TRIANGLE PHARMACEUTICALS INC
10-Q, 1997-11-14
PHARMACEUTICAL PREPARATIONS
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<PAGE>



                          SECURITIES AND EXCHANGE COMMISSION
                               Washington, D.C.  20549
                                           
                                      FORM 10-Q
                                           
  X           QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
- ----          OF THE SECURITIES EXCHANGE ACT OF 1934

                 For the quarterly period ended September 30, 1997
                                           
                                          OR
                                           
              TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
              SECURITIES  EXCHANGE ACT OF 1934

              For the transition period  from ________ to _______.

                          Commission File Number:  000-21589
                                           
                            TRIANGLE PHARMACEUTICALS, INC.
                (Exact name of Registrant as specified in its charter)
                                           
                    DELAWARE                             56-1930728
       (State or other jurisdiction                 (I.R.S. Employer
       of incorporation or organization)            Identification No.)


       4 University Place
       4611 University Drive
       Durham, North Carolina                               27707
(Address of principal executive offices)                  (zip code)

    Registrant's telephone number, including area code: (919) 493-5980


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

    As of October 31, 1997, there were 19,995,338 shares of Triangle 
Pharmaceuticals, Inc. Common Stock outstanding.

<PAGE>

                      TRIANGLE PHARMACEUTICALS, INC.
                                           
                           TABLE OF CONTENTS
                                           
                                           
                                           
Part I.  Financial Information                                          Page No.
                                                                        --------

    Item 1.   Financial Statements (unaudited)

         Condensed Consolidated Balance Sheets -
           December 31, 1996 and September 30, 1997...................    3 - 4

         Condensed Consolidated Statements of Operations -
           Three and Nine Months Ended September 30, 1996 and 1997,
           and Period From Inception (July 12, 1995) Through
           September 30, 1997.........................................        5

         Condensed Consolidated Statements of Cash Flows -
           Nine Months Ended September 30, 1996 and 1997 and
           Period From Inception (July 12, 1995) Through
           September 30, 1997.........................................        6

         Condensed Consolidated Statements of Stockholders' Equity -
           Period From Inception (July 12, 1995) Through
           December 31, 1995, 1996 and Nine Months Ended
           September 30, 1997.........................................        7

         Notes to Condensed Consolidated Financial Statements.........   8 - 10

    Item 2.   Management's Discussion and Analysis of Financial
                Condition and Results of Operations...................  11 - 26

Part II. Other Information

    Item 2.   Changes in Securities...................................       27

    Item 6.   Exhibits and Reports on Form 8-K........................       28

    Signatures........................................................       29


                                      2
<PAGE>

                        PART I - FINANCIAL INFORMATION



ITEM 1.  FINANCIAL STATEMENTS

                      TRIANGLE PHARMACEUTICALS, INC.
                      (A DEVELOPMENT STAGE COMPANY)
                  CONDENSED CONSOLIDATED BALANCE SHEETS
                                           
                                           



                                        DECEMBER 31,     SEPTEMBER 30,
ASSETS                                      1996              1997
- ------                                 -------------     -------------
                                                          (unaudited)
Current assets:
   Cash and cash equivalents........    $25,255,006       $45,288,572
   Restricted deposits..............         56,067            42,087
   Investments......................     17,226,221        21,047,462
   Interest receivable..............        272,716           319,248
   Other receivables................        455,910             1,110
   Prepaid expenses.................        558,423           283,248
                                       -------------     -------------
      Total current assets..........     43,824,343        66,981,727
                                       -------------     -------------
Property, plant and equipment, net..        832,049         1,689,761
Investments.........................     10,719,917                --
Restricted deposits.................        118,933            86,901
                                       -------------     -------------

      Total assets..................    $55,495,242       $68,758,389
                                       -------------     -------------
                                       -------------     -------------


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


                                     3
<PAGE>

                      TRIANGLE PHARMACEUTICALS, INC.
                      (A DEVELOPMENT STAGE COMPANY)
                   CONDENSED CONSOLIDATED BALANCE SHEETS



