,000 shares in the aggregate per calendar year.

Outstanding options under the Predecessor Plan will be incorporated into the
1996 Plan upon the consummation of the Offerings, and no further option grants
will be made under the Predecessor Plan. The incorporated options will continue
to be governed by their existing terms, unless the Plan Administrator (described
below) elects to extend one or more features of the 1996 Plan to those options.
However, except as otherwise noted below, the outstanding options under the
Predecessor Plan contain substantially the same terms and conditions summarized
below for the Discretionary Option Grant Program in effect under the 1996 Plan.

The 1996 Plan is divided into four separate components: (i) the
Discretionary Option Grant Program under which eligible individuals in the
Company's employ or service (including officers and other employees, non-
employee Board members and independent consultants) may, at the discretion of
the Plan Administrator, be granted options to purchase shares of Common Stock at
an exercise price not less than 85% of their fair market value on the grant
date, (ii) the Stock Issuance Program under which such individuals may, in the
Plan Administrator's discretion, be issued shares of Common Stock directly,
through the purchase of such shares at a price not less than 100% of their fair
market value at the time of issuance or as a bonus tied to the performance of
services, (iii) the Salary Investment Option Grant Program under which executive
officers and other highly compensated employees may elect to apply a portion of
their base salary to the acquisition of special stock option grants and (iv) the
Automatic Option Grant Program under which option grants will automatically be
made at periodic intervals to eligible non-employee Board members to purchase
shares of Common Stock at an exercise price equal to 100% of their fair market
value on the grant date.

The Board or a committee appointed by the Board (the "Plan Administrator")
will administer the Discretionary Option Grant, Stock Issuance and Salary
Investment Option Grant Programs. The Plan Administrator will have complete
discretion to determine which eligible individuals will receive option grants or
stock issuances, the time or times at which such option grants or stock
issuances are to be made, the number of shares subject to each such grant or
issuance, the vesting schedule to be in effect for the option grant or stock
issuance, the maximum term for which any granted option is to remain outstanding
and whether an option will be granted as an incentive stock option or a
non-statutory stock option under the Federal tax laws. The administration of the
Automatic Option Grant Program will be self-executing in accordance with the
express provisions of such Program.

In the event the Plan Administrator elects to activate the Salary Investment
Option Grant Program for one or more calendar years, each executive officer and
other highly compensated employee of the Company selected for participation may
elect, prior to the start of the calendar year, to reduce his or her base salary
for that calendar year by a specified dollar amount not less than $10,000 nor
more than $50,000. If such election is approved by the Plan Administrator, the
officer will be granted, on or before the last trading day in January in the
calendar year for which the salary reduction is to be in effect, a non-statutory
option to purchase that number of shares of Common Stock determined by dividing
the total salary reduction amount by an amount equal to at least one-third and
no more than two-thirds (the exact amount to be established by the Plan
Administrator) of the fair market value per share of Common Stock on the grant
date. The option will be exercisable at a price per share equal to the
difference between the amount paid by the optionee for the option and the fair
market value of the option shares on the grant date. As a result, upon exercise
of the options issued under the Salary Investment Option Grant Program, the
optionee will have paid 100% of the fair market value of the option shares as of
the grant date. The option will become

52
<PAGE>
exercisable in a series of twelve (12) equal monthly installments over the
calendar year for which the salary reduction is in effect and will become fully
exercisable upon certain changes in the ownership or control of the Company.

Under the Automatic Option Grant Program, at each Annual Stockholders
Meeting, beginning with the 1997 Annual Meeting, each individual who (i) is
elected or re-elected to serve as a non-employee Board member or (ii) was
appointed as a non-employee Board member since the last Annual Stockholders
Meeting (and whose Board term does not expire at such Meeting) will receive an
option grant to purchase shares of Common Stock. The number of shares subject to
the option will be equal to 1,334 shares for the first year of the optionee's
Board term and 1,333 shares for each additional year remaining on the optionee's
Board term following the automatic option grant. Each option granted pursuant to
the Automatic Option Grant Program will have an exercise price equal to the fair
market value per share of Common Stock on the grant date and will have a maximum
term of 10 years, subject to earlier termination following the optionee's
cessation of Board service. The options will vest as to 1,334 shares for the
first year and 1,333 shares for each additional year of the optionee's Board
service measured from the grant date. However, each outstanding option will
become fully vested upon (i) certain changes in the ownership or control of the
Company or (ii) the death or disability of the optionee while serving as a Board
member. The automatic options may only be exercised to the extent vested.

Payment of the exercise price for the shares of Common Stock subject to
option grants made under the 1996 Plan may be made in cash or in shares of
Common Stock valued at fair market value on the exercise date. The optionee may
elect to make payment for the option shares upon exercise through a same-day
sale program, which enables the optionee to purchase the option shares without
making any cash payment. In addition, the Plan Administrator may provide
financial assistance to one or more optionees in the exercise of their
outstanding options by allowing such individuals to deliver a full-recourse,
interest-bearing promissory note in full payment of the exercise price and
associated withholding taxes incurred in connection with such exercise.

53
<PAGE>
In the event that the Company is acquired by merger or asset sale, the
unvested portion of each outstanding option under the Discretionary Option Grant
or Salary Investment Option Grant Programs that is not to be assumed by the
successor corporation will automatically vest in full. Similarly, unless the
Company assigns the repurchase rights associated with any unvested shares under
the Stock Issuance Program to the successor corporation, such unvested shares
will vest in full. Any outstanding options assumed by the successor corporation
and shares that remain subject to repurchase rights assigned to the successor
corporation will not vest immediately, but will vest in accordance with their
original vesting schedule. The Plan Administrator will have the authority under
the Discretionary Option Grant, Salary Investment Option Grant and Stock
Issuance Programs to grant options and to structure repurchase rights so that
the shares subject to those options or repurchase rights will automatically vest
in the event the individual's service is terminated, whether involuntarily or
through a resignation for good reason, within a specified period (not to exceed
eighteen (18) months) following (i) a merger or asset sale in which those
options are assumed or those repurchase rights are assigned, (ii) a hostile
change in control of the Company effected by a successful tender offer for more
than 50% of the outstanding voting stock or by proxy contest for the election of
Board members or (iii) the sale, transfer or disposition of all or substantially
all of the Company's assets (each a "Corporate Transaction"). The Plan
Administrator will also have the discretion to provide for the automatic
acceleration of options and the lapse of any repurchase rights upon (i) a
hostile change in control of the Company effected by a successful tender offer
for more than 50% of the Company's outstanding voting stock or by proxy contest
for the election of Board members or (ii) the termination of the individual's
service, whether involuntarily or through a resignation for good reason, within
a specified period (not to exceed eighteen (18) months) following such a hostile
change in control. The unvested portion of the options currently outstanding
under the Predecessor Plan will accelerate and such options will terminate and
cease to be exercisable upon an acquisition of the Company by merger or asset
sale, unless those options are assumed by the acquiring entity. The unvested
portion of any options assumed by the successor corporation will automatically
accelerate upon the involuntary termination of the optionee's service within
twelve (12) months following the occurrence of a Corporate Transaction in which
the options are assumed or replaced by the successor corporation.

Stock appreciation rights may be issued in tandem with option grants made
under the Discretionary Option Grant Program. The holders of these rights will
have the opportunity to elect between the exercise of their outstanding stock
options for shares of Common Stock or the surrender of those options for an
appreciation distribution from the Company equal to the excess of (i) the fair
market value of the vested shares of Common Stock subject to the surrendered
option over (ii) the aggregate exercise price payable for such shares. The
appreciation distribution may be made in cash or in shares of Common Stock.
There are currently no outstanding stock appreciation rights.

The Plan Administrator has the authority to effect the cancellation of
outstanding options under the Discretionary Option Grant Program (including
options incorporated from the Predecessor Plan) in return for the grant of new
options for the same or a different number of option shares with an exercise
price per share based upon the fair market value of the Common Stock on the new
grant date.

The Board may amend or modify the 1996 Plan at any time. The 1996 Plan will
terminate ten years from its effective date unless otherwise terminated by the
Board prior to such date.

EMPLOYEE STOCK PURCHASE PLAN

The Company's Employee Stock Purchase Plan (the "Purchase Plan") was adopted
by the Board on August 30, 1996 and was subsequently approved by the
stockholders on September 5, 1996. The Purchase Plan is designed to allow
eligible employees of the Company to purchase shares of Common Stock, at
semi-annual intervals, through periodic payroll deductions under the Purchase
Plan. A reserve of 300,000 shares of Common Stock has been established for this
purpose.

The Purchase Plan will be implemented in a series of successive offering
periods, each with a maximum duration of twenty-four (24) months. However, the
initial offering period will begin on the day the underwriting agreements are
executed in connection with the Offerings and will end on the last business day
in August 1998.

54
<PAGE>
Individuals who are eligible employees on the start date of any offering
period may enter the Purchase Plan on that start date or on any subsequent
semi-annual entry date (March 1 or September 1 each year). Individuals who
become eligible employees after the start date of the offering period may join
the Purchase Plan on any subsequent semi-annual entry date within that period.

Payroll deductions may not exceed 10% of the participant's base salary for
each semi-annual period of participation, and the accumulated payroll deductions
will be applied to the purchase of shares on the participant's behalf on each
semi-annual purchase date (the last business day of February and August each
year, with the first purchase date to occur on the last business day of
February, 1997) at a purchase price per share not less than 85% of the LOWER of
(i) the fair market value of the Common Stock on the participant's entry date
into the offering period or (ii) the fair market value of the Common Stock on
the semi-annual purchase date. Should the fair market value of the Common Stock
on any semi-annual purchase date be less than the fair market value of the
Common Stock on the first day of the offering period, then the current offering
period will automatically end and a new twenty-four (24)-month offering period
will begin, based on the lower fair market value.

Limitations on Liability and Indemnification Matters

The Company's Second Restated Certificate of Incorporation eliminates,
subject to certain exceptions, directors' personal liability to the Company or
its stockholders for monetary damages for breaches of fiduciary duties. The
Second Restated Certificate of Incorporation does not, however, eliminate or
limit the personal liability of a director for (i) any breach of the director's
duty of loyalty to the Company or its stockholders, (ii) acts or omissions not
in good faith or which involve intentional misconduct or a knowing violation of
law, (iii) unlawful payments of dividends or unlawful stock repurchases or
redemptions as provided in Section 174 of the Delaware General Corporation Law
or (iv) for any transaction from which the director derived an improper personal
benefit.

The Company's Restated Bylaws provide that the Company shall indemnify its
directors and executive officers to the fullest extent permitted under the
Delaware General Corporation Law, and may indemnify its other officers,
employees and other agents as set forth in the Delaware General Corporation Law.
In addition, the Company has entered into indemnification agreements with its
directors and officers. The indemnification agreements contain provisions that
require the Company, among other things, to indemnify its directors and
executive officers against certain liabilities (other than liabilities arising
from intentional or knowing and culpable violations of law) that may arise by
reason of their status or service as directors or executive officers of the
Company or other entities to which they provide service at the request of the
Company and to advance expenses they may incur as a result of any proceeding
against them as to which they could be indemnified. The Company believes that
these provisions and agreements are necessary to attract and retain qualified
directors and officers. The Company has obtained an insurance policy covering
directors and officers for claims that such directors and officers may otherwise
be required to pay or for which the Company is required to indemnify them,
subject to certain exclusions.

55
<PAGE>
CERTAIN TRANSACTIONS

Since its inception in July 1995, the Company has issued, in private
placement transactions, shares of its Preferred Stock as follows: 5,231,671
shares of Series A Preferred Stock at a price of $0.75 per share (and warrants
to purchase up to 130,000 shares of Series A Preferred Stock at an exercise
price of $0.75 per share); and 3,706,234 shares of Series B Preferred Stock at a
price of $5.00 per share (and warrants to purchase up to 16,000 shares of Series
B Preferred Stock at an exercise price of $5.00 per share). The purchasers of
Preferred Stock include, among others, the following executive officers,
directors and holders of more than five percent of the Company's outstanding
stock and their respective affiliates (all shares of Preferred Stock are
convertible into Common Stock on a one-for-one basis):

<TABLE>
<CAPTION>
Preferred Stock
---------------------- Total
Executive Officers, Directors and 5% Stockholders Series A Series B Consideration
- ------------------------------------------------------------------------- ---------- ---------- -------------
<S> <C> <C> <C>
Venrock Associates and affiliated fund(1)................................ 1,466,667 600,000 $ 4,100,000
George McFadden and affiliated entities
and individuals(2)..................................................... 1,333,000 600,000 4,000,000
Forward Ventures and affiliated funds
and individual(3)...................................................... 1,050,000 600,000 3,788,000
The Wellcome Trust(4).................................................... -- 1,000,000 5,000,000
Schroder Venture Managers Limited(5)..................................... 466,667 187,083 1,285,000
David W. Barry, M.D...................................................... 266,667 40,000 400,000
M. Nixon Ellis, Ph.D..................................................... 133,333 68,151 441,000
Karl Y. Hostetler, M.D. (6).............................................. 100,000 10,000 125,000
</TABLE>

- ------------

(1) Includes shares purchased by Venrock Associates and Venrock Associates II,
L.P. Anthony B. Evnin, Ph.D. is a general partner of both entities and a
director of the Company.

(2) Includes shares purchased by John H. McFadden, Carol McFadden, Lesley
Taylor, McFadden Brothers and several trusts for the benefit of George
McFadden or his children. Mr. McFadden is a director of the Company.

(3) Includes shares purchased by Forward Ventures II, L.P., Forward Ventures
Vanguard Fund and Jeff Sollender, an advisor to Forward Ventures and a
venture partner of Forward III Associates, L.L.C. Standish M. Fleming is a
general partner of Forward Ventures II, L.P., a member of Forward III
Associates, L.L.C., the general partner of Forward Ventures Vanguard Fund,
and a director of the Company.

(4) Peter McPartland is a director of Schroder Ventures Life Sciences Advisers
(UK) Ltd., a wholly-owned subsidiary of Schroder Ventures Life Sciences
Advisors Limited, which acts as an advisor to The Wellcome Trust. Mr.
McPartland is also a director of the Company.

(5) Includes shares purchased by Schroder Venture Managers Limited, as manager
for Schroder Ventures International Life Sciences Fund LP1, Schroder
Ventures International Life Sciences Fund LP2, Schroder Ventures
International Life Sciences Fund Trust and Schroder Venture Managers
Limited, as investment manager for the Schroder Ventures International Life
Sciences Fund Co-investment Scheme. Mr. McPartland is a director of Schroder
Ventures Life Sciences Advisers (UK) Ltd., a wholly-owned subsidiary of
Schroder Ventures Life Sciences Advisors Limited, which acts as an advisor
to Schroder Venture Managers Limited. Mr. McPartland is also a director of
the Company.

(6) All shares purchased by a family trust.

Holders of Preferred Stock, certain holders of Common Stock and holders of
warrants to purchase Preferred Stock are entitled to certain registration rights
with respect to the Common Stock issued or issuable upon conversion or exercise
thereof. See "Description of Capital Stock--Registration Rights."

55
<PAGE>
In November 1995, the Company entered into a license agreement and separate
consulting agreements with Dr. Karl Y. Hostetler, one of the Company's directors
and a member of the Company's Scientific Advisory Board, and another member of
the Company's Scientific Advisory Board. Pursuant to the license agreement, the
Company obtained its rights to ACVMP and 2-CdAP. See "Business--License and
Option Agreements." Under the terms of the consulting agreement with Dr.
Hostetler, the Company paid Dr. Hostetler an initial fee of $3,000 and agreed to
sell to Dr. Hostetler shares of the Company's Series A Preferred Stock and
Common Stock and to pay him an annual fee of $25,000 in consideration of the
consulting services Dr. Hostetler agreed to provide in the antiviral and
anticancer fields. The consulting agreement will terminate in November 1999,
unless earlier terminated by the Company.

In July 1995, Dr. David W. Barry, the Chairman and Chief Executive Officer
of the Company, and Forward Ventures II, L.P., a holder of more than five
percent of the Company's outstanding stock, and of which Standish M. Fleming, a
director of the Company, is a general partner, purchased 800,000 and 375,000
shares of Common Stock, respectively, at $0.01 per share (the then fair market
value of the Common Stock as determined by the Company's Board). These shares
represented all of the shares of Common Stock issued in this financing. In
November 1995, Dr. Karl Y. Hostetler and Standish M. Fleming, directors of the
Company, Dr. M. Nixon Ellis, a director and executive officer of the Company,
and Dr. Phillip A. Furman, Dr. Sandra Lehrman and James A. Klein, Jr., all
executive officers of the Company at that time, purchased 300,000, 62,500,
200,000, 150,000, 150,000 and 100,000 shares of Common Stock, respectively, at
$0.01 per share (the then fair market value of the Common Stock as determined by
the Company's Board). A total of 1,345,000 shares of Common Stock were issued in
this financing. In December 1995, Chris A. Rallis, an executive officer of the
Company, purchased 150,000 shares of Common Stock at $0.01 per share (the then
fair market value of the Common Stock as determined by the Company's Board). The
Company exercised its option to repurchase all 150,000 shares of Common Stock
from Dr. Lehrman upon her departure from the Company in July 1996.

The Company believes that all of the transactions set forth above were made
on terms no less favorable to the Company than could have been obtained from
unaffiliated third parties. All future transactions between the Company and its
officers, directors, principal stockholders and their respective affiliates will
be approved in accordance with the Delaware General Corporation Law by a
majority of the Board, including a majority of the independent and disinterested
directors of the Board, and will be on terms no less favorable to the Company
than could be obtained from unaffiliated third parties.

56
<PAGE>
PRINCIPAL STOCKHOLDERS

The following table sets forth certain information regarding the beneficial
ownership of the Common Stock as of October 11, 1996 (giving effect to the
Conversion as if it had occurred on such date), and as adjusted to reflect the
completion of the Offerings, by (i) each person known to the Company to
beneficially own more than 5% of the Company's Common Stock, (ii) each of the
Company's directors, (iii) each of the Named Executive Officers and (iv) all
directors and executive officers of the Company as a group:

<TABLE>
<CAPTION>
Percentage
Beneficially Owned(2)
Number of
5% Stockholders, Directors, Beneficially ----------------------------
Named Executive Officers, and Directors Owned Before After
and Executive Officers as a Group (1) Shares(2) Offerings Offerings
- --------------------------------------------------------------------------- ------------ ------------- -------------
<S> <C> <C> <C>
Venrock Associates(3)...................................................... 2,066,667 15.9% 12.1%
30 Rockefeller Plaza
New York, NY 10112
Forward Ventures II, L.P.(4)............................................... 1,975,000 15.2 11.6
10975 Torreyana Road, Suite 230
San Diego, CA 92121
The Wellcome Trust(5)...................................................... 1,000,000 7.7 5.9
183 Euston Road
London, England NW1 2BE
Schroder Venture Managers Limited(6)....................................... 653,750 5.0 3.8
22 Church Street
Hamilton, HM 11, Bermuda
David W. Barry, M.D(7)..................................................... 1,303,881 10.0 7.7
M. Nixon Ellis, Ph.D.(8)................................................... 632,351 4.8 3.7
Anthony B. Evnin, Ph.D.(9)................................................. 2,066,667 15.9 12.1
30 Rockefeller Plaza
New York, NY 10112
Standish M. Fleming(10).................................................... 2,037,500 15.7 12.0
10975 Torreyana Road, Suite 230
San Diego, CA 92121
Karl Y. Hostetler, M.D.(11)................................................ 410,000 3.2 2.4
14024 Rue St. Raphael
Del Mar, CA 92104
George McFadden(12)........................................................ 1,923,000 14.8 11.3
745 Fifth Avenue
New York, NY 10151
Peter McPartland(13)....................................................... 653,750 5.0 3.8
20 Southampton Street
London WC2E 7QG
United Kingdom
Phillip A. Furman, Ph.D.(14)............................................... 231,795 1.8 1.4
James A. Klein, Jr.(15).................................................... 164,391 1.3 1.0
Sandra N. Lehrman, M.D.(16)................................................ 144,333 1.1 *
All directors and executive officers as a group
(12 persons)(7)-(17)..................................................... 11,719,984 86.1 66.5
</TABLE>

- ------------

* Less than 1%

(1) Except as otherwise indicated, (i) the stockholders named in the table have
sole voting and investment power with respect to all shares of Common Stock
shown as beneficially owned by them, subject to community property laws,
where applicable and (ii) the address of all stockholders listed in the
table is: 4 University Place, 4611 University Drive, Durham, North Carolina
27707.

(2) Percentage ownership is based on 13,015,238 shares of Common Stock
outstanding on October 11, 1996 (giving effect to the Conversion as if it
had occurred on such date) and is calculated pursuant to Rule 13d-3(d)(1)
under the Securities Exchange Act of 1934, as amended.

57
<PAGE>
(3) Includes 685,736 shares of Common Stock beneficially owned by Venrock
Associates II, L.P. Dr. Evnin is a general partner of Venrock Associates and
Venrock Associates II, L.P.