                                                 DECEMBER 31,     SEPTEMBER 30,
LIABILITIES AND STOCKHOLDERS' EQUITY                 1996              1997
- ------------------------------------             ------------     -------------
                                                                   (unaudited)
Current liabilities:
  Accounts payable............................   $  1,584,348     $  2,380,667
  Accrued license fees........................        150,000               --
  Capital lease obligation-current............        102,006          176,909
  Other accrued expenses......................        639,255        2,775,730
                                                 ------------     ------------
      Total current liabilities...............      2,475,609        5,333,306
Capital lease obligation-noncurrent...........        364,385          344,082
                                                 ------------     ------------
      Total liabilities.......................      2,839,994        5,677,388
                                                 ------------     ------------
Commitments and contingencies (See notes 4
  and 5)......................................             --               --
Stockholders' equity:
  Common Stock, $0.001 par value; authorized
   75,000,000 shares; issued and outstanding
   17,567,890 and 19,995,338 shares...........         17,568           19,995
Warrants......................................        151,873          216,471
Additional paid-in capital....................     64,548,647      102,242,194
Accumulated deficit during development stage..    (11,884,166)     (39,259,071)
Deferred compensation.........................       (178,674)        (138,588)
                                                 ------------     ------------
      Total stockholders' equity..............     52,655,248       63,081,001
                                                 ------------     ------------

      Total liabilities and stockholders'
       equity.................................   $ 55,495,242     $ 68,758,389
                                                 ------------     ------------
                                                 ------------     ------------

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


                                      4
<PAGE>

                         TRIANGLE PHARMACEUTICALS, INC.
                         (A DEVELOPMENT STAGE COMPANY) 
               CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS 
                                   (UNAUDITED)



<TABLE>

                                                                                                                 PERIOD FROM
                                                                                                                  INCEPTION
                                                                                                                (JULY 12, 1995)
                                          THREE MONTHS ENDED SEPTEMBER 30,    NINE MONTHS ENDED SEPTEMBER 30,      THROUGH
                                          --------------------------------    -------------------------------    SEPTEMBER 30,
                                              1996                1997           1996                1997           1997
                                          -----------         ------------    -----------        ------------   --------------
<S>                                       <C>                 <C>             <C>                <C>             <C> 
Operating expenses:
  License fees.........................   $   494,397         $         --    $ 3,246,226        $    500,000    $  3,767,147
  Development..........................     1,270,731            6,568,629      2,613,322          13,262,108      18,228,840
  Purchased research and
    development........................            --           11,261,150             --          11,261,150      11,261,150
  General and administrative...........       998,528            1,471,220      2,488,684           4,935,830       9,498,686
                                          -----------         ------------    -----------        ------------    ------------
                                            2,763,656           19,300,999      8,348,232          29,959,088      42,755,823
                                          -----------         ------------    -----------        ------------    ------------
Interest income........................       224,797            1,086,993        309,955           2,584,183       3,496,752
                                          -----------         ------------    -----------        ------------    ------------

Net loss...............................   $(2,538,859)        $(18,214,006)   $(8,038,277)       $(27,374,905)   $(39,259,071)
                                          -----------         ------------    -----------        ------------    ------------
                                          -----------         ------------    -----------        ------------    ------------

Net loss per share.....................            --         $      (0.91)            --        $      (1.48)
                                                              ------------                       ------------    
                                                              ------------                       ------------    
Pro forma net loss per share...........      $  (0.19)                  --    $     (0.58)                 --
                                          -----------                         -----------    
                                          -----------                         -----------    
Shares used in computing pro forma 
  net loss per share and net loss per
  share................................    13,045,548           19,988,451     13,863,850          18,554,524
                                          -----------         ------------    -----------        ------------    
                                          -----------         ------------    -----------        ------------    
</TABLE>







               The accompanying notes are an integral part of these 
                   condensed consolidated financial statements.
                                       
                                       5

<PAGE>

                        TRIANGLE PHARMACEUTICALS, INC.
                        (A Development Stage Company)
                Condensed Consolidated Statements of Cash Flows
                                  (Unaudited) 