(4) Includes 1,475,000 shares of Common Stock beneficially owned by Forward
Ventures II, L.P. and 500,000 shares of Common Stock beneficially owned by
Forward Ventures Vanguard Fund. Mr. Fleming is a general partner of Forward
Ventures II, L.P. and a member of Forward III Associates L.L.C., the general
partner of Forward Ventures Vanguard Fund.

(5) All shares beneficially owned by The Wellcome Trust Limited as trustee of
The Wellcome Trust.

(6) All shares beneficially owned by Schroder Venture Managers Limited, as
manager for Schroder Ventures International Life Sciences Fund LP1, Schroder
Ventures International Life Sciences Fund LP2, Schroder Ventures
International Life Sciences Fund Trust and Schroder Venture Managers
Limited, as investment manager for the Schroder Ventures International Life
Sciences Fund Co-investment Scheme. Mr. McPartland is a director of Schroder
Ventures Life Sciences Advisers (UK) Ltd., a wholly-owned subsidiary of
Schroder Ventures Life Sciences Advisors Limited, which acts as an advisor
to Schroder Venture Managers Limited.

(7) Includes 25,381 shares of Common Stock issuable upon the exercise of options
that are exercisable within 60 days of October 11, 1996.

(8) Includes 230,867 shares of Common Stock issuable upon the exercise of
options that are exercisable within 60 days of October 11, 1996.

(9) Includes 1,380,931 shares of Common Stock beneficially owned by Venrock
Associates and 685,736 shares of Common Stock beneficially owned by Venrock
Associates II, L.P. Dr. Evnin is a general partner of Venrock Associates and
Venrock Associates II, L.P. and consequently shares voting and investment
power with respect to all such shares. Dr. Evnin disclaims beneficial
ownership of these shares other than to the extent of his individual
partnership interest.

(10) Includes 1,475,000 shares of Common Stock beneficially owned by Forward
Ventures II, L.P. and 500,000 shares of Common Stock beneficially owned by
Forward Ventures Vanguard Fund. Mr. Fleming is a general partner of Forward
Ventures II, L.P. and a member of Forward III Associates L.L.C., the general
partner of Forward Ventures Vanguard Fund, and consequently shares voting
and investment power with respect to all such shares. Mr. Fleming disclaims
beneficial ownership of these shares other than to the extent of his
individual partnership and member interests.

(11) All shares of Common Stock are beneficially owned by a family trust.

(12) Includes 100,000 shares, 588,000 shares, 245,000 shares, 500,000 shares and
90,000 shares of Common Stock beneficially owned by (i) McFadden Brothers,
(ii) a family trust, (iii) two family trusts for the benefit of two of Mr.
McFadden's children, (iv) other family members and (v) a former family
member, respectively. Mr. McFadden exercises shared voting and investment
power with respect to all such shares. Mr. McFadden disclaims beneficial
ownership of these shares other than to the extent of his pecuniary interest
in the shares beneficially owned by McFadden Brothers and the family trust.

(13) Includes 653,750 shares of Common Stock beneficially owned by Schroder
Venture Managers Limited, as manager for Schroder Ventures International
Life Sciences Fund LP1, Schroder Ventures International Life Sciences Fund
LP2, Schroder Ventures International Life Sciences Fund Trust and Schroder
Venture Managers Limited, as investment manager for the Schroder Ventures
International Life Sciences Fund Co-investment Scheme. Mr. McPartland is a
director of Schroder Ventures Life Sciences Advisers (UK) Ltd., a wholly-
owned subsidiary of Schroder Ventures Life Sciences Advisors Limited, which
acts as an advisor to Schroder Venture Managers Limited. Mr. McPartland
disclaims beneficial ownership of these shares other than to the extent of
his individual interest arising from his position as a director of Schroder
Ventures Life Sciences Advisers (UK) Ltd.

(14) Includes 56,795 shares of Common Stock issuable upon the exercise of
options that are exercisable within 60 days of October 11, 1996.

(15) Includes 41,387 shares of Common Stock issuable upon the exercise of
options that are exercisable within 60 days of October 11, 1996.

(16) Includes 50,000 shares of Common Stock held by Dr. Lehrman's child.

(17) Includes 595,623 shares of Common Stock issuable upon the exercise of
options beneficially owned by certain executive officers and directors of
the Company that are exercisable within 60 days of October 11, 1996.

58
<PAGE>
DESCRIPTION OF CAPITAL STOCK

As of October 11, 1996, there were 4,077,333 shares of Common Stock and
8,937,905 shares of Preferred Stock outstanding. As of such date, the Company
had a total of approximately 45 stockholders. Upon completion of the Offerings,
there will be 17,015,238 shares of Common Stock outstanding (assuming no
exercise of outstanding options and warrants) and no shares of Preferred Stock
outstanding (after giving effect to the Conversion, which will occur upon the
closing of the Offerings). After completion of the Offerings, the Company's
authorized capital stock will consist of 75,000,000 shares of Common Stock,
$0.001 par value per share, and 5,000,000 shares of Preferred Stock, $0.001 par
value per share (the "New Preferred Stock").

Common Stock

The holders of Common Stock are entitled to one vote for each share held of
record on all matters submitted to a vote of stockholders. Subject to the
preferential rights that may be granted by the Board in connection with the
future issuance of New Preferred Stock the holders of Common Stock are entitled
to receive ratably such dividends, if any, as may be declared by the Board out
of funds legally available for the payment of dividends. See "Dividend Policy."
In the event of a liquidation, dissolution or winding up of the Company, the
holders of Common Stock are entitled to share ratably in all assets remaining
after payment of liabilities and liquidation preferences of any outstanding
shares of New Preferred Stock. Holders of Common Stock have no preemptive rights
or rights to convert their Common Stock into any other securities. There are no
redemption or sinking fund provisions applicable to the Common Stock. All
outstanding shares of Common Stock are, and the Common Stock to be outstanding
upon completion of the Offerings will be, fully paid and non-assessable.

Preferred Stock, Warrants and Stock Options

As of October 11, 1996, a total of 5,231,671 and 3,706,234 shares of Series
A Preferred Stock and Series B Preferred Stock were outstanding, respectively.
Upon the closing of the Offerings, all of the Preferred Stock will be converted
into 8,937,905 shares of Common Stock.

As of October 11, 1996, a total of (i) 1,076,260 shares of Common Stock were
issuable upon exercise of outstanding options at a weighted average exercise
price of $1.87 per share and (ii) 146,000 shares of Preferred Stock were
issuable upon exercise of outstanding warrants at a weighted average exercise
price of $1.22 per share. All of the options have been granted under the
Predecessor Plan. All of the warrants will automatically convert into the right
to purchase the same number of shares of Common Stock at the same exercise price
upon the completion of the Offerings. The holder of the warrants to purchase
130,000 shares of Series A Preferred Stock is entitled to certain registration
rights. See "--Registration Rights." All of these options and warrants, unless
exercised prior to the completion of the Offerings, will remain outstanding
after the completion of the Offerings.

New Preferred Stock

After completion of the Offerings, the Board will have the authority,
without further action by the stockholders, to issue up to 5,000,000 shares of
New Preferred Stock in one or more series and to fix the rights, priorities,
preferences, qualifications, limitations and restrictions, including dividend
rights, conversion rights, voting rights, terms of redemption, terms of sinking
funds, liquidation preferences and the number of shares constituting any series
or the designation of such series, which could decrease the amount of earnings
and assets available for distribution to holders of Common Stock or adversely
affect the rights and powers, including voting rights, of the holders of the
Common Stock. The issuance of New Preferred Stock could have the effect of
delaying or preventing a change in control of the Company or make removal of
management more difficult. Additionally, the issuance of New Preferred Stock may
have the effect of decreasing the market price of the Common Stock, and may
adversely affect the voting and other rights of the holders of Common Stock.

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Antitakeover Effects of Charter, Bylaws and Delaware Law

SECOND RESTATED CERTIFICATE OF INCORPORATION AND RESTATED BYLAWS

The Company's Second Restated Certificate of Incorporation authorizes the
Board to establish one or more series of undesignated New Preferred Stock, the
terms of which can be determined by the Board at the time of issuance. See
"--New Preferred Stock." The Second Restated Certificate of Incorporation also
provides that all stockholder action must be effected at a duly called meeting
of stockholders and not by a consent in writing. The Company's Restated Bylaws
provide that the Company's Board will be classified into three classes of
directors beginning at the 1997 annual meeting of stockholders. See
"Management--Executive Officers, Key Employees and Directors." In addition, the
Restated Bylaws do not permit stockholders of the Company to call a special
meeting of stockholders; only the Company's Chief Executive Officer, President,
Chairman of the Board or a majority of the Board are permitted to call a special
meeting of stockholders. The Restated Bylaws also require that stockholders give
advance notice to the Company's secretary of any nominations for director or
other business to be brought by stockholders at any stockholders' meeting and
require a supermajority vote of members of the Board and/or stockholders to
amend certain Bylaw provisions. These provisions of the Second Restated
Certificate of Incorporation and the Restated Bylaws could discourage potential
acquisition proposals and could delay or prevent a change in control of the
Company. Such provisions may also have the effect of preventing changes in the
management of the Company. See "Risk Factors--Antitakeover Effects of Charter,
Bylaws and Delaware Law."

DELAWARE TAKEOVER STATUTE

The Company is subject to Section 203 of the Delaware General Corporation
Law ("Section 203") which, subject to certain exceptions, prohibits a Delaware
corporation from engaging in any business combination with any interested
stockholder (defined as any person or entity that is the beneficial owner of at
least 15% of a corporation's voting stock) for a period of three years following
the time that such stockholder became an interested stockholder, unless: (i)
prior to such time, the board of directors of the corporation approved either
the business combination or the transaction that resulted in the stockholder's
becoming an interested stockholder; (ii) upon consummation of the transaction
that resulted in the stockholder becoming an interested stockholder, the
interested stockholder owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced, excluding, for purposes of
determining the number of shares outstanding, those shares owned (x) by persons
who are directors and also officers and (y) by employee stock plans in which
employee participants do not have the right to determine confidentially whether
shares held subject to the plan will be tendered in a tender or exchange offer;
or (iii) at or subsequent to such time, the business combination is approved by
the Board and authorized at an annual or special meeting of stockholders, and
not by written consent, by the affirmative vote of at least two-thirds of the
outstanding voting stock that is not owned by the interested stockholder.

Section 203 defines business combination to include: (i) any merger or
consolidation involving the corporation and the interested stockholder; (ii) any
sale, lease, exchange, mortgage, transfer, pledge or other disposition involving
the interested stockholder and 10% or more of the assets of the corporation;
(iii) subject to certain exceptions, any transaction which results in the
issuance or transfer by the corporation of any stock of the corporation to the
interested stockholder; (iv) any transaction involving the corporation that has
the effect of increasing the proportionate share of the stock of any class or
series of the corporation beneficially owned by the interested stockholder; or
(v) any receipt by the interested stockholder of the benefit of any loans,
advances, guarantees, pledges or other financial benefits provided by or through
the corporation.

Registration Rights

The Company and the holders (the "Holders") of approximately 9,000,000
shares of Preferred Stock (which will convert to Common Stock upon the closing
of the Offerings) (the "Registrable Securities") are parties to a certain
Restated Investors' Rights Agreement pursuant to which the Holders are entitled
to certain rights with respect to the registration of such shares of Common
Stock under the Securities Act of 1933, as amended (the "Securities Act"). If
the Company proposes to register any of its securities under the Securities Act,
either for its

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<PAGE>
own account or for the account of other stockholders exercising registration
rights, such Holders are entitled to notice of such registration and are
entitled to include shares of such Common Stock therein. A majority of such
Holders of the Registrable Securities are also entitled to certain demand
registration rights pursuant to which they may require the Company to file a
registration statement under the Securities Act at the Company's expense with
respect to their shares of Common Stock, and the Company is required to use its
best efforts to effect such registration. Further, the Holders of such
Registrable Securities may require the Company to file additional registration
statements on Form S-3 at the Company's expense. All of these registration
rights are subject to certain conditions and limitations, among them the right
of the underwriters of an offering to limit the number of shares of Registrable
Securities included in such registration and the right of the Company not to
effect a requested registration within 180 days following an offering of the
Company's securities, including the Offerings. The Company is required to bear
all expenses, other than underwriting discounts and commissions, in connection
with any registration of the Registrable Securities. The Company is also
required to indemnify the Holders and the underwriters for the Holders, if any,
under certain circumstances.

The Company has also entered into two additional Investors' Rights
Agreements, pursuant to which the holders ("Additional Rights Holders") of
700,000 shares of Common Stock and the holder of a warrant to purchase up to
130,000 shares of Series A Preferred Stock (which warrant automatically converts
into the right to purchase Common Stock upon the closing of the Offerings)
("Additional Registrable Securities") are entitled to certain rights with
respect to the registration of such shares of Common Stock under the Securities
Act. If the Company proposes to register any of its securities under the
Securities Act, either for its own account or for the account of other
stockholders exercising registration rights, such Additional Rights Holders are
entitled to notice of such registration and are entitled to include shares of
such Common Stock therein. These registration rights are subject to certain
conditions and limitations, among them the right of the underwriters of an
offering to limit the number of shares of Additional Registrable Securities
included in such registration. The Company is required to bear all expenses,
other than underwriting discounts and commissions, in connection with any
registration of the Additional Registrable Securities. The Company is also
required to indemnify the Additional Rights Holders and the underwriters for the
Additional Rights Holders, if any, under certain circumstances.

All of the registration rights granted by the Company expire on the earlier
of (i) the fifth anniversary of the closing of the Offerings or (ii) the date
after which all shares of Common Stock for which registration rights have been
granted may be immediately sold under Rule 144(k) under the Securities Act.

Transfer Agent and Registrar

American Stock Transfer & Trust Company has been appointed as the transfer
agent and registrar for the Company's Common Stock.

SHARES ELIGIBLE FOR FUTURE SALE

Prior to the Offerings, there has been no public market for the Common Stock
of the Company. Future sales of substantial amounts of Common Stock in the
public market could adversely affect prevailing market prices of the Common
Stock. Upon completion of the Offerings, the Company will have outstanding
17,015,238 shares of Common Stock (excluding the shares of Common Stock issuable
upon exercise of outstanding options and warrants). Of such shares, the
4,000,000 shares of Common Stock sold in the Offerings will be freely tradeable
without restrictions under the Securities Act, except for any shares held by an
"affiliate" of the Company, which will be subject to the resale limitations of
Rule 144 under the Securities Act ("Rule 144"). The remaining 13,015,238 shares,
which were issued by the Company in private transactions in reliance upon one or
more exemptions under the Securities Act, are "restricted securities" under Rule
144 and may be sold in compliance with such Rule, pursuant to registration under
the Securities Act or pursuant to an exemption therefrom. Generally, under Rule
144, each person holding restricted securities for a period of two years may,
every three months after the expiration of such two-year holding period, sell an
amount of shares equal to the greater of (i) one percent of the Company's then
outstanding Common Stock or (ii) the average weekly trading volume during the
four weeks prior

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<PAGE>
to the proposed sale. In addition, sales under Rule 144 may be made only through
unsolicited brokerage transactions or to market makers and are subject to
various other conditions. None of these rules applies to restricted securities
sold for the account of a person who is not and has not been an "affiliate" of
the Company (as that term is defined in the Securities Act) during the three
months prior to the proposed sale and who has beneficially owned the securities
for at least three years. None of the outstanding shares is currently tradeable
under Rule 144.

Stockholders owning an aggregate of approximately 12,300,000 shares of
Common Stock, representing approximately 95% of the total shares outstanding
(and approximately 1,000,000 shares issuable upon exercise of outstanding
options and warrants), including shares held by all executive officers and
directors and certain other stockholders and option holders of the Company, have
agreed not to offer, sell, contract to sell, pledge or otherwise dispose of,
directly or indirectly, any shares of Common Stock or other securities of the
Company that are substantially similar to the Common Stock, including but not
limited to any securities that are convertible into or exchangeable for, or that
represent the right to receive, shares of Common Stock or any such substantially
similar securities, without the prior written consent of Dillon, Read & Co. Inc.
for a period of 180 days after the date of this Prospectus.

Any employee, officer or director of or consultant to the Company who
purchased his or her shares pursuant to a written compensatory plan or contract
is entitled to rely on the resale provisions of Rule 701, which permit (i)
nonaffiliates to sell their Rule 701 shares without compliance with the public
information, holding period, volume limitation or notice provisions of Rule 144
and (ii) affiliates to sell their Rule 701 shares without compliance with Rule
144's holding period restrictions. Holders of approximately 300,000 currently
outstanding shares of Common Stock may sell their shares under Rule 701 at any
time 90 days after the completion of the Offerings, subject to the restrictions
of the 180 day lock-up agreement described above and certain other contractual
restrictions.

The Company intends to file a registration statement under the Securities
Act on Form S-8 covering an aggregate of approximately 2,200,000 shares of
Common Stock reserved for issuance under the 1996 Plan and the Purchase Plan.
Such registration statement is expected to be filed as soon as practicable after
the completion of the Offerings and will become effective automatically upon
filing. Accordingly, shares registered under such registration statement will be
available for resale by nonaffiliates in the public market, subject to any
vesting restrictions with the Company and any other contractual restrictions.

CERTAIN UNITED STATES FEDERAL TAX CONSIDERATIONS
FOR NON-UNITED STATES HOLDERS OF COMMON STOCK

The following is a discussion of certain United States federal income and
estate tax consequences of the ownership and disposition of Common Stock by a
"Non-United States Holder." A "Non-United States Holder" is a person or entity
that, for United States federal income tax purposes, is a non-resident alien
individual, a foreign corporation, a foreign partnership, or a foreign estate or
trust. An alien individual may be deemed to be a resident alien (as opposed to a
non-resident alien) by virtue of being present in the United States on at least
31 days in the calendar year and for an aggregate of 183 days during a
three-year period ending in the current calendar year (counting, for such
purposes, all of the days present in the current year, one-third of the days
present in the immediately preceding year, and one-sixth of the days present in
the second preceding year). In addition to the "substantial presence test"
described in the immediately preceding sentence, an alien may be treated as a
resident alien if he (i) is a lawful permanent resident at any time during the
year, or (ii) elects to be treated as a United States resident and meets the
"substantial presence test" in the immediately following year. Generally,
resident aliens are subject to United States federal tax as if they were United
States citizens and residents.

This discussion is based on the Internal Revenue Code of 1986, as amended
(the "Code"), and administrative and judicial interpretations as of the date
hereof, all of which may be changed either retroactively or prospectively. This
discussion does not address all aspects of United States federal income and
estate taxation that may be

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<PAGE>
relevant in light of any Non-United States Holder's particular facts and
circumstances (such as being a United States expatriate) and does not address
any tax consequences arising under the laws of any state, local or foreign
taxing jurisdiction.

Prospective holders are urged to consult their tax advisors with respect to
the particular United States federal, state, local and non-United States income
and other tax consequences of holding and disposing Common Stock.

Dividends

Dividends paid to a Non-United States Holder of Common Stock generally will
be subject to withholding tax at a 30% rate or such lower rate as may be
specified by an applicable income tax treaty. For purposes of determining
whether tax is to be withheld at a 30% rate or at a reduced rate as specified by
an income tax treaty, the Company ordinarily will presume that dividends paid to
an address in a foreign country are paid to a resident of such country absent
knowledge that such presumption is not warranted. However, under recently
proposed United States Treasury regulations which have not yet become effective,
a Non-United States Holder of Common Stock would be required to file an
appropriate withholding certificate (generally Form W-8) in order to claim the
benefits of a tax treaty.

Upon the filing of an Internal Revenue Service Form 4224 with the payor,
there will be no withholding tax on dividends that are effectively connected
with the Non-United States Holder's conduct of a trade or business within the
United States. Instead, the effectively connected dividends will be subject to
regular United States income tax in the same manner as if the Non-United States
Holder were a United States resident. A non-United States corporation receiving
effectively connected dividends also may be subject to an additional "branch
profits tax" which is imposed under certain circumstances, at a rate of 30% (or
such lower rate as may be specified by an applicable treaty) of the non-United
States corporation's effectively connected earnings and profits, subject to
certain adjustments.

Gain on Disposition of Common Stock

A Non-United States Holder generally will not be subject to United States
federal income tax with respect to gain realized on a sale or other disposition
of Common Stock unless (i) the gain is effectively connected with a trade or
business of such holder in the United States (which gain, in the case of a
foreign corporation, must also be taken into account for branch profits tax
purposes), (ii) in the case of certain Non-United States Holders who are non-
resident alien individuals and hold the Common Stock as a capital asset, such
individuals are present in the United States for 183 or more days in the taxable
year of the disposition and (a) have a "tax home" in the United States for such
year or (b) the gain is attributable to an office or other fixed place of
business maintained in the United States by such individual, or (iii) the
Company is or has been a "United States real property holding corporation"
within the meaning of Section 897(c)(2) of the Code at any time within the
shorter of the five-year period preceding such disposition or such Non-United
States Holder's holding period. The Company believes that it currently is not a
United States real property holding corporation and does not anticipate that it
will become one in the future. Further, even if the Company were to become a
United States real property holding corporation, any gain recognized by a
Non-United States Holder still would not be subject to United States tax if the
shares were considered to be "regularly traded" (within the meaning of
applicable United States Treasury regulations) on an established securities
market (E.G., the Nasdaq National Market System, on which the Company's Common
Stock will be listed) and the Non-United States Holder did not own, directly or
indirectly, at any time during the five-year period ending on the date of the
disposition, more than five percent of the Common Stock.

Non-United States Holders should note that legislation has been proposed on
several occasions that would subject certain Non-United States Holders owning a
specified percentage of the stock of the Company to United States tax on the
gain realized from the sale (or other disposition) of the Common Stock. Although
to date this legislation has not been enacted, it is not possible to predict
whether such legislation will be enacted in the future, and, if so enacted, in
what form.

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<PAGE>
Information Reporting Requirements and Backup Withholding

Generally, the Company must report to the United States Internal Revenue
Service the amount of dividends paid, the name and address of the recipient, and
the amount, if any, of tax withheld. A similar report is sent to the holder.
Pursuant to tax treaties or other agreements, the United States Internal Revenue
Service may make its reports available to tax authorities in the recipient's
country of residence. Dividends paid to a Non-United States Holder at an address
within the United States may be subject to 31% backup withholding if the
Non-United States Holder fails to establish that it is entitled to an exemption
or to provide a correct tax payer identification number and other information to
the payor. Dividends paid to a Non-United States Holder at an address outside
the United States generally will not be subject to backup withholding.

Information reporting and 31% backup withholding will apply to the proceeds
of a disposition of Common Stock paid to or through a United States office of a
broker unless the disposing holder certifies its non-United States status or
otherwise establishes an exemption. A Non-United States Holder may establish
non-United States status by filing an Internal Revenue Service Form W-8 with the
broker. Generally, United States information reporting and backup withholding
will not apply to a payment of disposition proceeds if the payment is made
outside the United States through a non-United States office of a non-United
States broker. However, United States information reporting requirements (but
not backup withholding) will apply to a payment of disposition proceeds outside
the United States if (i) the payment is made through an office outside the
United States of a broker that is either (a) a United States person, (b) a
foreign person which derives 50% or more of its gross income for certain periods
from the conduct of a trade or business in the United States or (c) a
"controlled foreign corporation" for United States federal income tax purposes,
and (ii) the broker fails to maintain documentary evidence that the holder is a
Non-United States Holder and that certain conditions are met, or that the holder
otherwise is entitled to an exemption.

Backup withholding is not an additional tax. Rather, the tax liability of
persons subject to backup withholding will be reduced by the amount of tax
withheld. If withholding results in an overpayment of taxes, a refund may be
obtained, provided that the required information is furnished to the United
States Internal Revenue Service.

Federal Estate Tax

An individual Non-United States Holder who is treated as the owner of, or
has made certain lifetime transfers of an interest in, the Common Stock will be
required to include the value thereof in his gross estate for United States
federal estate tax purposes, and may be subject to United States federal estate
tax unless an applicable estate tax treaty provides otherwise.

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UNDERWRITING

The names of the U.S. Underwriters for the United States Offering and the
aggregate number of shares of Common Stock that each has severally agreed to
purchase from the Company, subject to the terms and conditions specified in the
United States Underwriting Agreement, are as follows:

<TABLE>
<CAPTION>
Number of
U.S. Underwriters Shares
- ---------------------------------------------------------------------------------- ------------
<S> <C>
Dillon, Read & Co. Inc............................................................
Bear, Stearns & Co. Inc...........................................................
------------

Total................................................................
------------
------------
</TABLE>

The U.S. Managing Underwriters are Dillon, Read & Co. Inc. and Bear, Stearns
& Co. Inc.

The names of the International Underwriters for the International Offering
and the aggregate number of shares of Common Stock that each has severally
agreed to purchase from the Company, subject to the terms and conditions
specified in the International Underwriting Agreement, are as follows:

<TABLE>
<CAPTION>
Number of
International Underwriters Shares
- ---------------------------------------------------------------------------------- ------------
<S> <C>
Dillon, Read & Co. Inc............................................................
Bear, Stearns International Limited...............................................
ING Baring Securities Limited.....................................................
------------

Total................................................................
------------
------------
</TABLE>

The International Managing Underwriters are Dillon, Read & Co. Inc., Bear,
Stearns International Limited and ING Baring Securities Limited.

The U.S. Underwriters and the International Underwriters are collectively
referred to herein as the "Underwriters," and the United States Underwriting
Agreement and the International Underwriting Agreement are collectively referred
to herein as the "Underwriting Agreements." The offering price and aggregate
underwriting discounts and commissions per share for the two Offerings are
identical. The closing of the United States Offering is a condition to the
closing of the International Offering, and vice versa.

If any shares of Common Stock offered hereby are purchased by the
Underwriters, all such shares will be so purchased. The Underwriting Agreements
contain certain provisions whereby if any United States Underwriter or
International Underwriter defaults in its obligation to purchase such shares and
if the aggregate obligations of the U.S. Underwriters or International
Underwriters so defaulting do not exceed 10% of the shares offered in the United
States Offering or the International Offering, respectively, the remaining U.S.
Underwriters, or some of them, or the remaining International Underwriters, or
some of them, as the case may be, must assume such obligations.

The shares of Common Stock offered hereby are being initially offered
severally by the Underwriters for sale at the price set forth on the cover page
hereof, or at such price less a concession not to exceed $ per share on
sales to certain dealers. The Underwriters may allow, and such dealers may
reallow, a concession not to exceed $ per share to other Underwriters or
to certain other dealers. The offering of the shares of Common Stock is made for
delivery when, as and if accepted by the Underwriters and subject to prior sale
and to withdrawal,

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cancellation or modification of the offer without notice. The Underwriters
reserve the right to reject any order for the purchase of the shares of Common
Stock. After the initial offering of the Common Stock, the offering price,
concession and reallowance may be varied by the U.S. Managing Underwriters or
the International Managing Underwriters.

Pursuant to the Agreement between the U.S. Underwriters and the
International Underwriters (the "Agreement Between Underwriters"), each U.S.
Underwriter has represented and agreed that, with certain exceptions, (i) it is
not purchasing any United States Shares (as defined below) for the account of
anyone other than a United States or Canadian Person (as defined below) and (ii)
it has not offered or sold, and will not offer or sell, directly or indirectly,
any United States Shares or distribute any Prospectus relating to the United
States Shares outside the United States or Canada or to anyone other than a
United States or Canadian Person. Pursuant to the Agreement Between
Underwriters, each International Underwriter has represented and agreed that,
with certain exceptions, (i) it is not purchasing any International Shares (as
defined below) for the account of any United States or Canadian Person and (ii)
it has not offered or sold, and will not offer or sell, directly or indirectly,
any International Shares or distribute any Prospectus relating to the
International Shares within the United States or Canada or to any United States
or Canadian Person. The foregoing limitations do not apply to stabilization
transactions or to certain other transactions specified in the Agreement Between
Underwriters. As used herein "United States or Canadian Person" means any
resident of the United States or Canada, or any corporation, pension, profit
sharing or other trust or other entity organized under the laws of the United
States or Canada or of any political subdivision thereof (other than a branch
located outside the United States and Canada of any United States or Canadian
Person) and includes any United States or Canadian branch of a person who is
otherwise not a United States or Canadian Person. All shares of Common Stock to
be purchased by the U.S. Underwriters and the International Underwriters are
referred to herein as the "United States Shares" and the "International Shares,"
respectively.

Pursuant to the Agreement Between Underwriters, sales may be made between
the U.S. Underwriters and the International Underwriters of such number of
shares of Common Stock as may be mutually agreed. As a result, shares of Common
Stock originally purchased pursuant to the United States Underwriting Agreement
may be sold outside the United States and Canada, and shares of Common Stock
originally purchased pursuant to the International Underwriting Agreement may be
sold in the United States and Canada. The price of any shares so sold will,
unless otherwise agreed, be the price to the public, less an amount not greater
than the selling concession.

Pursuant to the Agreement Between Underwriters, each U.S. Underwriter has
represented that it has not offered or sold, and has agreed not to offer or
sell, any shares of Common Stock, directly or indirectly, in Canada in
contravention of the securities laws of Canada or any province or territory
thereof and has represented that any offer of Common Stock in Canada will be
made only pursuant to an exemption from the requirement to file a prospectus in
the province or territory of Canada in which any such offer is made. Each U.S.
Underwriter has further agreed to send any dealer who purchases from it any
shares of Common Stock a notice stating in substance that, by purchasing such
Common Stock, such dealer represents and agrees that it has not offered or sold,
and will not offer or sell, directly or indirectly, any of such Common Stock in
Canada or to, or for the benefit of, any resident of Canada in contravention of
the securities laws of Canada and any province or territory thereof and that any
offer of Common Stock in Canada will be made only pursuant to an exemption from
the requirement to file a prospectus in the province of Canada in which such
offer is made, and that such dealer will deliver to any other dealer to whom it
sells any of such Common Stock a notice to the foregoing effect.

Pursuant to the Agreement Between Underwriters, each International
Underwriter has represented and agreed that: (i) it has not offered or sold, and
during the period of six months from the date hereof will not offer or sell, any
shares of Common Stock to persons in the United Kingdom except to persons whose
ordinary activities involve them in acquiring, holding, managing or disposing of
investments (as principal or agent) for the purposes of their businesses or
otherwise in circumstances that have not resulted and will not result in an
offer to the public in the United Kingdom within the meaning of Public Offers of
Securities Regulations 1995 (the "Regulations"); (ii) it has complied and will
comply with all applicable provisions of the Financial Services Act 1986 and the
Regulations with respect to anything done by it in relation to the Common Stock
in, from or otherwise involving the United Kingdom; and (iii) it has only issued
or passed on and will only issue or pass on to any person in the United Kingdom

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<PAGE>
any document received by it in connection with the offer of the Common Stock if
that person is of a kind described in Article 11(3) of the Financial Services
Act 1986 (Investment Advertisements) (Exemptions) Order 1988 or is a person to
whom such document may otherwise lawfully be issued or passed on.

The Company has granted to the U.S. Underwriters an option to purchase an
aggregate of up to an additional 600,000 shares of Common Stock on the same
terms. If the U.S. Underwriters exercise this option, each of the U.S.
Underwriters will be obligated, subject to certain conditions, to purchase
approximately the same proportion of the aggregate shares so purchased as the
number of shares to be purchased by it shown in the above tables bears to
600,000. The U.S. Underwriters may exercise such option on or before the
thirtieth day from the date hereof solely for the purpose of covering
over-allotments, if any, in connection with the Offerings.

Prior to the Offerings, there has been no public market for the Common
Stock. Consequently, the initial public offering price for the Common Stock will
be determined by negotiation between the U.S. Managing Underwriters, the
International Managing Underwriters and the Company. Factors to be considered in
determining such price will be prevailing market conditions, the state of the
Company's development, recent financial results of the Company, the future
prospects of the Company and its industry, market valuations of securities of
companies engaged in activities deemed by the U.S. Managing Underwriters and the
International Managing Underwriters to be similar to those of the Company, and
other factors deemed relevant.

The Underwriters do not intend to confirm sales to accounts over which they
exercise discretionary authority. Of the 4,000,000 shares of Common Stock
offered hereby by the Company, up to of such shares will be reserved for
sale to persons designated by the Company. There can be no assurance that such
shares will be purchased by these persons. Shares not so purchased will be
reoffered immediately by the Underwriters to the public at the initial public
offering price.

The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act, as amended, or to
contribute to payments that the Underwriters may be required to make in respect
thereof.

LEGAL MATTERS

The validity of the Common Stock offered hereby will be passed upon for the
Company by Brobeck, Phleger & Harrison LLP, San Diego, California. A member of
such firm owns a total of 13,333 shares of the Company's Common Stock. Certain
legal matters will be passed upon for the Underwriters by King & Spalding, New
York, New York.

EXPERTS

The financial statements of the Company as of December 31, 1995 and for the
period from inception (July 12, 1995) to December 31, 1995, included in this
Prospectus have been so included in reliance on the report of Price Waterhouse
LLP, independent accountants, given on the authority of said firm as experts in
auditing and accounting.

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<PAGE>
The statements in this Prospectus under the captions "Risk
Factors--Uncertainty of Patents; Dependence on Patents, Licenses and Proprietary
Rights" and "Business--Patents and Proprietary Rights" have been reviewed and
approved by Kilpatrick & Cody LLP, Atlanta, Georgia, patent counsel for the
Company, as experts in such matters and are included herein in reliance upon
that review and approval.

ADDITIONAL INFORMATION

The Company has filed with the Securities and Exchange Commission (the
"Commission") the Registration Statement under the Securities Act, with respect
to the Common Stock offered hereby. This Prospectus, which is part of the
Registration Statement, does not contain all of the information set forth in the
Registration Statement and the exhibits and schedules filed therewith. For
further information with respect to the Company and the Common Stock offered
hereby, reference is hereby made to such Registration Statement and to the
exhibits and schedules filed therewith. Statements contained in this Prospectus
regarding the contents of any contract or other document are not necessarily
complete, and in each instance reference is made to the copy of such contract or
document filed as an exhibit to the Registration Statement, each such statement
being qualified in all respects by such reference. The Registration Statement,
including the exhibits and schedules thereto, may be inspected without charge at
the principal office of the Commission, 450 Fifth Street, N.W., Washington, D.C.
20549, and at the regional offices of the Commission located at Seven World
Trade Center, Suite 1300, New York, New York 10048, and Citicorp Center, 500
West Madison Street, Suite 1400, Chicago, Illinois 60661, and copies of all or
any part thereof may be obtained at prescribed rates from the Commission's
Public Reference Section at such addresses. Also, the Commission maintains a
World Wide Web site on the Internet at http://www.sec.gov that contains reports,
proxy and information statements and other information regarding registrants
that file electronically with the Commission. Upon approval of the Common Stock
for quotation on the Nasdaq National Market, such reports, proxy and information
statements and other information also can be inspected at the office of Nasdaq
Operations, 1735 K Street, N.W., Washington, D.C. 20006.

68
<PAGE>
INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
Page
---------
<S> <C>
Report of Independent Accountants...................................................... F-2
Statement of Operations for the period from inception (July 12, 1995) through December
31, 1995 and the six months ended June 30, 1996 (unaudited).......................... F-3
Balance Sheet as of December 31, 1995 and June 30, 1996 (unaudited) and Pro Forma
Stockholders' Equity at June 30, 1996 (unaudited).................................... F-4
Statement of Stockholders' Equity for the period from inception (July 12, 1995) through
December 31, 1995 and the six months ended June 30, 1996 (unaudited)................. F-5
Statement of Cash Flows for the period from inception (July 12, 1995) through December
31, 1995 and the six months ended June 30, 1996 (unaudited).......................... F-6
Notes to Financial Statements.......................................................... F-7
</TABLE>

F-1
<PAGE>
Report of Independent Accountants

To the Board of Directors
and Stockholders of
Triangle Pharmaceuticals, Inc.

In our opinion, the accompanying balance sheet and the related statements of
operations, of stockholders' equity and of cash flows present fairly, in all
material respects, the financial position of Triangle Pharmaceuticals, Inc. (the
Company), a development stage company, at December 31, 1995, and the results of
its operations and its cash flows for the period from inception (July 12, 1995)
through December 31, 1995 in conformity with generally accepted accounting
principles. 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 audit. We conducted our audit of these statements in
accordance with generally accepted auditing standards which 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, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for the opinion expressed
above.

PRICE WATERHOUSE LLP
Raleigh, North Carolina
April 26, 1996

F-2
<PAGE>

Triangle Pharmaceuticals, Inc.
(A Development Stage Company)

Statement of Operations

<TABLE>
<CAPTION>
Period From Period From
Inception Six Inception
(July 12, 1995) Months (July 12, 1995)
Through Ended Through
December 31, June 30, June 30,
1995 1996 1996
--------------- ------------- ---------------
<S> <C> <C> <C>
(Unaudited) (Unaudited)
Operating expenses:
License fees................................................... -- $ 2,751,829 $ 2,751,829
Development.................................................... -- 1,342,591 1,342,591
General and administrative..................................... $ 1,004,815 1,490,156 2,494,971
--------------- ------------- ---------------
1,004,815 5,584,576 6,589,391
--------------- ------------- ---------------
Interest income.................................................. 37,232 85,158 122,390
--------------- ------------- ---------------
Net loss......................................................... $ (967,583) $ (5,499,418) $ (6,467,001)
--------------- ------------- ---------------
--------------- ------------- ---------------
Pro forma net loss per share..................................... $ (0.07) $ (0.39)
--------------- -------------
--------------- -------------
Shares used in computing pro forma net loss per share............ 14,237,498 14,237,498
--------------- -------------
--------------- -------------
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-3
<PAGE>

Triangle Pharmaceuticals, Inc.
(A Development Stage Company)
Balance Sheet

<TABLE>
<CAPTION>
June 30, 1996
---------------------------
<S> <C> <C> <C>
Pro Forma
December 31, Stockholders'
1995 Actual Equity
------------- ------------ -------------

<CAPTION>
(Unaudited)
<S> <C> <C> <C>
Assets
Current assets:
Cash and cash equivalents......................................... $ 3,081,586 $ 5,825,617
Restricted deposits............................................... -- 35,000
Investments....................................................... -- 11,305,549
Interest receivable............................................... -- 103,541
Other receivables................................................. -- 101,249
Prepaid expenses.................................................. -- 69,657
------------- ------------
Total current assets............................................ 3,081,586 17,440,613
------------- ------------
Laboratory and office equipment..................................... 22,605 461,154
Less accumulated depreciation....................................... (2,206) (11,526)
------------- ------------
20,399 449,628
------------- ------------
Restricted deposits................................................. -- 140,000
------------- ------------
Total assets.................................................... $ 3,101,985 $ 18,030,241
------------- ------------
------------- ------------
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable.................................................. $ 122,751 $ 432,808
Accrued license fees.............................................. -- 500,000
Accrued vacation pay.............................................. -- 76,534
Other accrued expenses............................................ 91,718 91,868
------------- ------------
Total current liabilities....................................... 214,469 1,101,210
------------- ------------
Total liabilities............................................... 214,469 1,101,210
------------- ------------
Commitments and contingencies....................................... -- --
Stockholders' equity:
Series A convertible preferred stock, $0.001 par value; authorized
5,200,000 and 5,400,000 shares; issued and outstanding 5,181,671
and 5,231,671 shares 5,182 5,232 --
Series B convertible preferred stock, $0.001 par value; authorized
-0- and 4,000,000 shares; issued and outstanding -0- and
3,706,234 shares................................................ -- 3,706 --
Warrants.......................................................... -- 54,280 $ 54,280
Common stock, $0.001 par value; authorized 14,800,000 and
30,000,000 shares; issued and outstanding 2,670,000 and
4,211,833 shares; 13,149,738 shares pro forma................... 2,670 4,212 13,150
Additional paid-in capital........................................ 3,858,997 23,540,791 23,540,791
Accumulated deficit during development stage...................... (967,583) (6,467,001) (6,467,001)
------------- ------------ -------------
2,899,266 17,141,220 17,141,220
Deferred compensation............................................... (11,750) (212,189) (212,189)
------------- ------------ -------------
Total stockholders' equity...................................... 2,887,516 16,929,031 $16,929,031
------------- ------------ -------------
-------------
Total liabilities and stockholders' equity...................... $ 3,101,985 $ 18,030,241
------------- ------------
------------- ------------
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-4
<PAGE>

Triangle Pharmaceuticals, Inc.
(A Development Stage Company)

Statement of Stockholders' Equity
<TABLE>
<CAPTION>
Series A Series B
Convertible Convertible
Preferred Stock Preferred Stock Common Stock Additional
----------------------- ----------------------- ----------------------- Paid-In
Shares Amount Shares Amount Warrants Shares Amount Capital
---------- ----------- ---------- ----------- ----------- ---------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Initial sale of stock..... 933,334 $ 933 -- -- -- 1,175,000 $ 1,175 $ 709,642
Additional sale of
stock................... 4,248,337 4,249 -- -- -- 1,495,000 1,495 3,137,355
Stock-based compensation.. -- -- -- -- -- -- -- 12,000
Net loss, July 12 through
December 31, 1995....... -- -- -- -- -- -- -- --
---------- ----------- ---------- ----------- ----------- ---------- ----------- ------------
Balance, December 31,
1995.................... 5,181,671 5,182 -- -- -- 2,670,000 2,670 3,858,997

(Unaudited)
Sale of stock............. 50,000 50 3,706,234 $ 3,706 -- 560,000 560 18,504,846
Sale of warrants.......... -- -- -- -- $ 130 -- -- --
Stock-based compensation.. -- -- -- -- 54,150 700,000 700 1,126,500
Stock options exercised... -- -- -- -- -- 281,833 282 50,448
Net loss.................. -- -- -- -- -- -- -- --
---------- ----------- ---------- ----------- ----------- ---------- ----------- ------------
Balance, June 30, 1996.... 5,231,671 $ 5,232 3,706,234 $ 3,706 $ 54,280 4,211,833 $ 4,212 $ 23,540,791
---------- ----------- ---------- ----------- ----------- ---------- ----------- ------------
---------- ----------- ---------- ----------- ----------- ---------- ----------- ------------