<TABLE>
<CAPTION>                                                                                      PERIOD FROM 
                                                                                                INCEPTION
                                                        NINE MONTHS ENDED SEPTEMBER 30,      (JULY 12, 1995)
                                                        -------------------------------         THROUGH
                                                             1996             1997         SEPTEMBER 30, 1997
                                                        --------------    -------------    ------------------
<S>                                                     <C>               <C>              <C>
Cash flows from operating activities: 
Net loss............................................... $  (8,038,277)    $ (27,374,905)      $ (39,259,071)
Adjustments to reconcile net loss to net 
   cash used by operating activities: 
   Depreciation and amortization.......................        51,035           195,534             296,226
   Purchased research and development..................            --        11,261,150          11,261,150
   Stock-based compensation: license fees..............       636,000                --             636,000
   Stock-based compensation: development...............       332,135            33,647             380,216
   Stock-based compensation: general and 
      administrative...................................       185,286            91,818             323,340
Change in assets and liabilities:.....
   Receivables.........................................      (523,049)          408,268            (320,358)
   Prepaid expenses....................................      (686,348)          275,175            (283,248)
   Accounts payable....................................       229,868           796,319           2,380,667
   Accrued license fees and other expenses.............     1,377,141         1,967,614           2,687,078
                                                        -------------    --------------       -------------
Net cash used by operating activities..................    (6,436,209)      (12,345,380)        (21,898,000)
                                                        -------------    --------------       -------------
Cash flows from investing activities: 
   (Purchase) sale of restricted deposits..............      (175,000)           46,012            (128,988)
   Purchase of investments.............................    (9,558,127)      (17,564,880)        (50,832,805)
   Proceeds from sale and maturity of investments......            --        24,463,556          29,785,343
   Purchase of property, plant and equipment...........      (745,454)         (994,446)         (1,810,723)
   Acquisition of Avid Corp., net of cash acquired.....            --        (3,052,921)         (3,052,921)
                                                        -------------    --------------       -------------
Net cash (used by) provided from investing activities..   (10,478,581)        2,897,321         (26,040,094)
                                                        -------------    --------------       -------------
Cash flows from financing activities: 
   Sale of stock, net of related issuance costs........    18,496,839        29,523,079          92,892,975
   Sale of options.....................................            --            52,500              52,500
   Sale of warrants....................................           130                --                 130
   Proceeds from stock options exercised...............        23,588               975              26,063
   Equipment financing.................................            --                --             354,416
   Principal payments on capital lease obligation......            --           (94,929)            (99,418)
                                                        -------------    --------------       -------------
Net cash provided from financing activities............    18,520,557        29,481,625          93,226,666
                                                        -------------    --------------       -------------
Net increase in cash and cash equivalents..............     1,605,767        20,033,566          45,288,572
Cash and cash equivalents at beginning of period.......     3,081,586        25,255,006                  --  
                                                        -------------    --------------       -------------
Cash and cash equivalents at end of period............. $   4,687,353     $  45,288,572       $  45,288,572
                                                        -------------    --------------       -------------
                                                        -------------    --------------       -------------

Supplemental disclosure of noncash investing activities:
  On August 28, 1997, the Company issued 400,000 shares of common stock in exchange for 
  all outstanding shares of Avid Corporation.
</TABLE>

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

                                       6

<PAGE>

                      TRIANGLE PHARMACEUTICALS, INC.
                       (A DEVELOPMENT STAGE COMPANY)
         CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>


                               CONVERTIBLE
                              PREFERRED STOCK                COMMON STOCK       ADDITIONAL
                           ------------------            -------------------      PAID-IN    ACCUMULATED     DEFERRED 
                             SHARES    AMOUNT  WARRANTS    SHARES     AMOUNT      CAPITAL      DEFICIT     COMPENSATION   TOTAL
                           ---------- -------  --------  ----------  -------    ----------  ------------   ------------ -----------
<S>                        <C>        <C>      <C>       <C>         <C>        <C>         <C>            <C>          <C>
Initial sale of stock......   933,334  $  933        --   1,175,000  $ 1,175    $  709,642            --            --  $   711,750
Additional sale of stock... 4,248,337   4,249        --   1,495,000    1,495     3,137,355            --            --    3,143,099
Stock-based compensation...        --      --        --          --       --        12,000            --     $ (11,750)         250
Net loss, July 12 through     
 December 31, 1995.........        --      --        --          --       --            --  $   (967,583)           --     (967,583)
                           --------------------------------------------------------------------------------------------------------
Balance, December 31, 1995. 5,181,671   5,182        --   2,670,000    2,670     3,858,997      (967,583)      (11,750)   2,887,516
                                            