Accumulated Deferred
Deficit Compensation Total
------------- -------------- ------------
<S> <C> <C> <C>
Initial sale of stock..... -- -- $ 711,750
Additional sale of
stock................... -- -- 3,143,099
Stock-based compensation.. -- $ (11,750) 250
Net loss, July 12 through
December 31, 1995....... $ (967,583) -- (967,583)
------------- -------------- ------------
Balance, December 31,
1995.................... (967,583) (11,750) 2,887,516
(Unaudited)
Sale of stock............. -- -- 18,509,162
Sale of warrants.......... -- -- 130
Stock-based compensation.. -- (175,673) 1,005,677
Stock options exercised... -- (24,766) 25,964
Net loss.................. (5,499,418) -- (5,499,418)
------------- -------------- ------------
Balance, June 30, 1996.... $(6,467,001) $ (212,189) $ 16,929,031
------------- -------------- ------------
------------- -------------- ------------
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-5
<PAGE>

Triangle Pharmaceuticals, Inc.
(A Development Stage Company)

Statement of Cash Flows

<TABLE>
<CAPTION>
Period From
Inception Period From
(July 12, 1995) Inception (July
Through Six Months 12, 1995)
December 31, Ended Through June
1995 June 30, 1996 30, 1996
--------------- -------------- ---------------
<S> <C> <C> <C>
(Unaudited) (Unaudited)
Cash flows from operating activities:
Net loss....................................................... $ (967,583) $ (5,499,418) $ (6,467,001)
Adjustments to reconcile net loss to net cash used by operating
activities:
Depreciation and amortization.............................. 2,206 9,320 11,526
Stock-based compensation: license fees..................... -- 636,000 636,000
Stock-based compensation: development...................... -- 313,327 313,327
Stock-based compensation: general and administrative....... 250 72,230 72,480
Change in assets and liabilities:
Receivables.............................................. -- (204,790) (204,790)
Prepaid expenses......................................... -- (69,657) (69,657)
Accounts payable......................................... 122,751 310,057 432,808
Accrued license fees, vacation pay and other expenses.... 91,718 564,342 656,060
--------------- -------------- ---------------
Net cash used by operating activities.......................... (750,658) (3,868,589) (4,619,247)
--------------- -------------- ---------------
Cash flows from investing activities:
Purchase of restricted deposits.............................. -- (175,000) (175,000)
Purchase of investments...................................... -- (11,305,549) (11,305,549)
Purchase of laboratory and office equipment.................. (22,605) (438,549) (461,154)
--------------- -------------- ---------------
Net cash used by investing activities.......................... (22,605) (11,919,098) (11,941,703)
--------------- -------------- ---------------
Cash flows from financing activities:
Sale of stock, net of related expenses....................... 3,854,849 18,509,162 22,364,011
Sale of warrants............................................. -- 130 130
Proceeds from stock options exercised........................ -- 22,426 22,426
--------------- -------------- ---------------
Net cash provided by financing activities...................... 3,854,849 18,531,718 22,386,567
--------------- -------------- ---------------
Net increase in cash........................................... 3,081,586 2,744,031 5,825,617
Cash and cash equivalents at beginning of period............... -- 3,081,586 --
--------------- -------------- ---------------
Cash and cash equivalents at end of period..................... $ 3,081,586 $ 5,825,617 $ 5,825,617
--------------- -------------- ---------------
--------------- -------------- ---------------
</TABLE>

Supplemental disclosure of noncash investing and financing activities (note 6)

The accompanying notes are an integral part of these finanicial statements.

F-6
<PAGE>

Triangle Pharmaceuticals, Inc.
(A Development Stage Company)

Period From Inception Through December 31, 1995

Notes to Financial Statements

1. Organization and Summary of Significant Accounting Policies

Organization

Triangle Pharmaceuticals, Inc. (the Company), a development stage company,
was formed July 12, 1995 as a Delaware corporation. The Company is engaged in
the development of new drug candidates primarily in the antiviral area, and has
not yet generated revenues from operations.

Cash and cash equivalents

The Company considers all short-term deposits with an initial maturity of
three months or less to be cash equivalents. The carrying amount of cash and
cash equivalents approximates fair value.

Restricted deposits

Restricted deposits consist of cash and cash equivalents which collateralize
a letter of credit and which have been classified as current and long-term based
on the expected release date of such restriction.

Investments

Investments consist primarily of commercial paper and government bonds with
original maturities at date of purchase beyond three months and less than twelve
months. Such investments are carried at fair value, which approximates cost, and
are considered to be available-for-sale.

Laboratory and office equipment

Laboratory and office equipment is recorded at cost and depreciated using
the straight-line method over the estimated useful life of the assets.
Laboratory equipment has an estimated useful life of 5 years. Office equipment
has an estimated useful life of 4 years.

Revenue recognition

Revenue recognition will be based upon shipment of products.

License fees

License fees are charged to expense as incurred.

Income taxes

Statement of Financial Accounting Standards No. 109 (SFAS 109) "ACCOUNTING
FOR INCOME TAXES" is the authoritative guidance for accounting for income taxes.
SFAS 109 is an asset and liability approach that requires the recognition of
deferred tax assets and liabilities for the expected future tax consequences of
events that have been recognized in the Company's financial statements or tax
returns. In estimating future tax consequences, SFAS 109 generally considers all
expected future events other than enactment of changes in tax law or rates. If
it is "more likely than not" that some portion or all of a deferred tax asset
will not be realized, a valuation allowance is recorded.

F-7
<PAGE>

Triangle Pharmaceuticals, Inc.
(A Development Stage Company)

Period From Inception Through December 31, 1995

Notes to Financial Statements (Continued)

1. Organization and Summary of Significant Accounting Policies (Continued)
Unaudited pro forma net loss per share and unaudited pro forma balance sheet

The Company's historical capital structure is not indicative of its
prospective structure given the conversion of the Series A and Series B
convertible preferred stock into common stock concurrent with the closing of the
Company's anticipated initial public offering (see Note 6). Accordingly,
historical net loss per common share is not considered meaningful and has not
been presented herein. The calculation of the shares used in computing pro forma
net earnings per share includes the effect of the conversion of the Series A and
Series B convertible preferred stock described in Note 2 into shares of common
stock concurrent with the closing of the Company's anticipated initial public
offering as if they were converted as of July 12, 1995. Also, pursuant to
Securities and Exchange Commission Staff Accounting Bulletin No. 83, common
stock or equivalent shares from convertible preferred stock or stock options
sold or issued at prices below the anticipated initial public offering price per
share in the twelve months preceding the initial filing have been included in
the calculation as if outstanding for all periods presented.

Interim financial information

Interim financial information for the six months ended June 30, 1996
included herein is unaudited; however, in the opinion of the Company, the
interim financial information includes all adjustments, consisting of only
normal recurring adjustments, necessary for a fair presentation of the results
for the interim period. The results of operations for the six months ended June
30, 1996 are not necessarily indicative of the results to be expected for the
year.

Use of estimates

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

Recent accounting pronouncements

2. Stockholders' Equity

Series A preferred shares may be converted into an equal number of shares of
common stock at the option of the stockholder, and the Company has reserved
5,181,671 shares of common stock for issuance in the event of such conversion.
Each share of Series A preferred stock will be automatically converted to common
stock upon the closing of an initial public offering with a net price per share
in excess of $3.50 and net proceeds in excess of $10,000,000. Preferred voting
rights are one vote for each share of common stock into which the preferred
shares

F-8
<PAGE>

Triangle Pharmaceuticals, Inc.
(A Development Stage Company)

Period From Inception Through December 31, 1995

Notes to Financial Statements (Continued)

2. Stockholders' Equity (Continued)
may be converted. Preferred dividends at a $0.05 per share annual rate may be
paid from legally available assets of the Company. Such dividends are not
cumulative. No dividends were declared during the period from inception through
December 31, 1995.

Under the terms of various agreements, the Company has the option to
repurchase common stock from certain stockholders who were employed by or who
provided services to the Company at the time they acquired those shares. The
Company may repurchase such shares in the event the stockholder discontinues
employment or provision of services. The repurchase price is limited to the
amount the stockholder originally paid for the shares. The number of shares
subject to repurchase decreases to zero over periods ranging from three to four
years.

On December 19, 1995, the Company sold 150,000 shares of common stock to an
officer. The Company accrued $250 of compensation expense related to the portion
of the common stock for which the Company's repurchase option had lapsed based
on the difference between the fair value and the selling price per share.

3. Licensing Agreements

On November 16, 1995, the Company entered into an agreement with inventors,
Dr. Karl Hostetler and Dr. Dennis Carson, to license the patent rights to two
drug candidates. This agreement gives the Company exclusive rights to make, have
made, use, market, distribute and sell these drug candidates throughout the
world. Under this agreement, the Company will pay $1,000,000 per drug candidate
to the above mentioned inventors upon FDA approval of each drug candidate.
Additionally, the Company will pay royalties based on a percentage of net sales
(calculated on a non-cumulative calendar year basis) of each licensed drug
candidate that incorporates the patented compounds. As FDA approval of these
drug candidates had not been received, no license fees or royalties were paid or
accrued during the period from inception through December 31, 1995.

4. Option Agreement

On December 20, 1995, the Company entered into a two year option agreement
with Mitsubishi Chemical Corporation (Mitsubishi) to carry out evaluation and
development of an anti-HIV drug candidate, including clinical trials. Within the
option period, the Company must inform Mitsubishi whether or not it intends to
enter into a license agreement to acquire exclusive worldwide rights for the
drug candidate, other than in the Far East. Mitsubishi has agreed to reimburse
the Company for up to $1,600,000 of costs associated with development work
during the option period. Development expenses for the six months ended June 30,
1996 have been reduced by approximately $100,000 related to reimbursement of
such costs.

5. Income Taxes

At December 31, 1995, the Company had a net operating loss carryforward of
approximately $961,000, which expires in 2011. The Company's ability to utilize
its net operating loss carryforward may be subject to an annual limitation in
future periods pursuant to the "change in ownership" provisions under Section
382 of the Internal Revenue Code. The Company provided a valuation allowance
equal to the $376,000 deferred asset represented by the net operating loss
carryforward and therefore recognized no benefit in the financial statements for
the period ended December 31, 1995.

F-9
<PAGE>

Triangle Pharmaceuticals, Inc.
(A Development Stage Company)

Period From Inception Through December 31, 1995

Notes to Financial Statements (Continued)

6. Subsequent Events

Lease

In January 1996, the Company entered into a lease agreement for office and
laboratory facilities. The monthly rent is constant over the initial term and
the lease is renewable at the option of the Company. The Company has provided a
$175,000 letter of credit, collateralized by an equivalent amount of cash and
cash equivalents, as security for the lessor. Minimum lease payments are as
follows:

<TABLE>
<CAPTION>
Year Amount
- -------------------------------------------------------------------------------- ------------
<S> <C>
1996............................................................................ $ 594,364
1997............................................................................ 673,102
1998............................................................................ 886,425
1999............................................................................ 1,198,412
2000............................................................................ 1,230,960
2001............................................................................ 1,264,809
2002............................................................................ 1,300,010
2003............................................................................ 990,762
</TABLE>

License agreements

During the first four months of 1996, the Company entered into agreements
with Emory University and the University of Georgia Research Foundation, Inc. to
develop and commercialize two anti-HIV drug candidates, CS-92 and DAPD. The
Company also entered into an agreement with Emory University to develop and
commercialize the anti-HIV drug candidate, FTC.

In the aggregate, these agreements require payments of $1,100,000 upon
execution and payments of up to $15,750,000 contingent upon the achievement of
certain development milestones. Additionally, the Company will pay royalties
based on a percentage of net sales of each licensed product incorporating these
drug candidates. All of the agreements require minimum royalty payments
commencing three years after regulatory approval. Depending on the Company's
success and timing in obtaining regulatory approval, aggregate annual minimum
royalties could range from $2,000,000 (if only a single drug candidate is
approved for one indication) to $46,000,000 (if all drug candidates are approved
for all indications). One agreement requires additional payments totaling
$1,500,000 at the earlier of eighteen months after execution or upon certain
financing activities, such as an initial public offering. Through June 30, 1996
the Company had paid $1,600,000 related to these commitments. Under the terms of
certain of these agreements, the Company granted 700,000 shares of its common
stock to the licensors. License fee expenses of approximately $636,000 were
recorded based on the fair value of these shares on the dates of grant.

Option agreement

In September 1996, the Company entered into a two year option agreement with
the University of California, San Diego, to carry out evaluation and development
of a drug candidate, including clinical trials. During the option period, the
Company has the right to enter into a license agreement to acquire rights for
the drug candidate, and is obligated to fund certain clinical costs up to a
maximum of $436,000.

F-10
<PAGE>

Triangle Pharmaceuticals, Inc.
(A Development Stage Company)

Period From Inception Through December 31, 1995

Notes to Financial Statements (Continued)

6. Subsequent Events (Continued)
Stock transactions

In February 1996, the Company's Board of Directors approved a stock option
plan (the Plan), under which the Company's Board of Directors may grant options
to purchase up to 1,700,000 newly issued shares of common stock. Information
concerning options granted under the Plan is as follows:

<TABLE>
<CAPTION>
Exercise
Number Price
Grant Date of Options Per Share
- ------------------------------------------------------ ----------- -------------
<S> <C> <C> <C>
February 14, 1996..................................... 918,167 $ 0.0750
February 14, 1996..................................... 171,833 0.0825
April 19, 1996........................................ 30,000 0.0750
August 12, 1996....................................... 33,000 6.00
September 6, 1996..................................... 48,000 6.00
September 6, 1996..................................... 210,000 7.00
</TABLE>

With the exception of the 171,833 options granted on February 14, 1996 which
vest over five years, and the 48,000 options granted on September 6, 1996 which
vest immediately, the options granted (or the shares received upon exercise)
vest 25% on the grant date anniversary and 25% over each of the subsequent three
years. Through September 10, 1996, 297,333 of the above options were exercised
and 37,407 were forfeited. The Company accrued $15,880 of compensation expense
in the six months ended June 30, 1996 related to the portion of the options
granted and shares received upon exercise in which the optionees acquired a
vested interest based on the differences between fair value and the exercise
price per share.

In April 1996, Board of Directors approved an amendment to the Company's
certificate of incorporation increasing the number of authorized Series A
preferred stock to 5,400,000.

In connection with certain consulting agreements executed during the six
months ended June 30, 1996, the Company sold 50,000 shares of Series A preferred
and 560,000 shares of common stock. The Company accrued $313,327 of consulting
expense related to the portion of the shares for which the Company's repurchase
option had lapsed based on the differences between fair value and the selling
price per share.

In June 1996, the Board of Directors approved an amendment to the Company's
certificate of incorporation increasing the number of authorized shares of
common and preferred stock to 30,000,000 and 10,000,000, respectively, and
authorizing 4,000,000 shares of Series B preferred stock.

On June 11, 1996 the Company sold 3,706,234 Series B preferred shares.
Series B preferred shares may be converted into an equal number of shares of
common stock at the option of the stockholder, and the Company reserved a like
number of common shares for issuance in the event of conversion. Each share of
Series B preferred will automatically be converted to common stock upon the
closing of an initial public offering with (i) a net price per share in excess
of $7.50 per share prior to January 1, 1997 and $10 per share thereafter, and
(ii) net proceeds in excess of $15,000,000. Series B preferred shares have one
vote for each share of common stock into which they may be converted.
Noncumulative dividends are $0.35 per share per year.

Warrants

In connection with a consulting agreement executed in May 1996, the Company
issued warrants for $130 which entitle the holder to purchase 130,000 shares of
Series A preferred or common stock at a price of $0.75 per

F-11
<PAGE>

Triangle Pharmaceuticals, Inc.
(A Development Stage Company)

Period From Inception Through December 31, 1995

Notes to Financial Statements (Continued)

6. Subsequent Events (Continued)
share. The shares represented by the warrants vest over a five year period
commencing March 1, 1996. The Company accrued $54,150 of consulting expense in
the six months ended June 30, 1996 for the elapsed portion of the vesting period
based on the difference between the fair value of such Series A preferred shares
and the exercise price per share.

In connection with an equipment lease line obtained in August 1996, the
Company issued warrants which entitle the holder to purchase 16,000 shares of
Series B preferred or common stock at a price of $5.00 per share.

Initial public offering (IPO)

The Company has initiated a plan to complete an IPO of common stock during
the fourth quarter of 1996. It is anticipated that upon the closing of such IPO
the Company's current classes of preferred stock would be converted to common
stock on a 1:1 share ratio.

F-12
<PAGE>
- -----------------------------------------------------
-----------------------------------------------------
- -----------------------------------------------------
-----------------------------------------------------

No dealer, salesperson or other person has been authorized to give any
information or to make any representation not contained in this Prospectus and,
if given or made, such information or representation may not be relied upon as
having been authorized by the Company or any Underwriter. This Prospectus does
not constitute an offer to sell, or a solicitation of an offer to buy, shares of
Common Stock in any jurisdiction to any person to whom it is unlawful to make
any such offer or solicitation in such jurisdiction or in which the person
making such offer or solicitation is not qualified to do so. Neither the
delivery of this Prospectus nor any sale made hereunder shall, under any
circumstances, create any implication that there has been no change in the
affairs of the Company since the date hereof or that the information contained
herein is correct as of any time subsequent to its date.

--------------------------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
Page
---------
<S> <C>
Prospectus Summary.................................... 3
Risk Factors.......................................... 5
Special Note Regarding Forward-Looking Statements..... 17
Use of Proceeds....................................... 17
Dividend Policy....................................... 17
Capitalization........................................ 18
Dilution.............................................. 19
Selected Financial Data............................... 20
Management's Discussion and Analysis of Financial
Condition and Results of Operations................. 21
Business.............................................. 24
Management............................................ 46
Certain Transactions.................................. 55
Principal Stockholders................................ 57
Description of Capital Stock.......................... 59
Shares Eligible for Future Sale....................... 61
Certain United States Federal Tax Considerations for
Non-United States Holders of Common Stock........... 62
Underwriting.......................................... 65
Legal Matters......................................... 67
Experts............................................... 67
Additional Information................................ 68
Index to Financial Statements......................... F-1
</TABLE>

--------------------------

Until , 1996 (25 days after the date of this Prospectus), all
dealers effecting transactions in the registered securities, whether or not
participating in this distribution, may be required to deliver a Prospectus.
This is in addition to the obligation of dealers to deliver a Prospectus when
acting as Underwriters and with respect to their unsold allotments or
subscriptions.

[TRIANGLE]

--------------------------

4,000,000 SHARES

COMMON STOCK
PROSPECTUS

, 1996

---------------------

DILLON, READ & CO. INC.

BEAR, STEARNS & CO. INC.

- -----------------------------------------------------
-----------------------------------------------------
- -----------------------------------------------------
-----------------------------------------------------
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
SUBJECT TO COMPLETION, DATED OCTOBER 15, 1996
4,000,000 SHARES

[LOGO]
COMMON STOCK

The Common Stock has been approved for listing on the Nasdaq National Market
under the symbol "VIRS."

For a discussion of certain risks of an investment in the shares of Common
Stock offered hereby, see "Risk Factors" on pages 5-16.
-----------------

<TABLE>
<CAPTION>
Underwriting
Price to Discounts and Proceeds to
Public Commissions* Company+
<S> <C> <C> <C>
Per Share..................... $ $ $
Total++....................... $ $ $
</TABLE>

- -------------

* The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriting."

+ Before deducting expenses of the Offerings payable by the Company estimated
to be $700,000.

The Common Stock is being offered by the Underwriters as set forth under
"Underwriting" herein. It is expected
that delivery of certificates therefor will be made at the offices of Dillon,
Read & Co. Inc., New York, New York, on or about , 1996. The Underwriters
include:

DILLON, READ & CO. INC.
BEAR, STEARNS INTERNATIONAL LIMITED
ING BARINGS

The date of this Prospectus is , 1996
<PAGE>
[Alternate Back Cover Page for International Offering]

There are restrictions on the offer and sale of the shares of Common Stock
offered hereby in the United Kingdom. All applicable provisions of the Financial
Services Act 1986 and the Companies Act 1985 with respect to anything done by a
person in relation to the Common Stock in, from or otherwise involving the
United Kingdom must be complied with. See "Underwriting."

In this Prospectus, references to "dollars" and "$" are to United States
dollars.