Sale of stock.............. 3,756,234   3,756        --   4,942,652    4,943    59,506,348            --            --   59,515,047
Sale of warrants...........        --      --  $    130          --       --            --            --            --          130
Stock-based compensation...        --      --   151,743     700,000      700     1,126,500            --       141,181)   1,137,762
Stock options exercised....        --      --        --     317,333      317        56,802            --       (25,743)      31,376
Conversion of Preferred to 
 Common Stock..............(8,937,905) (8,938)       --   8,937,905    8,938            --            --            --           --
Net loss...................        --      --        --          --       --            --   (10,916,583)           --  (10,916,583)
                           --------------------------------------------------------------------------------------------------------
Balance, December 31, 1996.        --      --   151,873  17,567,890   17,568    64,548,647   (11,884,166)     (178,674)  52,655,248
 (UNAUDITED)  
Sale of stock..............                               2,014,448    2,014    29,521,065            --            --   29,523,079
Acquisition of Avid........        --      --        --     400,000      400     8,117,100            --            --    8,117,500
Sale of options............        --      --        --          --       --        52,500            --            --       52,500
Stock-based compensation...        --      --    64,598          --       --            --            --        35,891      100,489
Stock options exercised....        --      --        --      13,000       13         2,882            --         4,195        7,090
Net loss...................        --      --        --          --       --            --   (27,374,905)           --  (27,374,905)
                           --------------------------------------------------------------------------------------------------------
Balance, September 30, 
1997.......................        --  $   --  $216,471  19,995,338  $19,995  $102,242,194  $(39,259,071)  $  (138,588) $63,081,001
                           --------------------------------------------------------------------------------------------------------
                           --------------------------------------------------------------------------------------------------------

</TABLE>

              The accompanying notes are an integral part of these 
                   condensed consolidated financial statements.
                                       
                                       7

                             
<PAGE>

                         TRIANGLE PHARMACEUTICALS, INC.
                          (A DEVELOPMENT STAGE COMPANY)

             NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  (UNAUDITED)

1.  Basis of Presentation

    The accompanying unaudited condensed financial statements of Triangle 
Pharmaceuticals, Inc. and its subsidiary (the "Company" or "Triangle") have 
been prepared in accordance with generally accepted accounting principles and 
applicable Securities and Exchange Commission regulations for interim 
financial information.  These financial statements do not include all of the 
information and footnotes required by generally accepted accounting 
principles for complete financial statements.  It is presumed that users of 
this interim financial information have read or have access to the audited 
financial statements for the preceding fiscal year contained in Triangle 
Pharmaceuticals, Inc. Annual Report on Form 10-K.  In the opinion of 
management, all adjustments (consisting of normal recurring adjustments) 
considered necessary for fair presentation have been included.  Operating 
results for the interim periods presented are not necessarily indicative of 
the results that may be expected for the full year.

2.  Principles of Consolidation

    The condensed consolidated financial statements include the accounts of 
Triangle Pharmaceuticals, Inc. and its wholly-owned subsidiary.  All 
significant intercompany accounts and transactions have been eliminated.

3.  Net Loss Per Share

    The weighted average shares outstanding used in the calculation of pro 
forma net loss per share includes the effect of the conversion of all of the 
Company's Preferred Stock as if such conversion occurred as of July 12, 1995. 
Additionally, common stock or equivalent shares from stock options and awards 
sold or issued at prices below the Initial Public Offering ("IPO") price per 
share in the twelve months preceding the initial filing of the Company's 
Registration Statement on Form S-1 on September 11, 1996, have been included 
in the calculations as if outstanding from July 12, 1995 through June 30, 
1996 pursuant to the requirements of the Securities and Exchange Commission. 
The common stock equivalents have been excluded from the calculation 
subsequent to June 30, 1996 because they have the effect of reducing net loss 
per share.

    For the three and nine month periods ended September 30, 1997, the 
weighted average shares outstanding used in the calculation of net loss per 
share do not include Common Stock equivalents because they have the effect of 
reducing net loss per share.  Fully diluted earnings per share were not 
materially different from primary earnings per share.

4.  Licensing Agreements

    The Company's existing license agreements require future payments of up 
to $43,250,000 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 (if only a single drug candidate is approved for 
one indication) to $49,500,000 (if all drug candidates are approved for all 
indications) under the Company's existing license agreements.  In addition, 
beginning in 1998 the Company is required to make an annual payment ranging 
from $500,000 to $1,000,000 to maintain the exclusivity of it's license for 
one of it's drug candidates beginning in 1998.