--------------------------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Prospectus Summary.................................... 3
Risk Factors.......................................... 5
Special Note Regarding Forward-Looking Statements..... 17
Use of Proceeds....................................... 17
Dividend Policy....................................... 17
Capitalization........................................ 18
Dilution.............................................. 19
Selected Financial Data............................... 20
Management's Discussion and Analysis of Financial
Condition and Results of Operations................. 21
Business.............................................. 24
Management............................................ 46
Certain Transactions.................................. 55
Principal Stockholders................................ 57
Description of Capital Stock.......................... 59
Shares Eligible for Future Sale....................... 61
Certain United States Federal Tax Considerations for
Non-United States Holders of Common Stock........... 62
Underwriting.......................................... 65
Legal Matters......................................... 67
Experts............................................... 67
Additional Information................................ 68
Index to Financial Statements......................... F-1
</TABLE>

--------------------------

[TRIANGLE]

--------------------------

4,000,000 SHARES

COMMON STOCK
PROSPECTUS

, 1996

---------------------

DILLON, READ & CO. INC.

BEAR, STEARNS INTERNATIONAL LIMITED

ING BARINGS

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

The following table sets forth all expenses, other than underwriting
discounts and commissions, payable by the Registrant in connection with the sale
of the Common Stock being registered. All the amounts shown are estimates,
except for the registration fee, the Nasdaq National Market filing fee and the
NASD fee.

<TABLE>
<S> <C>
Registration fee.................................................. $ 15,069
Nasdaq National Market fee........................................ 17,500
NASD fee.......................................................... 4,870
Blue Sky fees and expenses........................................ 15,000
Printing and engraving expenses................................... 150,000
Legal fees and expenses........................................... 350,000
Accounting fees and expenses...................................... 100,000
Transfer Agent and Registrar fees................................. 5,000
Miscellaneous expenses............................................ 42,561
---------
TOTAL......................................................... $ 700,000
---------
---------
</TABLE>

ITEM 14. INDEMNIFICATION OF OFFICERS AND DIRECTORS.

Section 145 of the Delaware General Corporation Law permits indemnification
of officers and directors of the Company under certain conditions and subject to
certain limitations. Section 145 of the Delaware General Corporation Law also
provides that a corporation has the power to purchase and maintain insurance on
behalf of its officers and directors against any liability asserted against such
person and incurred by him or her in such capacity, or arising out of his or her
status as such, whether or not the corporation would have the power to indemnify
him or her against such liability under the provisions of Section 145 of the
Delaware General Corporation Law.

Article VII, Section (i) of the Restated Bylaws of the Company provides that
the Company shall indemnify its directors and executive officers to the fullest
extent not prohibited by the Delaware General Corporation Law. The rights to
indemnity thereunder continue as to a person who has ceased to be a director,
officer, employee or agent and inure to the benefit of the heirs, executors and
administrators of the person. In addition, expenses incurred by a director or
officer in defending any civil, criminal, administrative or investigative
action, suit or proceeding by reason of the fact that he or she is or was a
director or officer of the Company (or was serving at the Company's request as a
director or officer of another corporation) shall be paid by the Company in
advance of the final disposition of such action, suit or proceeding upon receipt
of an undertaking by or on behalf of such director or officer to repay such
amount if it shall ultimately be determined that he or she is not entitled to be
indemnified by the Company as authorized by the relevant section of the Delaware
General Corporation Law.

As permitted by Section 102(b)(7) of the Delaware General Corporation Law,
Article 5, Section (a) of the Company's Second Restated Certificate of
Incorporation provides that a director of the Company shall not be personally
liable for monetary damages for breach of fiduciary duty as a director, except
for liability (i) for any breach of the director's duty of loyalty to the
Company or its stockholders, (ii) for acts or omissions not in good faith or
acts or omissions that involve intentional misconduct or a knowing violation of
law, (iii) under Section 174 of the Delaware General Corporation Law or (iv) for
any transaction from which the director derived any improper personal benefit.

The Company has entered into indemnification agreements with each of its
directors. Generally, the indemnification agreements attempt to provide the
maximum protection permitted by Delaware law as it

II-1
<PAGE>
may be amended from time to time. Under such additional indemnification
provisions, however, an individual will not receive indemnification for
judgments, settlements or expenses if he or she is found liable to the Company
(except to the extent the court determines he or she is fairly and reasonably
entitled to indemnity for expenses), for settlements not approved by the Company
or for settlements and expenses if the settlement is not approved by the court.
The indemnification agreements provide for the Company to advance to the
individual any and all reasonable expenses (including legal fees and expenses)
incurred in investigating or defending any such action, suit or proceeding. In
order to receive an advance of expenses, the individual must submit to the
Company copies of invoices presented to him or her for such expenses. Also, the
individual must repay such advances upon a final judicial decision that he or
she is not entitled to indemnification.

The Company intends to enter into additional indemnification agreements with
each of its directors and officers to effectuate these indemnity provisions and
to purchase directors' and officers' liability insurance.

The U.S. Underwriting Agreement (Exhibit 1.1 hereto) and the International
Underwriting Agreement (Exhibit 1.2 hereto) contain provisions by which the U.S.
Underwriters and the International Underwriters, respectively, have agreed to
indemnify the Company, each person, if any, who controls the Company within the
meaning of Section 15 of the Securities Act, each director of the Company, and
each officer of the Company who signs this Registration Statement, with respect
to information furnished in writing by or on behalf of the Underwriters for use
in the Registration Statement.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.

Since July 12, 1995 (the date of inception), the Company has sold and issued
the following unregistered securities:

(1) From July 1995 to September 10, 1996, the Company issued options to
purchase an aggregate of 1,411,000 shares of Common Stock under the
Predecessor Plan. An aggregate of 297,333 shares of Common Stock were issued
through the exercise of options granted under the Predecessor Plan. Options
to purchase 37,407 shares of Common Stock granted under the Predecessor Plan
were not exercised prior to the date of termination. For additional
information concerning these transactions, reference is made to the
information contained under the caption "Management--Benefit Plans" in the
form of the Prospectus included herein.

(2) On July 19, 1995, the Company issued an aggregate of 1,175,000
shares of Common Stock to various investors for an aggregate consideration
of $11,750.

(3) On July 19, 1995, the Company issued an aggregate of 933,334 shares
of Series A Preferred Stock to various investors for an aggregate
consideration of $700,000.

(4) On November 8, 1995, the Company issued an aggregate of 1,345,000
shares of Common Stock to various investors for an aggregate consideration
of $13,450.

(5) On November 8, 1995, the Company issued an aggregate of 4,248,337
shares of Series A Preferred Stock to various investors for an aggregate
consideration of $3,186,252.75.

(6) On December 19, 1995, the Company issued 150,000 shares of Common
Stock to a certain investor for the consideration of $1,500.

(7) On March 19, 1996, the Company issued 60,000 shares of Common Stock
to a certain investor for the consideration of $600.

(8) On March 20, 1996, the Company issued 60,000 shares of Common Stock
to a certain investor for the consideration of $600.

(9) On April 11, 1996, the Company issued 425,000 shares of Common Stock
to a certain investor for the consideration of $4,250.

II-2
<PAGE>
(10) On April 11, 1996, the Company issued an aggregate of 675,000 shares
of Common Stock to the University of Georgia Research Foundation, Inc. and
Emory University in consideration of those parties having entered into
certain License Agreements with the Company.

(11) On May 9, 1996, the Company issued 40,000 shares of Common Stock to
a certain investor for an aggregate consideration of $400.

(12) On May 9, 1996, the Company issued 10,000 shares of Series A
Preferred Stock to a certain investor for an aggregate consideration of
$7,500.

(13) On May 14, 1996, the Company issued 33,333 shares of Series A
Preferred Stock to a certain investor for an aggregate consideration of
$25,000.

(14) On May 15, 1996, the Company issued 6,667 shares of Series A
Preferred Stock to a certain investor for an aggregate consideration of
$5,000.

(15) On May 21, 1996, the Company issued a warrant to purchase up to
130,000 shares of Series A Preferred Stock (which warrant automatically
converts to the right to purchase shares of Common Stock upon the completion
of the Offerings) at an exercise price of $0.75 per share to Burrill &
Craves for the consideration of $130.

(16) On June 11, 1996, the Company issued an aggregate of 3,706,234
shares of Series B Preferred Stock to various investors for an aggregate
consideration of $18,531,170.

(17) On August 8, 1996, the Company issued a warrant to purchase up to
16,000 shares of Series B Preferred Stock (which warrant automatically
converts to the right to purchase shares of Common Stock upon the completion
of the Offerings) at an exercise price of $5.00 per share to Comdisco, Inc.
in consideration of the execution of a certain Master Lease Agreement by
Comdisco, Inc.

The sales and issuances of securities in the above transactions were deemed
to be exempt under the Securities Act by virtue of Section 4(2) thereof and/or
Regulation D and Rule 701 promulgated thereunder as transactions not involving
any public offering. The purchasers in each case represented their intention to
acquire the securities for investment only and not with a view to any
distribution thereof. Appropriate legends were affixed to the stock certificates
issued in such transactions. Similar representations of investment intent were
obtained and similar legends imposed in connection with any subsequent transfers
of any such securities. The Company believes that all recipients had adequate
access, either through employment or other relationships, to information about
the Company to make an informed investment decision.

II-3
<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

(A) EXHIBITS.

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- --------- --------------------------------------------------------------------------------------------------
<C> <S>
.+11 Form of U.S. Underwriting Agreement.

+1.2 Form of International Underwriting Agreement.

++3.1 Restated Certificate of Incorporation of the Company.

++3.2 Form of Second Restated Certificate of Incorporation of the Company to become effective
immediately prior to the Offerings.

++3.3 Bylaws of the Company, as amended.

++3.4 Form of Restated Bylaws of the Company to be effective immediately prior to the Offerings.

4.1 Form of Certificate for Common Stock.

5.1 Opinion of Brobeck, Phleger & Harrison LLP with respect to the Common Stock being registered.

++10.1 Form of Restricted Stock Purchase Agreement.

++10.2 Form of Employee Proprietary Information and Inventions Agreement.

++10.3 Form of Scientific Advisor Agreement.

++10.4 Series A Preferred Stock Purchase Agreement among the Company and the investors listed on Schedule
A thereto, dated July 19, 1995.

++10.5 Series A Preferred Stock Purchase Agreement among the Company and the investors listed on Schedule
A thereto, dated October 31, 1995.

++10.6 Series A Preferred Stock Purchase Agreement among the Company and Schroder Venture Managers
Limited dated November 8, 1995.

++10.7 Series A Preferred Stock Purchase Agreement among the Company and Chris Rallis dated November 8,
1995.

++*10.8 License Agreement between the Company, Karl Hostetler, M.D. and Dennis Carson, M.D., dated
November 16, 1995.

++*10.9 Consulting Agreement between the Company and Karl Hostetler, M.D.,
dated November 16, 1995.

++*10.10 Consulting Agreement between the Company and Dennis Carson, M.D.,
dated November 16, 1995.

++*10.11 Option Agreement between the Company and Mitsubishi Chemical Corporation, dated December 20, 1995.

++10.12 Sublease between the Company and Eli Lilly and Company, dated January 18, 1996.

++10.13 Letter of Credit from First Union Bank, dated February 28, 1996.

++10.14 1996 Stock Option/Stock Issuance Plan.

++10.15 1996 Stock Option/Stock Issuance Plan Form of Notice of Grant.

++10.16 1996 Stock Option/Stock Issuance Plan Form of Stock Option Agreement.

++10.17 1996 Stock Option/Stock Issuance Plan Form of Stock Purchase Agreement.

++10.18 Sublease Amendment between the Company and Eli Lilly and Company, dated March 1, 1996.
</TABLE>

II-4
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- --------- --------------------------------------------------------------------------------------------------
++*10.19 License Agreement among the Company, Emory University and the University of Georgia Research
Foundation, Inc. for compound DAPD, dated March 31, 1996.
<C> <S>

++*10.20 License Agreement among the Company, Emory University and the University of Georgia Research
Foundation, Inc. for compound CS-92, dated March 31, 1996.

++10.21 Restricted Stock Purchase Agreement among the Company and the stockholders listed on Exhibit A
thereto, dated March 31, 1996.

++*10.22 License Agreement between the Company and Emory University for compound FTC, dated April 17, 1996.

++10.23 Restricted Stock Purchase Agreement between the Company and Emory University, dated April 17,
1996.

++10.24 Amended and Restated Investors' Rights Agreement among the Company and the investors listed on
Schedule A thereto, dated April 17, 1996.

++10.25 Series A Preferred Stock Purchase Agreement among the Company and the stockholders listed on
Schedule A thereto, dated May 9, 1996.

++10.26 Stock Purchase Warrant between the Company and Burrill & Craves, dated May 21, 1996.

++10.27 Investors' Rights Agreement between the Company and Burrill & Craves, dated May 21, 1996.

++10.28 Series B Preferred Stock Purchase Agreement among the Company and the investors listed on Schedule
A thereto, dated June 11, 1996.

++10.29 Restated Investors' Rights Agreement among the Company and certain stockholders of the Company,
dated June 11, 1996.

++10.30 Restated Co-Sale Agreement among the Company and certain stockholders of the Company, dated June
11, 1996.

++10.31 Second Amendment to Sublease between the Company and Eli Lilly and Company, dated August 2, 1996.

++10.32 Master Lease Agreement between the Company and Comdisco, Inc. dated August 8, 1996.

++10.33 Stock Purchase Warrant between the Company and Comdisco, Inc. dated August 8, 1996.

++*10.34 Option Agreement between the Company and The Regents of the University of California, dated
September 1, 1996.

++*10.35 Sponsored Research Agreement between the Company and The Regents of the University of California,
dated September 1, 1996.

++10.36 1996 Stock Incentive Plan.

++10.37 1996 Stock Incentive Plan Form of Notice of Grant.

++10.38 1996 Stock Incentive Plan Form of Stock Option Agreement.

10.39 Employee Stock Purchase Plan.

10.40 Form of Indemnification Agreement between the Company and each of its directors.

10.41 Form of Indemnification Agreement between the Company and each of its officers.

10.42 Form of Written Consent of Holders of Series A and Series B Preferred Stock to conversion, dated
September 5, 1996.
</TABLE>

II-5

<PAGE>

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- --------- --------------------------------------------------------------------------------------------------
10.43 Form of Waiver of Registration Rights, dated September 5, 1996.
<C> <S>

11.1 Computation of pro forma net loss per share.

23.1 Consent of Brobeck, Phleger & Harrison LLP (contained in their opinion filed as
Exhibit 5.1).

23.2 Consent of Price Waterhouse LLP, Independent Accountants.

23.3 Consent of Kilpatrick & Cody LLP.

++24.1 Power of Attorney.

++27.1 Financial Data Schedule.
</TABLE>

- ------------------------

* Certain confidential portions of this Exhibit were omitted by means of
marking such portions with an asterisk (the "Mark"). This Exhibit has been
filed separately with the Secretary of the Commission without the Mark
pursuant to the Company's Application Requesting Confidential Treatment under
Rule 406 under the Securities Act.

++ Previously filed.

+ To be filed by amendment.

(B) FINANCIAL STATEMENT SCHEDULES INCLUDED SEPARATELY IN THE REGISTRATION
STATEMENT.

All other schedules are omitted because they are not required, are not
applicable or the information is included in the Financial Statements or Notes
thereto.

ITEM 17. UNDERTAKINGS.

The undersigned hereby undertakes to provide to the Underwriters at the
closing specified in the Underwriting Agreement, certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.

Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the Company
pursuant to the provisions described in Item 14, or otherwise, the Company has
been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Company of expenses
incurred or paid by a director, officer or controlling person of the Company in
the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the shares of Common
Stock being registered hereby, the Company will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.

The undersigned registrant hereby undertakes that:

(1) For purposes of determining any liability under the Securities Act, the
information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.

(2) For the purpose of determining any liability under the Securities Act,
each post-effective amendment that contains a form of prospectus shall be deemed
to be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial BONA FIDE offering thereof.

II-6
<PAGE>
SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Company has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Durham, County of Durham,
State of North Carolina, on the 23rd day of October, 1996.

TRIANGLE PHARMACEUTICALS, INC.

BY: /S/ DAVID W. BARRY
------------------------------------------
DAVID W. BARRY
CHAIRMAN AND CHIEF EXECUTIVE OFFICER

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.

<TABLE>
<CAPTION>
Signature Title Date
- ------------------------------ --------------------------- -------------------

<S> <C> <C>
Chairman of the Board and
/s/ DAVID W. BARRY Chief Executive Officer
- ------------------------------ (Principal Executive October 23, 1996
(David W. Barry) Officer)

Chief Financial Officer and
/s/ JAMES A. KLEIN, JR. Treasurer
- ------------------------------ (Principal Financial and October 23, 1996
(James A. Klein, Jr.) Accounting Officer)

*
- ------------------------------ Director, President and October 23, 1996
(M. Nixon Ellis) Chief Operating Officer

*
- ------------------------------ Director October 23, 1996
(Anthony B. Evnin)

*
- ------------------------------ Director October 23, 1996
(Standish M. Fleming)

*
- ------------------------------ Director October 23, 1996
(Karl Y. Hostetler)

*
- ------------------------------ Director October 23, 1996
(George McFadden)
</TABLE>

II-7
<PAGE>

<TABLE>
<CAPTION>
Signature Title Date
- ------------------------------ --------------------------- -------------------

<S> <C> <C>
*
- ------------------------------ Director October 23, 1996
(Peter McPartland)

*/s/ DAVID W. BARRY
- ------------------------------
(David W. Barry, attorney in October 23, 1996
fact)
</TABLE>

II-8
<PAGE>
EXHIBIT INDEX

<TABLE>
<CAPTION>
Exhibit
Number Description Page
- --------- ------------------------------------------------------------------------------------------- -----------
<C> <S> <C>
.+11 Form of U.S. Underwriting Agreement.
+1.2 Form of International Underwriting Agreement.
++3.1 Restated Certificate of Incorporation of the Company.
++3.2 Form of Second Restated Certificate of Incorporation of the Company to become effective
immediately prior to the Offerings.
++3.3 Bylaws of the Company, as amended.
++3.4 Form of Restated Bylaws of the Company to be effective immediately prior to the Offerings.
4.1 Form of Certificate for Common Stock.
5.1 Opinion of Brobeck, Phleger & Harrison LLP with respect to the Common Stock being
registered.
++10.1 Form of Restricted Stock Purchase Agreement.
++10.2 Form of Employee Proprietary Information and Inventions Agreement.
++10.3 Form of Scientific Advisor Agreement.
++10.4 Series A Preferred Stock Purchase Agreement among the Company and the investors listed on
Schedule A thereto, dated July 19, 1995.
++10.5 Series A Preferred Stock Purchase Agreement among the Company and the investors listed on
Schedule A thereto, dated October 31, 1995.
++10.6 Series A Preferred Stock Purchase Agreement among the Company and Schroder Venture Managers
Limited dated November 8, 1995.
++10.7 Series A Preferred Stock Purchase Agreement among the Company and Chris Rallis dated
November 8, 1995.
++*10.8 License Agreement between the Company, Karl Hostetler, M.D. and Dennis Carson, M.D., dated
November 16, 1995.
++*10.9 Consulting Agreement between the Company and Karl Hostetler, M.D.,
dated November 16, 1995.
++*10.10 Consulting Agreement between the Company and Dennis Carson, M.D.,
dated November 16, 1995.
++*10.11 Option Agreement between the Company and Mitsubishi Chemical Corporation, dated December
20, 1995.
++10.12 Sublease between the Company and Eli Lilly and Company, dated January 18, 1996.
++10.13 Letter of Credit from First Union Bank, dated February 28, 1996.
++10.14 1996 Stock Option/Stock Issuance Plan.
++10.15 1996 Stock Option/Stock Issuance Plan Form of Notice of Grant.
++10.16 1996 Stock Option/Stock Issuance Plan Form of Stock Option Agreement.
++10.17 1996 Stock Option/Stock Issuance Plan Form of Stock Purchase Agreement.
++10.18 Sublease Amendment between the Company and Eli Lilly and Company, dated March 1, 1996.
++*10.19 License Agreement among the Company, Emory University and the University of Georgia
Research Foundation, Inc. for compound DAPD, dated March 31, 1996.
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
Exhibit
Number Description Page
- --------- ------------------------------------------------------------------------------------------- -----------
++*10.20 License Agreement among the Company, Emory University and the University of Georgia
Research Foundation, Inc. for compound CS-92, dated March 31, 1996.
<C> <S> <C>
++10.21 Restricted Stock Purchase Agreement among the Company and the stockholders listed on
Exhibit A thereto, dated March 31, 1996.
++*10.22 License Agreement between the Company and Emory University for compound FTC, dated April
17, 1996.
++10.23 Restricted Stock Purchase Agreement between the Company and Emory University, dated April
17, 1996.
++10.24 Amended and Restated Investors' Rights Agreement among the Company and the investors listed
on Schedule A thereto, dated April 17, 1996.
++10.25 Series A Preferred Stock Purchase Agreement among the Company and the stockholders listed
on Schedule A thereto, dated May 9, 1996.
++10.26 Stock Purchase Warrant between the Company and Burrill & Craves, dated May 21, 1996.
++10.27 Investors' Rights Agreement between the Company and Burrill & Craves, dated May 21, 1996.
++10.28 Series B Preferred Stock Purchase Agreement among the Company and the investors listed on
Schedule A thereto, dated June 11, 1996.
++10.29 Restated Investors' Rights Agreement among the Company and certain stockholders of the
Company, dated June 11, 1996.
++10.30 Restated Co-Sale Agreement among the Company and certain stockholders of the Company, dated
June 11, 1996.
++10.31 Second Amendment to Sublease between the Company and Eli Lilly and Company, dated August 2,
1996.
++10.32 Master Lease Agreement between the Company and Comdisco, Inc. dated August 8, 1996.
++10.33 Stock Purchase Warrant between the Company and Comdisco, Inc. dated August 8, 1996.
++*10.34 Option Agreement between the Company and The Regents of the University of California, dated
September 1, 1996.
++*10.35 Sponsored Research Agreement between the Company and The Regents of the University of
California, dated September 1, 1996.
++10.36 1996 Stock Incentive Plan.
++10.37 1996 Stock Incentive Plan Form of Notice of Grant.
++10.38 1996 Stock Incentive Plan Form of Stock Option Agreement.
10.39 Employee Stock Purchase Plan.
10.40 Form of Indemnification Agreement between the Company and each of its directors.
10.41 Form of Indemnification Agreement between the Company and each of its officers.
10.42 Form of Written Consent of Holders of Series A and Series B Preferred Stock to conversion,
dated September 5, 1996.
10.43 Form of Waiver of Registration Rights, dated September 5, 1996.
11.1 Computation of pro forma net loss per share.
23.1 Consent of Brobeck, Phleger & Harrison LLP (contained in their opinion filed as
Exhibit 5.1).
</TABLE>