                                       8
<PAGE>

                        TRIANGLE PHARMACEUTICALS, INC.
                         (A DEVELOPMENT STAGE COMPANY)

             NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  (UNAUDITED)

5.  Avid Acquisition

    On August 28, 1997 ("the Closing Date"), the Company  acquired Avid 
Corporation ("Avid"), a private, antiviral pharmaceutical company. Pursuant 
to the merger agreement, Triangle issued 400,000 shares of  common stock for 
all outstanding shares of Avid and agreed to issue up to 2,100,000 additional 
shares of common stock contingent upon the attainment of certain development 
milestones of Avid's compounds.  The 400,000 shares issued had an aggregate 
fair market value of approximately $8,117,500 and direct transaction costs 
were approximately $1,100,000.  The total purchase price of $9,217,500 has 
been allocated to the assets purchased and liabilities assumed based on their 
respective values. In connection with the acquisition, the Company incurred a 
non-recurring charge of $11,261,150 for acquired in-process research and 
development as it assumed operating and other liabilities of Avid totaling 
$1,250,000 and certain development liabilities totaling approximately 
$1,000,000.  Each option under Avid's stock option plans and each warrant to 
purchase Avid stock outstanding at the closing was converted into the right 
upon exercise to receive that portion of the merger consideration that would 
have been received had such option or warrant been exercised immediately 
prior to the merger.  The merger is being accounted for as a purchase and the 
operating results of Avid have been included from the date of acquisition.

    The issuance of any of the 2,100,000 contingent shares of the Company's 
common stock will be recorded as additional purchase price and will be 
allocated upon resolution of the underlying contingency.  The amount recorded 
will be the fair market value of the common stock issued at the time the 
contingency is resolved.

    Avid's principal assets consist of worldwide license rights to a protease 
inhibitor (DMP-450) for the treatment of human immunodeficiency virus 
infection, early preclinical stage compounds for the treatment of Hepatitis B 
virus infection, proprietary assays to screen drug candidates for the 
treatment of HBV and assay technology for the potential use in screening drug 
candidates for the treatment of Hepatitis C virus infection.

    The following unaudited pro forma consolidated results of operations have 
been prepared as if the acquisition of Avid had occurred at the beginning of 
1996 and 1997:

                                           NINE MONTHS ENDED SEPTEMBER 30,
                                          ---------------------------------
                                               1996               1997
                                          ---------------   ---------------
          Revenues                        $           --    $           --
                                          ---------------   ---------------
                                          ---------------   ---------------
          Net (loss)                      $  (21,066,205)   $  (30,527,921)
                                          ---------------   ---------------
                                          ---------------   ---------------
          Net (loss) per common share     $        (1.48)   $        (1.62)
                                          ---------------   ---------------
                                          ---------------   ---------------

    The pro forma net loss and net loss per share amounts for each period 
above include the acquired in-process research and development charge.  The 
pro forma consolidated results do not purport to be indicative of results 
that would have occurred had the acquisition been in effect for the periods 
presented, nor do they purport to be indicative of the results that will be 
obtained in the future.

                                       9
<PAGE>

                        TRIANGLE PHARMACEUTICALS, INC.
                         (A DEVELOPMENT STAGE COMPANY)

             NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  (UNAUDITED)


6.  Accounting Pronouncements

    In February 1997, the Financial Accounting Standards Board issued 
Statement of Financial Accounting Standards ("SFAS 128"), "Earnings per 
Share."  SFAS 128 changes the computation of net income per share from the 
method currently prescribed by Accounting Principles Board Opinion No. 15. 
The Company intends to adopt SFAS 128 for periods ending after December 15, 
1997 and to restate previously reported historical information at that time. 
Adoption of SFAS 128 is not expected to materially affect the Company's 
financial statements.

    Statement of Financial Accounting Standards No. 130, "Reporting 
Comprehensive Income" ("SFAS 130"), was issued in June 1997.  SFAS 130 
establishes standards for reporting and display of comprehensive income and 
its components in a full set of general-purpose financial statements.  SFAS 
130 is effective for financial statements for fiscal years beginning after 
December 31, 1997.  The Company believes that the adoption of SFAS 130 will 
not have a material impact on the Company's financial position or results of 
operations.