<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description Page
- --------- ------------------------------------------------------------------------------------------- -----------
23.2 Consent of Price Waterhouse LLP, Independent Accountants.
<C> <S> <C>
23.3 Consent of Kilpatrick & Cody LLP.
++24.1 Power of Attorney.
++27.1 Financial Data Schedule.
</TABLE>

- ------------------------
* Certain confidential portions of this Exhibit were omitted by means of
marking such portions with an asterisk (the "Mark"). This Exhibit has been
filed separately with the Secretary of the Commission without the Mark
pursuant to the Company's Application Requesting Confidential Treatment under
Rule 406 under the Securities Act.
++ Previously filed.
+ To be filed by amendment.
<PAGE>
Registration No. 333-11793
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

------------------

EXHIBITS
FILED WITH
Form S-1

REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

------------------

TRIANGLE PHARMACEUTICALS, INC.
(Exact name of registrant as specified in its charter)

Volume I

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
Registration No. 333-11793
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

------------------

EXHIBITS
FILED WITH
Form S-1

REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

------------------

TRIANGLE PHARMACEUTICALS, INC.
(Exact name of registrant as specified in its charter)

Volume II

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
Registration No. 333-11793
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

------------------

EXHIBITS
FILED WITH
Form S-1

REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

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TRIANGLE PHARMACEUTICALS, INC.
(Exact name of registrant as specified in its charter)

Volume III

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Registration No. 333-11793
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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

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EXHIBITS
FILED WITH
Form S-1

REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

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TRIANGLE PHARMACEUTICALS, INC.
(Exact name of registrant as specified in its charter)

Volume IV

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Number Shares
Triangle Pharmaceuticals, Inc.

COMMON STOCK COMMON STOCK

INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE

SEE REVERSE FOR CERTAIN DEFINITIONS

CUSIP 89589H 10 4

This Certifies that

is the owner of
FULLY PAID AND NON-ASSESSABLE SHARES OF THE COMMON STOCK,
PAR VALUE $0.001 PER SHARE, OF

Triangle Pharmaceuticals, Inc. transferable on the books of the Corporation
in person or by duly authorized attorney upon surrender of this Certificate
properly endorsed. This Certificate is not valid unless countersigned by the
Transfer Agent and registered by the Registrar.
Witness the facsimile seal of the Corporation and the facsimile signatures
of its duly authorized officers.

Dated:

/s/Chris A. Rallis /s/M. Nixon Ellis
SECRETARY PRESIDENT AND CHIEF OPERATING OFFICER

COUNTERSIGNED AND REGISTERED:
AMERICAN STOCK TRANSFER & TRUST COMPANY
TRANSFER AGENT AND REGISTRAR

AUTHORIZED SIGNATURE

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TRIANGLE PHARMACEUTICALS, INC.

The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in
full according to applicable laws or regulations:

TEN COM -- as tenants in common
TEN ENT -- as tenants by the entireties
JT TEN -- as joint tenants with right of
survivorship and not as tenants
in common

UNIF GIFT MIN ACT -- ___________________ Custodian _____________________
(Cust) (Minor)
under Uniform Gifts to Minors
Act________________________________________________
(State)

Additional abbreviations may also be used though not in the above list.

For value received,________________________hereby sell, assign and transfer unto

PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE

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________________________________________________________________________________
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)
________________________________________________________________________________

________________________________________________________________________shares
of the Common Stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint

________________________________________________________________________Attorney
to transfer the said stock on the books of the within named Corporation with
full power of substitution in the premises.

Dated______________________

X_________________________________________________
NOTICE:THE SIGNATURE(S) TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME(S) AS
WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR, WITHOUT
ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER.

SIGNATURE(S) GUARANTEED:__________________________________________________
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN
ELIGIBLE GUARANTOR INSTITUTION (BANKS,
STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND
CREDIT UNIONS WITH MEMBERSHIP IN AN APPROVED
SIGNATURE GUARANTEE MEDALLION PROGRAM), PURSUANT
TO S.E.C. RULE 17Ad-15.

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TELEPHONE: (619) 234-1966 BROBECK 550 WEST C STREET
FACSIMILE: (619) 234-3848 (12TH FLOOR) PHLEGER & SUITE 1300
(619) 236-1403 (13TH FLOOR) HARRISON SAN DIEGO
WRITER'S DIRECT DIAL: LLP CALIFORNIA 92101-3532
ATTORNEYS AT LAW

October 23, 1996

Triangle Pharmaceuticals, Inc.
4 University Place
4611 University Drive
Durham, North Carolina 27707

Re: 4,600,000 Shares of Common Stock of Triangle Pharmaceuticals, Inc.
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Ladies and Gentlemen:

We have acted as counsel to Triangle Pharmaceuticals, Inc., a Delaware
corporation (the "Company"), in connection with the proposed issuance and
sale by the Company of up to 4,600,000 shares of the Company's Common Stock
(the "Shares"), pursuant to the Company's Registration Statement on Form S-1
filed on September 11, 1996 (the "Registration Statement").

In connection with this opinion, we have examined the Registration
Statement and related Prospectus, the Company's Restated Certificate of
Incorporation, as amended through the date hereof, the Second Restated
Certificate of Incorporation, which the Registration Statement contemplates
will become effective immediately prior to the issuance and sale of the
Shares, the Company's bylaws, as amended through the date hereof, the
restated bylaws which the Registration Statement contemplates will become
effective immediately prior to the issuance and sale of the Shares and the
originals, or copies certified to our satisfaction, of such records,
documents, certificates, memoranda and other instruments as in our judgment
are necessary or appropriate to enable us to render the opinion expressed
below (the "Documents"). We are relying (without any independent
investigation thereof) upon the truth and accuracy of the statements,
covenants, representations and warranties set forth in such Documents.

On the basis of the foregoing, and in reliance thereon, we are of the
opinion that the Shares have been duly authorized, and if, as and when issued
in accordance with the Registration Statement and Prospectus (as amended and
supplemented through the date of issuance) will be validly issued, fully paid
and nonassessable.

SAN FRANCISCO PALO ALTO LOS ANGELES ORANGE COUNTY
SAN DIEGO NEW YORK AUSTIN DENVER LONDON*
*BROBECK HALE AND DORK INTERNATIONAL OFFICE
<PAGE>

BROBECK
PHLEGER &
HARRISON
LLP
ATTORNEYS AT LAW
Triangle Pharmaceuticals, Inc. October 23, 1996
Page 2

We consent to the use of this opinion as an exhibit to the Registration
Statement and further consent to all references to us in the Registration
Statement, the Prospectus and any further amendments thereto. Subject to the
foregoing sentence, this opinion is given as of the date hereof solely for
your benefit and may not be relied upon, circulated, quoted or otherwise
referred to for any purpose without our prior written consent.

Very truly yours,

/s/ Brobeck, Phleger & Harrison LLP

BROBECK, PHLEGER & HARRISON LLP

<PAGE>

Exhibit 10.39

TRIANGLE PHARMACEUTICALS, INC.
EMPLOYEE STOCK PURCHASE PLAN

I. PURPOSE OF THE PLAN

This Employee Stock Purchase Plan is intended to promote the interests
of Triangle Pharmaceuticals, Inc., a Delaware corporation, by providing eligible
employees with the opportunity to acquire a proprietary interest in the
Corporation through participation in a payroll-deduction based employee stock
purchase plan designed to qualify under Section 423 of the Code.

Capitalized terms herein shall have the meanings assigned to such
terms in the attached Appendix.

II. ADMINISTRATION OF THE PLAN

The Plan Administrator shall have full authority to interpret and
construe any provision of the Plan and to adopt such rules and regulations for
administering the Plan as it may deem necessary in order to comply with the
requirements of Code Section 423. Decisions of the Plan Administrator shall be
final and binding on all parties having an interest in the Plan.

III. STOCK SUBJECT TO PLAN

A. The stock purchasable under the Plan shall be shares of
authorized but unissued or reacquired Common Stock, including shares of Common
Stock purchased on the open market. The maximum number of shares of Common
Stock which may be issued over the term of the Plan shall not exceed Three
Hundred Thousand (300,000) shares.

B. Should any change be made to the Common Stock by reason of any
stock split, stock dividend, recapitalization, combination of shares, exchange
of shares or other change affecting the outstanding Common Stock as a class
without the Corporation's receipt of consideration, appropriate adjustments
shall be made to (i) the maximum number and class of securities issuable under
the Plan, (ii) the maximum number and class of securities purchasable per
Participant on any one Purchase Date and (iii) the number and class of
securities and the price per share in effect under each outstanding purchase
right in order to prevent the dilution or enlargement of benefits thereunder.

IV. OFFERING PERIODS

A. Shares of Common Stock shall be offered for purchase under the
Plan through a series of successive offering periods until such time as (i) the
maximum number

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of shares of Common Stock available for issuance under the Plan shall have been
purchased or (ii) the Plan shall have been sooner terminated.

B. The initial offering period shall commence as of the Effective
Date of the Plan and shall continue until August 31, 1998. Thereafter, each
successive offering period shall be of 24 months duration. The next offering
period shall commence on the first business day in September 1998, and
subsequent offering periods shall commence as designated by the Plan
Administrator. Notwithstanding the above, the Plan Administrator may shorten
the duration of any offering period to less than twenty-four (24) months
provided that such action is taken prior to the start date of such offering
period.

C. Each offering period shall be comprised of a series of one or
more successive Purchase Intervals. Purchase Intervals shall run from the first
business day in March each year to the last business day in August of the same
year and from the first business day in September each year to the last business
day in February of the following year. Accordingly, the first Purchase Interval
in effect under the initial offering period shall commence at the Effective Time
and terminate on the last business day in February 1997.

D. Should the Fair Market Value per share of Common Stock on any
Purchase Date within an offering period be less than the Fair Market Value per
share of Common Stock on the start date of that offering period, then that
offering period shall automatically terminate immediately after the purchase of
shares of Common Stock on such Purchase Date, and a new offering period shall
commence on the next business day following such Purchase Date. The new
offering period shall have a duration of twenty four (24) months, unless a
shorter duration is established by the Plan Administrator within five (5)
business days following the start date of that offering period.

V. ELIGIBILITY

A. Each individual who is an Eligible Employee on the start date of
any offering period under the Plan may enter that offering period on such start
date or on any subsequent Semi-Annual Entry Date within that offering period,
provided he or she remains an Eligible Employee.

B. Each individual who first becomes an Eligible Employee after the
start date of an offering period may enter that offering period on any
subsequent Semi-Annual Entry Date within that offering period on which he or she
is an Eligible Employee.

C. The date an individual enters an offering period shall be
designated his or her Entry Date for purposes of that offering period.

D. To participate in the Plan for a particular offering period, the
Eligible Employee must complete the enrollment forms prescribed by the Plan
Administrator (including a stock purchase agreement and a payroll deduction
authorization) and file such

<PAGE>

forms with the Plan Administrator (or its designate) on or before his or her
scheduled Entry Date.

VI. PAYROLL DEDUCTIONS

A. The payroll deduction authorized by the Participant for purposes
of acquiring shares of Common Stock during an offering period may be any
multiple of one percent (1%) of the Base Salary paid to the Participant during
each Purchase Interval within that offering period, up to a maximum of ten
percent (10%). The deduction rate so authorized shall continue in effect
throughout the offering period, except to the extent such rate is changed in
accordance with the following guidelines:

(i) The Participant may, at any time during the
offering period, reduce his or her rate of payroll deduction to become
effective as soon as possible after filing the appropriate form with
the Plan Administrator. The Participant may not, however, effect more
than one (1) such reduction per Purchase Interval.

(ii) The Participant may, prior to the commencement of
any new Purchase Interval within the offering period, increase the
rate of his or her payroll deduction by filing the appropriate form
with the Plan Administrator. The new rate (which may not exceed the
ten percent (10%) maximum) shall become effective on the start date of
the first Purchase Interval following the filing of such form.

B. Payroll deductions shall begin on the first pay day following the
Participant's Entry Date into the offering period and shall (unless sooner
terminated by the Participant) continue through the pay day ending with or
immediately prior to the last day of that offering period. The amounts so
collected shall be credited to the Participant's book account under the Plan,
but no interest shall be paid on the balance from time to time outstanding in
such account. The amounts collected from the Participant shall not be held in
any segregated account or trust fund and may be commingled with the general
assets of the Corporation and used for general corporate purposes.

C. Payroll deductions shall automatically cease upon the termination
of the Participant's purchase right in accordance with the provisions of the
Plan.

D. The Participant's acquisition of Common Stock under the Plan on
any Purchase Date shall neither limit nor require the Participant's acquisition
of Common Stock on any subsequent Purchase Date, whether within the same or a
different offering period.

<PAGE>

VII. PURCHASE RIGHTS

A. GRANT OF PURCHASE RIGHT. A Participant shall be granted a
separate purchase right for each offering period in which he or she
participates. The purchase right shall be granted on the Participant's Entry
Date into the offering period and shall provide the Participant with the right
to purchase shares of Common Stock, in a series of successive installments over
the remainder of such offering period, upon the terms set forth below. The
Participant shall execute a stock purchase agreement embodying such terms and
such other provisions (not inconsistent with the Plan) as the Plan Administrator
may deem advisable.

Under no circumstances shall purchase rights be granted under the Plan
to any Eligible Employee if such individual would, immediately after the grant,
own (within the meaning of Code Section 424(d)) or hold outstanding options or
other rights to purchase, stock possessing five percent (5%) or more of the
total combined voting power or value of all classes of stock of the Corporation
or any Corporate Affiliate.

B. EXERCISE OF THE PURCHASE RIGHT. Each purchase right shall be
automatically exercised in installments on each successive Purchase Date within
the offering period, and shares of Common Stock shall accordingly be purchased
on behalf of each Participant (other than Participants whose payroll deductions
have previously been refunded pursuant to the Termination of Purchase Right
provisions below) on each such Purchase Date. The purchase shall be effected by
applying the Participant's payroll deductions for the Purchase Interval ending
on such Purchase Date to the purchase of whole shares of Common Stock at the
purchase price in effect for the Participant for that Purchase Date.

C. PURCHASE PRICE. The purchase price per share at which Common
Stock will be purchased on the Participant's behalf on each Purchase Date within
the offering period shall not be less than eighty-five percent (85%) of the
LOWER of (i) the Fair Market Value per share of Common Stock on the
Participant's Entry Date into that offering period or (ii) the Fair Market Value
per share of Common Stock on that Purchase Date.

D. NUMBER OF PURCHASABLE SHARES. The number of shares of Common
Stock purchasable by a Participant on each Purchase Date during the offering
period shall be the number of whole shares obtained by dividing the amount
collected from the Participant through payroll deductions during the Purchase
Interval ending with that Purchase Date by the purchase price in effect for the
Participant for that Purchase Date.

E. EXCESS PAYROLL DEDUCTIONS. Any payroll deductions not applied to
the purchase of shares of Common Stock on any Purchase Date because they are
not sufficient to purchase a whole share of Common Stock shall be held for the
purchase of Common Stock on the next Purchase Date. However, any payroll
deductions not applied to the purchase of Common Stock by reason of the
limitation on the maximum number of shares purchasable by the Participant on the
Purchase Date shall be promptly refunded.

<PAGE>

F. TERMINATION OF PURCHASE RIGHT. The following provisions shall
govern the termination of outstanding purchase rights:

(i) A Participant may, at any time prior to the next
scheduled Purchase Date in the offering period, terminate his or her
outstanding purchase right by filing the appropriate form with the
Plan Administrator (or its designate), and no further payroll
deductions shall be collected from the Participant with respect to the
terminated purchase right. Any payroll deductions collected during
the Purchase Interval in which such termination occurs shall, at the
Participant's election, be immediately refunded or held for the
purchase of shares on the next Purchase Date. If no such election is
made at the time such purchase right is terminated, then the payroll
deductions collected with respect to the terminated right shall be
refunded as soon as possible.

(ii) The termination of such purchase right shall be
irrevocable, and the Participant may not subsequently rejoin the
offering period for which the terminated purchase right was granted.
In order to resume participation in any subsequent offering period,
such individual must re-enroll in the Plan (by making a timely filing
of the prescribed enrollment forms) on or before his or her scheduled
Entry Date into that offering period.

(iii) Should the Participant cease to remain an Eligible
Employee for any reason (including death, disability or change in
status) while his or her purchase right remains outstanding, then that
purchase right shall immediately terminate, and all of the
Participant's payroll deductions for the Purchase Interval in which
the purchase right so terminates shall be immediately refunded.
However, should the Participant cease to remain in active service by
reason of an approved unpaid leave of absence, then the Participant
shall have the right, exercisable up until the last business day of
the Purchase Interval in which such leave commences, to (a) withdraw
all the payroll deductions collected to date on his or her behalf for
that Purchase Interval or (b) have such funds held for the purchase of
shares on his or her behalf on the next scheduled Purchase Date. In
no event, however, shall any further payroll deductions be collected
on the Participant's behalf during such leave. Upon the Participant's
return to active service, his or her payroll deductions under the Plan
shall automatically resume at the rate in effect at the time the leave
began, unless the Participant withdraws from the Plan prior to his or
her return.

G. CORPORATE TRANSACTION. Each outstanding purchase right shall
automatically be exercised, immediately prior to the effective date of any
Corporate Transaction, by applying the payroll deductions of each Participant
for the Purchase Interval in which such Corporate Transaction occurs to the
purchase of whole shares of Common

<PAGE>

Stock at a purchase price per share not less than eighty-five percent (85%) of
the LOWER of (i) the Fair Market Value per share of Common Stock on the
Participant's Entry Date into the offering period in which such Corporate
Transaction occurs or (ii) the Fair Market Value per share of Common Stock
immediately prior to the effective date of such Corporate Transaction. However,
the applicable limitation on the number of shares of Common Stock purchasable
per Participant shall continue to apply to any such purchase.

The Corporation shall use its best efforts to provide at least ten
(10)-days prior written notice of the occurrence of any Corporate Transaction,
and Participants shall, following the receipt of such notice, have the right to
terminate their outstanding purchase rights prior to the effective date of the
Corporate Transaction.

H. PRORATION OF PURCHASE RIGHTS. Should the total number of shares
of Common Stock to be purchased pursuant to outstanding purchase rights on any
particular date exceed the number of shares then available for issuance under
the Plan, the Plan Administrator shall make a pro-rata allocation of the
available shares on a uniform and nondiscriminatory basis, and the payroll
deductions of each Participant, to the extent in excess of the aggregate
purchase price payable for the Common Stock pro-rated to such individual, shall
be refunded.

I. ASSIGNABILITY. The purchase right shall be exercisable only by
the Participant and shall not be assignable or transferable by the Participant.

J. STOCKHOLDER RIGHTS. A Participant shall have no stockholder
rights with respect to the shares subject to his or her outstanding purchase
right until the shares are purchased on the Participant's behalf in accordance
with the provisions of the Plan and the Participant has become a holder of
record of the purchased shares.

VIII. ACCRUAL LIMITATIONS

A. No Participant shall be entitled to accrue rights to acquire
Common Stock pursuant to any purchase right outstanding under this Plan if and
to the extent such accrual, when aggregated with (i) rights to purchase Common
Stock accrued under any other purchase right granted under this Plan and (ii)
similar rights accrued under other employee stock purchase plans (within the
meaning of Code Section 423) of the Corporation or any Corporate Affiliate,
would otherwise permit such Participant to purchase more than Twenty-Five
Thousand Dollars ($25,000) worth of stock of the Corporation or any Corporate
Affiliate (determined on the basis of the Fair Market Value per share on the
date or dates such rights are granted) for each calendar year such rights are at
any time outstanding.

B. For purposes of applying such accrual limitations to the purchase
rights granted under the Plan, the following provisions shall be in effect:

<PAGE>

(i) The right to acquire Common Stock under each
outstanding purchase right shall accrue in a series of installments on
each successive Purchase Date during the offering period on which such
right remains outstanding.

(ii) No right to acquire Common Stock under any
outstanding purchase right shall accrue to the extent the Participant
has already accrued in the same calendar year the right to acquire
Common Stock under one (1) or more other purchase rights at a rate
equal to Twenty-Five Thousand Dollars ($25,000) worth of Common Stock
(determined on the basis of the Fair Market Value per share on the
date or dates of grant) for each calendar year such rights were at any
time outstanding.

C. If by reason of such accrual limitations, any purchase right of a
Participant does not accrue for a particular Purchase Interval, then the payroll
deductions which the Participant made during that Purchase Interval with respect
to such purchase right shall be promptly refunded.

D. In the event there is any conflict between the provisions of this
Article and one or more provisions of the Plan or any instrument issued
thereunder, the provisions of this Article shall be controlling.

IX. EFFECTIVE DATE AND TERM OF THE PLAN

A. The Plan shall become effective at the Effective Time, PROVIDED
no purchase rights granted under the Plan shall be exercised, and no shares of
Common Stock shall be issued hereunder, until (i) the Plan shall have been
approved by the stockholders of the Corporation and (ii) the Corporation shall
have complied with all applicable requirements of the 1933 Act (including the
registration of the shares of Common Stock issuable under the Plan on a Form S-8
registration statement filed with the Securities and Exchange Commission), all
applicable listing requirements of any stock exchange (or the Nasdaq National
Market, if applicable) on which the Common Stock is listed for trading and all
other applicable requirements established by law or regulation. In the event
such stockholder approval is not obtained, or such compliance is not effected,
within twelve (12) months after the date on which the Plan is adopted by the
Board, the Plan shall terminate and have no further force or effect, and all
sums collected from Participants during the initial offering period hereunder
shall be refunded.

B. Unless sooner terminated by the Board, the Plan shall terminate
upon the EARLIEST of (i) the last business day in August 2006, (ii) the date on
which all shares available for issuance under the Plan shall have been sold
pursuant to purchase rights exercised under the Plan or (iii) the date on which
all purchase rights are exercised in connection with a Corporate Transaction.
No further purchase rights shall be granted or

<PAGE>

exercised, and no further payroll deductions shall be collected, under the Plan
following such termination.

X. AMENDMENT OF THE PLAN

The Board may alter, amend, suspend or discontinue the Plan at any
time to become effective immediately following the close of any Purchase
Interval. However, the Board may not, without the approval of the Corporation's
stockholders, (i) materially increase the number of shares of Common Stock
issuable under the Plan or the maximum number of shares purchasable per
Participant on any one Purchase Date, except for permissible adjustments in the
event of certain changes in the Corporation's capitalization, (ii) alter the
purchase price formula so as to reduce the purchase price payable for the shares
of Common Stock purchasable under the Plan or (iii) materially increase the
benefits accruing to Participants under the Plan or materially modify the
requirements for eligibility to participate in the Plan.

XI. GENERAL PROVISIONS

A. All costs and expenses incurred in the administration of the Plan
shall be paid by the Corporation.

B. Nothing in the Plan shall confer upon the Participant any right
to continue in the employ of the Corporation or any Corporate Affiliate for any
period of specific duration or interfere with or otherwise restrict in any way
the rights of the Corporation (or any Corporate Affiliate employing such person)
or of the Participant, which rights are hereby expressly reserved by each, to
terminate such person's employment at any time for any reason, with or without
cause.

C. The provisions of the Plan shall be governed by the laws of the
State of Delaware without resort to that State's conflict-of-laws rules.

<PAGE>

SCHEDULE A

CORPORATIONS PARTICIPATING IN
EMPLOYEE STOCK PURCHASE PLAN
AS OF THE EFFECTIVE TIME

Triangle Pharmaceuticals, Inc.

<PAGE>

APPENDIX

The following definitions shall be in effect under the Plan:

A. BASE SALARY shall mean the (i) regular base salary paid to a
Participant by one or more Participating Companies during such individual's
period of participation in one or more offering periods under the Plan plus (ii)
any pre-tax contributions made by the Participant to any Code Section 401(k)
salary deferral plan or any Code Section 125 cafeteria benefit program now or
hereafter established by the Corporation or any Corporate Affiliate. The
following items of compensation shall NOT be included in Base Salary: (i) all
overtime payments, bonuses, commissions (other than those functioning as base
salary equivalents), profit-sharing distributions and other incentive-type
payments and (ii) any and all contributions (other than Code Section 401(k) or
Code Section 125 contributions) made on the Participant's behalf by the
Corporation or any Corporate Affiliate under any employee benefit or welfare
plan now or hereafter established.

B. BOARD shall mean the Corporation's Board of Directors.

C. CODE shall mean the Internal Revenue Code of 1986, as amended.

D. COMMON STOCK shall mean the Corporation's common stock.

E. CORPORATE AFFILIATE shall mean any parent or subsidiary
corporation of the Corporation (as determined in accordance with Code Section
424), whether now existing or subsequently established.

F. CORPORATE TRANSACTION shall mean either of the following
stockholder-approved transactions to which the Corporation is a party:

(i) a merger or consolidation in which securities
possessing more than fifty percent (50%) of the total combined voting
power of the Corporation's outstanding securities are transferred to a
person or persons different from the persons holding those securities
immediately prior to such transaction, or

(ii) the sale, transfer or other disposition of all or
substantially all of the assets of the Corporation in complete
liquidation or dissolution of the Corporation.

G. CORPORATION shall mean Triangle Pharmaceuticals, Inc., a Delaware
corporation, and any corporate successor to all or substantially all of the
assets or voting stock of Triangle Pharmaceuticals, Inc. which shall by
appropriate action adopt the Plan.

A-1.

<PAGE>

H. EFFECTIVE TIME shall mean the time at which the Underwriting
Agreement is executed and finally priced. Any Corporate Affiliate which becomes
a Participating Corporation after such Effective Time shall designate a
subsequent Effective Time with respect to its employee-Participants.

I. ELIGIBLE EMPLOYEE shall mean any person who is employed by a
Participating Corporation on a basis under which he or she is regularly expected
to render more than twenty (20) hours of service per week for more than five (5)
months per calendar year for earnings considered wages under Code Section
3401(a).

J. ENTRY DATE shall mean the date an Eligible Employee first
commences participation in the offering period in effect under the Plan. The
earliest Entry Date under the Plan shall be the Effective Time.

K. FAIR MARKET VALUE per share of Common Stock on any relevant date
shall be determined in accordance with the following provisions:

(i) If the Common Stock is at the time traded on the Nasdaq
National Market, then the Fair Market Value shall be the closing
selling price per share of Common Stock on the date in question, as
such price is reported by the National Association of Securities
Dealers on the Nasdaq National Market or any successor system. If
there is no closing selling price for the Common Stock on the date in
question, then the Fair Market Value shall be the closing selling
price on the last preceding date for which such quotation exists.

(ii) If the Common Stock is at the time listed on any Stock
Exchange, then the Fair Market Value shall be the closing selling
price per share of Common Stock on the date in question on the Stock
Exchange determined by the Plan Administrator to be the primary market
for the Common Stock, as such price is officially quoted in the
composite tape of transactions on such exchange. If there is no
closing selling price for the Common Stock on the date in question,
then the Fair Market Value shall be the closing selling price on the
last preceding date for which such quotation exists.

(iii) For purposes of the initial offering period which
begins at the Effective Time, the Fair Market Value shall be deemed to
be equal to the price per share at which the Common Stock is sold in
the initial public offering pursuant to the Underwriting Agreement.

L. 1933 ACT shall mean the Securities Act of 1933, as amended.

A-2.

<PAGE>

M. PARTICIPANT shall mean any Eligible Employee of a Participating
Corporation who is actively participating in the Plan.

N. PARTICIPATING CORPORATION shall mean the Corporation and such
Corporate Affiliate or Affiliates as may be authorized from time to time by the
Board to extend the benefits of the Plan to their Eligible Employees. The
Participating Corporations in the Plan as of the Effective Time are listed in
attached Schedule A.

O. PLAN shall mean the Corporation's Employee Stock Purchase Plan,
as set forth in this document.

P. PLAN ADMINISTRATOR shall mean the committee of two (2) or more
Board members appointed by the Board to administer the Plan.

Q. PURCHASE DATE shall mean the last business day of each Purchase
Interval. The initial Purchase Date shall be the last business day in February,
1997.

R. PURCHASE INTERVAL shall mean each successive six (6)-month period
within the offering period at the end of which there shall be purchased shares
of Common Stock on behalf of each Participant.

S. SEMI-ANNUAL ENTRY DATE shall mean the first business day in March
and September each year on which an Eligible Employee may first enter an
offering period.

T. STOCK EXCHANGE shall mean either the American Stock Exchange or
the New York Stock Exchange.

U. UNDERWRITING AGREEMENT shall mean the agreement between the
Corporation and the underwriter or underwriters managing the initial public
offering of the Common Stock.

A-3.

<PAGE>

Exhibit 10.40

INDEMNIFICATION AGREEMENT

THIS AGREEMENT is made and entered into this _____ day of September, 1996
between Triangle Pharmaceuticals, Inc., a Delaware corporation ("Corporation"),
and __________________ ("Director").

RECITALS:

A. Director, a member of the Board of Directors of Corporation, performs
a valuable service in such capacity for Corporation; and

B. The stockholders of Corporation have adopted Bylaws (the "Bylaws")
providing for the indemnification of the officers, directors, agents and
employees of Corporation to the maximum extent authorized by Section 145 of the
Delaware General Corporation Law, as amended (the "Law"); and

C. The Bylaws and the Law, by their non-exclusive nature, permit
contracts between Corporation and the members of its Board of Directors with
respect to indemnification of such directors; and

D. In accordance with the authorization as provided by the Law,
Corporation may from time to time purchase and maintain a policy or policies of
Directors and Officers Liability Insurance ("D & O Insurance"), covering certain
liabilities which may be incurred by its directors and officers in the
performance of services as directors and officers of Corporation; and

E. As a result of developments affecting the terms, scope and
availability of D & O Insurance there exists general uncertainty as to the
extent and overall desirability of protection afforded members of the Board of
Directors by such D & O Insurance, if any, and by statutory and bylaw
indemnification provisions; and

F. In order to induce Director to continue to serve as a member of the
Board of Directors of Corporation, Corporation has determined and agreed to
enter into this contract with Director;

NOW, THEREFORE, in consideration of Director's continued service as a
director after the date hereof, the parties hereto agree as follows:

1. INDEMNITY OF DIRECTOR. Corporation hereby agrees to hold harmless and
indemnify Director to the fullest extent authorized or permitted by the
provisions of the Law, as may be amended from time to time.

<PAGE>

2. ADDITIONAL INDEMNITY. Subject only to the exclusions set forth in
Section 3 hereof, Corporation hereby further agrees to hold harmless and
indemnify Director:

(a) against any and all expenses (including attorneys' fees), witness
fees, judgments, fines and amounts paid in settlement actually and reasonably
incurred by Director in connection with any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (including an action by or in the right of Corporation) to which
Director is, was or at any time becomes a party, or is threatened to be made a
party, by reason of the fact that Director is, was or at any time becomes a
director, officer, employee or agent of Corporation, or is or was serving or at
any time serves at the request of Corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise; and

(b) otherwise to the fullest extent as may be provided to Director by
Corporation under the non-exclusivity provisions of the Bylaws of Corporation
and the Law.

3. LIMITATIONS ON ADDITIONAL INDEMNITY. No indemnity pursuant to Section
2 hereof shall be paid by Corporation:

(a) except to the extent the aggregate of losses to be indemnified
thereunder exceeds the sum of such losses for which the Director is indemnified
pursuant to Section 1 hereof or pursuant to any D & O Insurance purchased and
maintained by Corporation;

(b) in respect of remuneration paid to Director if it shall be
determined by a final judgment or other final adjudication that such
remuneration was in violation of law;

(c) on account of any action, suit or proceeding in which judgment is
rendered against Director for an accounting of profits made from the purchase or
sale by Director of securities of Corporation pursuant to the provisions of
Section 16(b) of the Securities Exchange Act of 1934 and amendments thereto or
similar provisions of any federal, state or local statutory law;

(d) on account of Director's conduct which is finally adjudged to
have been knowingly fraudulent or deliberately dishonest, or to constitute
willful misconduct;

(e) on account of Director's conduct which is the subject of an
action, suit or proceeding described in Section 7(c)(ii) hereof;

(f) on account of or arising in response to any action, suit or
proceeding (other than an action, suit or proceeding referred to in Section 8(b)
hereof) initiated by Director or any of Director's affiliates against
Corporation or any officer, director or

-2-

<PAGE>

stockholder of Corporation unless such action, suit or proceeding was authorized
in the specific case by action of the Board of Directors of Corporation;

(g) on account of any action, suit or proceeding to the extent that
Director is a plaintiff, a counter-complainant or a cross-complainant therein
(other than an action, suit or proceeding permitted by Section 3(f) hereof); or

(h) if a final decision by a Court having jurisdiction in the matter
shall determine that such indemnification is not lawful (and, in this respect,
both Corporation and Director have been advised that the Securities and Exchange
Commission believes that indemnification for liabilities arising under the
federal securities laws is against public policy and is, therefore,
unenforceable and that claims for indemnification should be submitted to
appropriate courts for adjudication).

4. CONTRIBUTION. If the indemnification provided in Sections 1 and 2 is
unavailable and may not be paid to Director for any reason other than those set
forth in paragraphs (b) through (g) of Section 3, then in respect of any
threatened, pending or completed action, suit or proceeding in which Corporation
is or is alleged to be jointly liable with Director (or would be if joined in
such action, suit or proceeding), Corporation shall contribute to the amount of
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred and paid or payable by Director in
such proportion as is appropriate to reflect (i) the relative benefits received
by Corporation on the one hand and Director on the other hand from the
transaction from which such action, suit or proceeding arose, and (ii) the
relative fault of Corporation on the one hand and of Director on the other hand
in connection with the events which resulted in such expenses, judgments, fines
or settlement amounts, as well as any other relevant equitable considerations.
The relative fault of Corporation on the one hand and of Director on the other
shall be determined by reference to, among other things, the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
the circumstances resulting in such expenses, judgments, fines or settlement
amounts. Corporation agrees that it would not be just and equitable if
contribution pursuant to this Section 4 were determined by pro rata allocation
or any other method of allocation which does not take account of the foregoing
equitable considerations.

5. CONTINUATION OF OBLIGATIONS.

(a) All agreements and obligations of Corporation contained herein
shall continue during the period Director is a director, officer, employee or
agent of Corporation (or is or was serving at the request of Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust, employee benefit plan or other enterprise) and shall continue
thereafter so long as Director shall be subject to any possible claim or
threatened, pending or completed action, suit or proceeding, whether civil,
criminal or investigative, by reason of the fact that Director was serving
Corporation or such other entity in any capacity referred to herein.

-3-

<PAGE>

(b) For six years after the effective time of (i) the acquisition of
the Corporation by another entity by means of any transaction or series of
related transactions (including, without limitation, any reorganization, merger
or consolidation) or (ii) the sale of all or substantially all of the assets of
the Corporation by means of any transaction or series of related transactions,
the Corporation (to the extent the Corporation is not the continuing or
surviving person of such reorganization, merger, consolidation or sale) shall
cause the acquiring, continuing or surviving corporation to (x) indemnify and
hold harmless Director in accordance with Section 1 and 2 hereof and (y) use its
best efforts to provide directors' liability insurance on terms substantially
similar to the terms of the Corporation's then current directors' liability
insurance policy in effect on the dated thereof, or any other arrangement
reasonably satisfactory to Director, in respect of acts or omissions occurring
on or prior to the effective time of the reorganization, merger, consolidation
or sale.

6. NOTIFICATION AND DEFENSE OF CLAIM. Not later than thirty (30) days
after receipt by Director of notice of the commencement of any action, suit or
proceeding, Director will, if a claim in respect thereof is to be made against
Corporation under this Agreement, notify Corporation of the commencement
thereof; but the omission so to notify Corporation will not relieve it from any
liability which it may have to Director otherwise than under this Agreement.
With respect to any such action, suit or proceeding as to which Director
notifies Corporation of the commencement thereof:

(a) Corporation will be entitled to participate therein at its own
expense;

(b) except as otherwise provided below, to the extent that it may
wish, Corporation jointly with any other indemnifying party similarly notified
will be entitled to assume the defense thereof, with counsel reasonably
satisfactory to Director. After notice from Corporation to Director of its
election so as to assume the defense thereof, Corporation will not be liable to
Director under this Agreement for any legal or other expenses subsequently
incurred by Director in connection with the defense thereof other than
reasonable costs of investigation or as otherwise provided below. Director
shall have the right to employ his own counsel in such action, suit or
proceeding but the fees and expenses of such counsel incurred after notice from
Corporation of its assumption of the defense thereof shall be at the expense of
Director unless (i) the employment of counsel by Director has been authorized by
Corporation, (ii) Director shall have reasonably concluded that there may be a
conflict of interest between Corporation and Director in the conduct of the
defense of such action or (iii) Corporation shall not in fact have employed
counsel to assume the defense of such action, in each of which cases the fees
and expenses of Director's separate counsel shall be at the expense of
Corporation. Corporation shall not be entitled to assume the defense of any
action, suit or proceeding brought by or on behalf of Corporation or as to which
Director shall have made the conclusion provided for in (ii) above; and

(c) Corporation shall not be liable to indemnify Director under this
Agreement for any amounts paid in settlement of any action or claim effected
without its

-4-

<PAGE>

written consent. Corporation shall be permitted to settle any action except
that it shall not settle any action or claim in any manner which would impose
any penalty, out-of-pocket liability, or limitation on Director without
Director's written consent. Neither Corporation nor Director will unreasonably
withhold its or his consent to any proposed settlement.

7. ADVANCEMENT AND REPAYMENT OF EXPENSES.

(a) In the event that Director employs his own counsel pursuant to
Section 6(b)(i) through (iii) above, Corporation shall advance to Director,
prior to any final disposition of any threatened or pending action, suit or
proceeding, whether civil, criminal, administrative or investigative, any and
all reasonable expenses (including legal fees and expenses) incurred in
investigating or defending any such action, suit or proceeding within ten (10)
days after receiving copies of invoices presented to Director for such expenses.

(b) Director agrees that Director will reimburse Corporation for all
reasonable expenses paid by Corporation in defending any civil or criminal
action, suit or proceeding against Director in the event and only to the extent
it shall be ultimately determined by a final judicial decision (from which there
is no right of appeal) that Director is not entitled, under the provisions of
the Law, the Bylaws, this Agreement or otherwise, to be indemnified by
Corporation for such expenses.

(c) Notwithstanding the foregoing, Corporation shall not be required
to advance such expenses to Director if Director (i) commences any action, suit
or proceeding as a plaintiff unless such advance is specifically approved by a
majority of the Board of Directors or (ii) is a party to an action, suit or
proceeding brought by Corporation and approved by a majority of the Board which
alleges willful misappropriation of corporate assets by Director, disclosure of
confidential information in violation of Director's fiduciary or contractual
obligations to Corporation, or any other willful and deliberate breach in bad
faith of Director's duty to Corporation or its stockholders.

8. ENFORCEMENT.

(a) Corporation expressly confirms and agrees that it has entered
into this Agreement and assumed the obligations imposed on Corporation hereby in
order to induce Director to continue as a director of Corporation, and
acknowledges that Director is relying upon this Agreement in continuing in such
capacity.

(b) In the event Director is required to bring any action to enforce
rights or to collect moneys due under this Agreement and is successful in such
action, the Corporation shall reimburse Director for all Director's reasonable
fees and expenses in bringing and pursuing such action.

-5-

<PAGE>

9. SUBROGATION. In the event of payment under this agreement,
Corporation shall be subrogated to the extent of such payment to all of the
rights of recovery of Director, who shall execute all documents required and
shall do all acts that may be necessary to secure such rights and to enable
Corporation effectively to bring suit to enforce such rights.

10. NON-EXCLUSIVITY OF RIGHTS. The rights conferred on Director by this
Agreement shall not be exclusive of any other right which Director may have or
hereafter acquire under any statute, provision of Corporation's Certificate of
Incorporation or Bylaws, agreement, vote of stockholders or directors, or
otherwise, both as to action in his official capacity and as to action in
another capacity while holding office.

11. SURVIVAL OF RIGHTS. The rights conferred on Director by this
Agreement shall continue after Director has ceased to be a director, officer,
employee or other agent of Corporation or such other entity and shall inure to
the benefit of Director's heirs, executors and administrators.

12. SEPARABILITY. Each of the provisions of this Agreement is a separate
and distinct agreement and independent of the others, so that if any or all of
the provisions hereof shall be held to be invalid or unenforceable to any extent
for any reason, such invalidity or unenforceability shall not affect the
validity or enforceability of the other provisions hereof or the obligation of
the Corporation to indemnify the Director to the full extent provided by the
Bylaws or the Law, and the affected provision shall be construed and enforced so
as to effectuate the parties' intent to the maximum extent possible.

13. GOVERNING LAW. This Agreement shall be interpreted and enforced in
accordance with the internal laws of the State of Delaware.

14. BINDING EFFECT. This Agreement shall be binding upon Director and
upon Corporation, its successors and assigns, and shall inure to the benefit of
Director, his heirs, personal representatives and assigns and to the benefit of
Corporation, its successors and assigns.

15. AMENDMENT AND TERMINATION. No amendment, modification, termination or
cancellation of this Agreement shall be effective unless set forth in a writing
signed by both parties hereto.

[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

-6-

<PAGE>

IN WITNESS WHEREOF, the parties hereto have executed this Agreement on and
as of the day and year first above written.

CORPORATION: TRIANGLE PHARMACEUTICALS, INC.,
a Delaware corporation

By:
-------------------------------------
(Signature)

----------------------------------------
Print Name and Title

DIRECTOR:

----------------------------------------
(Signature)

----------------------------------------
Print Name

[SIGNATURE PAGE TO INDEMNIFICATION AGREEMENT]

<PAGE>

Exhibit 10.41

INDEMNIFICATION AGREEMENT

THIS AGREEMENT is made and entered into this _____ day of September, 1996
between Triangle Pharmaceuticals, Inc., a Delaware corporation ("Corporation"),
and ____________________ ("Officer").

RECITALS:

A. Officer, an officer (but not currently a member of the Board of
Directors) of Corporation, performs a valuable service in such capacity for
Corporation; and

B. The stockholders of Corporation have adopted Bylaws (the "Bylaws")
providing, for the indemnification of the officers, directors, agents and
employees of Corporation to the maximum extent authorized by Section 145 of the
Delaware General Corporation Law, as amended (the "Law"); and

C. The Bylaws and the Law, by their non-exclusive nature, permit
contracts between Corporation and its officers with respect to indemnification
of officers; and

E. As a result of developments affecting the terms, scope and
availability of D & O Insurance there exists general uncertainty as to the
extent and overall desirability of protection afforded officers by such D & O
Insurance, if any, and by statutory and bylaw indemnification provisions; and

F. In order to induce Officer to continue to serve as an officer of
Corporation, Corporation has determined and agreed to enter into this contract
with Officer;

NOW, THEREFORE, in consideration of Officer's continued service as an
officer after the date hereof, the parties hereto agree as follows:

1. INDEMNITY OF OFFICER. Corporation hereby agrees to hold harmless and
indemnify Officer to the fullest extent authorized or permitted by the
provisions of the Law, as it may be amended from time to time.

2. ADDITIONAL INDEMNITY. Subject only to the exclusions set forth in
Section 3 hereof, Corporation hereby further agrees to hold harmless and
indemnify Officer:

<PAGE>

(a) against any and all legal expenses (including attorneys' fees),
witness fees, judgments, fines and amounts paid in settlement actually and
reasonably incurred by Officer in connection with any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (including an action by or in the right of Corporation) to which
Officer is, was or at any time becomes a party, or is threatened to be made a
party, by reason of the fact that Officer is, was or at any time becomes a
director, officer, employee or agent of Corporation, or is or was serving or at
any time serves at the request of Corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise; and

(b) otherwise to the fullest extent as may be provided to Officer by
Corporation under the non-exclusivity provisions of the Bylaws of Corporation
and the Law.

3. LIMITATIONS ON ADDITIONAL INDEMNITY. No indemnity pursuant to Section
2 hereof shall be paid by Corporation:

(a) except to the extent the aggregate of losses to be indemnified
thereunder exceeds the sum of such losses for which Officer is indemnified
pursuant to Section 1 hereof or pursuant to any D & O Insurance purchased and
maintained by Corporation;

(b) in respect of remuneration paid to Officer if it shall be
determined by a final judgment or other final adjudication that such
remuneration was in violation of law;

(c) on account of any action, suit or proceeding in which judgment is
rendered against Officer for an accounting of profits made from the purchase or
sale by Officer of securities of Corporation pursuant to the provisions of
Section 16(b) of the Securities Exchange Act of 1934 and amendments thereto or
similar provisions of any federal, state or local statutory law;

(d) on account of Officer's conduct which is finally adjudged to have
been knowingly fraudulent or deliberately dishonest, or to constitute willful
misconduct;

(e) on account of Officer's conduct which is the subject of an
action, suit or proceeding described in Section 7(c)(ii) hereof;

(f) on account of or arising in response to any action, suit or
proceeding (other than an action, suit or proceeding referred to in Section 8(b)
hereof) initiated by Officer or any of Officer's affiliates against Corporation
or any officer, director or stockholder of Corporation unless such action, suit
or proceeding was authorized in the specific case by action of the Board of
Directors of Corporation;

-2-

<PAGE>

(g) on account of any action, suit or proceeding to the extent that
Officer is a plaintiff, a counter-complainant or a cross-complainant therein
(other than an action, suit or proceeding permitted by Section 3(f) hereof); or

(h) if a final decision by a Court having jurisdiction in the matter
shall determine that such indemnification is not lawful (and, in this respect,
both Corporation and Officer have been advised that the Securities and Exchange
Commission believes that indemnification for liabilities arising under the
federal securities laws is against public policy and is, therefore,
unenforceable and that claims for indemnification should be submitted to
appropriate courts for adjudication).

4. CONTRIBUTION. If the indemnification provided in Sections 1 and 2 is
unavailable and may not be paid to Officer for any reason other than those set
forth in paragraphs (b) through (g) of Section 3, then in respect of any
threatened, pending or completed action, suit or proceeding in which Corporation
is or is alleged to be jointly liable with Officer (or would be if joined in
such action, suit or proceeding), Corporation shall contribute to the amount of
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred and paid or payable by Officer in
such proportion as is appropriate to reflect (i) the relative benefits received
by Corporation on the one hand and Officer on the other hand from the
transaction from which such action, suit or proceeding arose, and (ii) the
relative fault of Corporation on the one hand and of Officer on the other hand
in connection with the events which resulted in such expenses, judgments, fines
or settlement amounts, as well as any other relevant equitable considerations.
The relative fault of Corporation on the one hand and of Officer on the other
hand shall be determined by reference to, among other things, the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent the circumstances resulting in such expenses, judgments, fines or
settlement amounts. Corporation agrees that it would not be just and equitable
if contribution pursuant to this Section 4 were determined by pro rata
allocation or any other method of allocation which does not take account of the
foregoing equitable considerations.

5. CONTINUATION OF OBLIGATIONS.

(a) All agreements and obligations of Corporation contained herein
shall continue during the period Officer is a director, officer, employee or
agent of Corporation (or is or was serving at the request of Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust, employee benefit plan or other enterprise) and shall continue
thereafter so long as Officer shall be subject to any possible claim or
threatened, pending or completed action, suit or proceeding, whether civil,
criminal or investigative, by reason of the fact that Officer was serving
Corporation or such other entity in any capacity referred to herein.

-3-

<PAGE>

transaction or series of related transactions, the Corporation (to the extent
the Corporation is not the continuing or surviving person of such
reorganization, merger, consolidation or sale) shall cause the acquiring,
continuing or surviving corporation to (x) indemnify and hold harmless Officer
in accordance with Section 1 and 2 hereof and (y) use its best efforts to
provide officers' liability insurance on terms substantially similar to the
terms of the Corporation's then current officers' liability insurance policy in
effect on the dated thereof, or any other arrangement reasonably satisfactory to
Officer, in respect of acts or omissions occurring on or prior to the effective
time of the reorganization, merger, consolidation or sale.

6. NOTIFICATION AND DEFENSE OF CLAIM. Not later than thirty (30) days
after receipt by Officer of notice of the commencement of any action, suit or
proceeding, Officer will, if a claim in respect thereof is to be made against
Corporation under this Agreement, notify Corporation of the commencement
thereof; but the omission so to notify Corporation will not relieve it from any
liability which it may have to Officer otherwise than under this Agreement.
With respect to any such action, suit or proceeding as to which Officer notifies
Corporation of the commencement thereof:

(a) Corporation will be entitled to participate therein at its own
expense;

(b) except as otherwise provided below, to the extent that it may
wish, Corporation jointly with any other indemnifying party similarly notified
will be entitled to assume the defense thereof, with counsel reasonably
satisfactory to Officer. After notice from Corporation to Officer of its
election so as to assume the defense thereof, Corporation will not be liable to
Officer under this Agreement for any legal or other expenses subsequently
incurred by Officer in connection with the defense thereof other than reasonable
costs of investigation or as otherwise provided below. Officer shall have the
right to employ his or her own counsel in such action, suit or proceeding but
the fees and expenses of such counsel incurred after notice from Corporation of
its assumption of the defense thereof shall be at the expense of Officer unless
(i) the employment of counsel by Officer has been authorized by Corporation,
(ii) Officer shall have reasonably concluded that there may be a conflict of
interest between Corporation and Officer in the conduct of the defense of such
action or (iii) Corporation shall not in fact have employed counsel to assume
the defense of such action, in each of which cases the fees and expenses of
Officer's separate counsel shall be at the expense of Corporation. Corporation
shall not be entitled to assume the defense of any action, suit or proceeding
brought by or on behalf of Corporation or as to which Officer shall have made
the conclusion provided for in (ii) above; and

(c) Corporation shall not be liable to indemnify Officer under this
Agreement for any amounts paid in settlement of any action or claim effected
without its written consent. Corporation shall be permitted to settle any
action except that it shall not settle any action or claim in any manner which
would impose any penalty, out-of-pocket liability, or limitation on Officer
without Officer's written consent.

-4-

<PAGE>

Neither Corporation nor Officer will unreasonably withhold its or his or her
consent to any proposed settlement.

7. ADVANCEMENT AND REPAYMENT OF EXPENSES.

(a) In the event that Officer employs his or her own counsel pursuant
to Section 6(b)(i) through (iii) above, Corporation shall advance to Officer,
prior to any final disposition of any threatened or pending action, suit or
proceeding, whether civil, criminal, administrative or investigative, any and
all reasonable expenses (including legal fees and expenses) incurred in
investigating or defending any such action, suit or proceeding within ten (10)
days after receiving copies of invoices presented to Officer for such expenses.

(b) Officer agrees that Officer will reimburse Corporation for all
reasonable expenses paid by Corporation in defending any civil or criminal
action, suit or proceeding against Officer in the event and only to the extent
it shall be ultimately determined by a final judicial decision (from which there
is no right of appeal) that Officer is not entitled, under the provisions of the
Law, the Bylaws, this Agreement or otherwise, to be indemnified by Corporation
for such expenses.

(c) Notwithstanding the foregoing, Corporation shall not be required
to advance such expenses to Officer if Officer (i) commences any action, suit or
proceeding as a plaintiff unless such advance is specifically approved by a
majority of the Board of Directors or (ii) is a party to an action, suit or
proceeding brought by Corporation and approved by a majority of the Board which
alleges willful misappropriation of corporate assets by Officer, disclosure of
confidential information in violation of Officer's fiduciary or contractual
obligations to Corporation, or any other willful and deliberate breach in bad
faith of Officer's duty to Corporation or its stockholders.

8. ENFORCEMENT.

(a) Corporation expressly confirms and agrees that it has entered
into this Agreement and assumed the obligations imposed on Corporation hereby in
order to induce Officer to continue as an officer of Corporation, and
acknowledges that Officer is relying upon this Agreement in continuing in such
capacity.

(b) In the event Officer is required to bring any action to enforce
rights or to collect moneys due under this Agreement and is successful in such
action, Corporation shall reimburse Officer for all of Officer's reasonable fees
and expenses in bringing and pursuing such action.

9. SUBROGATION. In the event of payment under this agreement,
Corporation shall be subrogated to the extent of such payment to all of the
rights of recovery of Officer, who shall execute all documents required and
shall do all acts that may be necessary to secure such rights and to enable
Corporation effectively to bring suit to enforce such rights.

-5-

<PAGE>

10. NON-EXCLUSIVITY OF RIGHTS. The rights conferred on Officer by this
Agreement shall not be exclusive of any other right which Officer may have or
hereafter acquire under any statute, provision of Corporation's Certificate of
Incorporation or Bylaws, agreement, vote of stockholders or directors, or
otherwise, both as to action in his or her official capacity and as to action in
another capacity while holding office.

11. SURVIVAL OF RIGHTS. The rights conferred on Officer by this Agreement
shall continue after Officer has ceased to be a director, officer, employee or
other agent of Corporation or such other entity and shall inure to the benefit
of Officer's heirs, executors and administrators.

12. SEPARABILITY. Each of the provisions of this Agreement is a separate
and distinct agreement and independent of the others, so that if any or all of
the provisions hereof shall be held to be invalid or unenforceable to any extent
for any reason, such invalidity or unenforceability shall not affect the
validity or enforceability of the other provisions hereof or the obligation of
Corporation to indemnify Officer to the full extent provided by the Bylaws or
the Law, and the affected provision shall be construed and enforced so as to
effectuate the parties' intent to the maximum extent possible.

13. GOVERNING LAW. This Agreement shall be interpreted and enforced in
accordance with the internal laws of the State of Delaware.

14. BINDING EFFECT. This Agreement shall be binding upon Officer and upon
Corporation, its successors and assigns, and shall inure to the benefit of
Officer, his or her heirs, personal representatives and assigns and to the
benefit of Corporation, its successors and assigns.

15. AMENDMENT AND TERMINATION. No amendment, modification, termination or
cancellation of this Agreement shall be effective unless set forth in a writing
signed by both parties hereto.

[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

-6-

<PAGE>

IN WITNESS WHEREOF, the parties hereto have executed this Agreement on and
as of the day and year first above written.

CORPORATION: TRIANGLE PHARMACEUTICALS, INC.,
a Delaware corporation

By:
--------------------------------
(Signature)

-----------------------------------
Print Name and Title

OFFICER:

-----------------------------------
(Signature)

-----------------------------------
Print Name

[SIGNATURE PAGE TO INDEMNIFICATION AGREEMENT]

<PAGE>

Exhibit 10-42

CONSENT TO AUTOMATIC CONVERSION

Triangle Pharmaceuticals, Inc.
4 University Place
4611 University Drive
Durham, North Carolina 27707
Attention: Chris A. Rallis

Dear Mr. Rallis:

In consideration of the proposed initial underwritten public offering of
Common Stock of Triangle Pharmaceuticals, Inc. a Delaware corporation (the
"Company"), to be managed by Dillon, Read & Co. Inc. and Bear, Stearns & Co.
(the "Underwriters") acting as the U.S. Representatives pursuant to a certain
U.S. Underwriting Agreement and also with the Underwriters acting as the
International Representatives pursuant to a certain International Underwriting
Agreement, expected to be consummated on or prior to the end of November 1996
(the "Public Offering"), and, subject to and conditioned upon the execution of
similar letter agreements by holders of a majority of the total number of
outstanding shares of Series A Preferred Stock and by holders of a majority of
the total number of outstanding shares of Series B Preferred Stock as required
by Article IV, Part B, Section 3(a)(ii) of the Restated Certificate of
Incorporation of the Company, as it may be amended from time to time (the
"Restated Certificate"), the undersigned hereby consents to and agrees that all
outstanding shares of Series A Preferred Stock and Series B Preferred Stock of
the Company held by the undersigned immediately prior to the date of the closing
of the Public Offering shall be automatically converted into shares of Common
Stock of the Company in accordance with the terms of the Restated Certificate.
The undersigned hereby agrees that such automatic conversion shall be effective
immediately prior to the close of the Public Offering regardless of minimum
price per share and aggregate net proceeds to the Company's account.

Dated: September 5, 1996

Very truly yours,

-----------------------------------
(STOCKHOLDER'S NAME AS
IT APPEARS ON STOCK BOOK)

By:
--------------------------------
Name

--------------------------------
Title

<PAGE>

Exhibit 10.43

WAIVER OF REGISTRATION RIGHTS

Triangle Pharmaceuticals, Inc.
4 University Place, 4611 University Drive
Durham, North Carolina 27707
Attention: Chris A. Rallis

Re: Public Offering of Common Stock of Triangle Pharmaceuticals, Inc.
-----------------------------------------------------------------

Dear Mr. Rallis:

In consideration of the proposed initial underwritten public offering of
Common Stock of Triangle Pharmaceuticals, Inc. a Delaware corporation (the
"Company"), to be managed by Dillon, Reed & Co. Inc. and Bear, Stearns & Co.
Inc. (collectively, the "Representatives"), expected to be consummated on or
prior to December 31, 1996 (the "Public Offering"), the undersigned hereby
waives (i) the rights, under that certain Restated Investors' Rights Agreement
dated June 11, 1996 (the "Investors' Agreement") between the Company and the
individuals and entities listed on Schedule A thereto (the "Investors"), of the
Investors to cause the Company to register the resale of the Investors'
Registrable Securities, as defined in the Investors' Agreement, as part of the
Public Offering, and (ii) the requirement to notify the Investors of the Public
Offering as set forth in the Investors' Agreement.

Dated: September 5, 1996 Very truly yours,

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(Print Name of Investor)

By:
-------------------------------------
Name

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Title

<PAGE>

WAIVER OF REGISTRATION RIGHTS

Triangle Pharmaceuticals, Inc.
4 University Place, 4611 University Drive
Durham, North Carolina 27707
Attention: Chris A. Rallis

Re: Public Offering of Common Stock of Triangle Pharmaceuticals, Inc.
-----------------------------------------------------------------

Dear Mr. Rallis:

In consideration of the proposed initial underwritten public offering of
Common Stock of Triangle Pharmaceuticals, Inc. a Delaware corporation (the
"Company"), to be managed by Dillon, Reed & Co. Inc. and Bear, Stearns & Co.
Inc. (collectively, the "Representatives"), expected to be consummated on or
prior to December 31, 1996 (the "Public Offering"), the undersigned hereby
waives (i) the rights under that certain Amended and Restated Investors' Rights
Agreement dated April 17, 1996 (the "Investors' Agreement"), between the Company
and the individuals and entities listed on Schedule A thereto (the "Investors"),
of the Investors to cause the Company to register the resale of the Investors'
Registrable Securities, as defined in the Investors' Agreement, as part of the
Public Offering, and (ii) the requirement to notify the Investors of the Public
Offering as set forth in the Investors' Agreement.

Dated: September 5, 1996 Very truly yours,

----------------------------------------
(Print Name of Investor)

By:
-------------------------------------
Name

-------------------------------------
Title

<PAGE>
Exhibit 11.1

Computation of Pro Forma Net Loss Per Share
(Unaudited)

Period From Inception
(July 12, 1995) Six Months
Through Ended
December 31, 1995 June 30, 1996
<S> <C> <C>
Historical weighted average shares outstanding 1,617,939 3,244,698

Effect of applying SAB Topic 4:D(1) 2,459,394 832,635

Series A preferred stock, convertible to Common Stock
at consummation of the planned initial public offering (2) 5,231,671 5,231,671

Series B preferred stock, convertible to Common Stock
at consummation of the planned initial public offering (2) 3,706,234 3,706,234

Common stock equivalents for preferred stock warrants outstanding (2) 146,000 146,000

Common stock equivalents for options outstanding (2) 1,076,260 1,076,260
--------------- --------------

Shares used in computing pro forma net loss per share 14,237,498 14,237,498
--------------- ---------------
--------------- ---------------

Net loss $ (967,583) $ (5,499,418)
--------------- ---------------
--------------- ---------------

Pro forma loss per share $ (0.07) $ (0.39)
--------------- ---------------
--------------- ---------------
</TABLE>

_________________________________________
(1) Effect of including all common stock issued at prices below the
expected public offering price during the twelve month period
preceding the planned offering as if it was outstanding at inception
(July 12, 1995).

(2) Issuance of convertible preferred stock, preferred stock warrants and
common stock options at prices below the expected public offering
price during the twelve month period preceding the planned offering
have been included as common stock equivalents as if they had been
issued as common stock as of July 12, 1995.

<PAGE>

Exhibit 23.2

CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-1 of our report dated April 26, 1996 relating
to the financial statements of Triangle Pharmaceuticals, Inc., which appears in
such Prospectus. We also consent to the references to us under the headings
"Experts" and "Selected Financial Data" in such Prospectus. However, it should
be noted that Price Waterhouse LLP has not prepared or certified such "Selected
Financial Data."

PRICE WATERHOUSE LLP

Raleigh, North Carolina
October 22, 1996

<PAGE>

EXHIBIT 23.3

[LETTERHEAD]

CONSENT FORM

The undersigned hereby consent to the use of our name and the statement
with respect to us that appears under the heading "Experts" in the Registration
Statement on Form S-1 and related Prospectus of Triangle Pharmaceuticals, Inc.

KILPATRICK & CODY L.L.P.

Dated: October 23, 1996 /s/ Kilpatrick & Cody
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