                                       10
<PAGE>

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND 
RESULTS OF OPERATIONS

    This Quarterly Report on Form 10-Q may contain certain projections, 
estimates and other forward-looking statements that involve a number of risks 
and uncertainties, including those discussed below at "-Risks and 
Uncertainties."  While this outlook represents management's current judgment 
on the future direction of the business, such risks and uncertainties could 
cause actual results to differ materially from any future performance 
suggested below.  The Company undertakes no obligation to release publicly 
the results of any revisions to the   statements contained in this report to 
reflect events or circumstances arising after the date hereof.  Unless the 
context otherwise requires, references in this Quarterly Report on Form 10-Q 
to "Triangle" and the "Company" are to Triangle Pharmaceuticals, Inc. and its 
wholly-owned subsidiary, Avid Corporation.

    The following should be read in conjunction with the Company's condensed 
consolidated financial statements.

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 have related primarily to 
recruiting personnel, negotiating 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 September 30, 1997, the 
Company's consolidated accumulated deficit was approximately $39.3 million.

    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 period to 
period and that such fluctuations may be substantial. See "--Risks and 
Uncertainties--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 "--Risks and 
Uncertainties--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 "--Risks and 
Uncertainties--Volatility of Stock Price."

                                       11
<PAGE>

RESULTS OF OPERATIONS

AVID ACQUISITION

    On August 28, 1997 ("the Closing Date"), the Company  acquired Avid 
Corporation ("Avid"), a private, antiviral pharmaceutical company. Pursuant 
to the merger agreement, Triangle issued 400,000 shares of the Company's 
common stock for all outstanding shares of Avid and agreed to issue up to 
2,100,000 additional shares of common stock contingent upon the attainment of 
certain development milestones of Avid's compounds.  The 400,000 shares 
issued had an aggregate fair market value of approximately $8,117,500 and 
direct transaction costs were approximately $1,100,000.  The total purchase 
price of $9,217,500 has been allocated to the assets purchased and 
liabilities assumed based on their respective values. In connection with the 
acquisition, the Company incurred a non-recurring charge of $11,261,150 for 
acquired in-process research and development as it assumed operating and 
other liabilities of Avid totaling $1,250,000 and certain development 
liabilities totaling approximately $1,000,000.  Each option under Avid's 
stock option plans and each warrant to purchase Avid stock outstanding at the 
closing was converted into the right upon exercise to receive that portion of 
the merger consideration that would have been received had such option or 
warrant been exercised immediately prior to the merger.  The merger is being 
accounted for as a purchase and the operating results of Avid have been 
included from the date of acquisition.

    The issuance of any of the 2,100,000 contingent shares of the Company's 
common stock will be recorded as additional purchase price and will be 
allocated upon resolution of the underlying contingency.  The amount recorded 
will be the fair market value of the common stock issued at the time the 
contingency is resolved.

    Avid's principal assets consist of worldwide license rights to a protease 
inhibitor (DMP-450) for the treatment of human immunodeficiency virus ("HIV") 
infection, early preclinical stage compounds for the treatment of Hepatitis B 
virus ("HBV") infection, proprietary assays to screen drug candidates for the 
treatment of HBV and assay technology for the potential use in screening drug 
candidates for the treatment of Hepatitis C virus infection.

THREE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996 

    The Company had total interest income of $1,086,993 for the three months 
ended September 30, 1997, compared to $224,797  for the same period in 1996. 
The increase in interest income is due primarily to an increase in 
investments associated with financing activities. See "--Liquidity and 
Capital Resources."

    There were no license fees  for the three months ended September 30, 
1997, compared to $494,397 for the same period in 1996.  The decrease is due 
to the absence of any new license agreements executed by the Company during 
the three month period ended September 30, 1997.  The amount in the prior 
year relates to one of the Company's license agreements.

    Purchased research and development totaled $11,261,150  for the three 
months ended September 30, 1997 which relates to the Company's acquisition of 
Avid on August 28, 1997.  The amount represents a non-recurring charge for 
in-process research and development technology.

    Development expenses totaled $6,568,629 for the three months ended 
September 30, 1997, compared to $1,270,731 for the same period in 1996.  The 
increase is due to the expansion of the Company's drug development 
activities. Development expenses for the three month period ended September 
30, 1997 consisted primarily of expenses for development work relating to 
drug synthesis, clinical trials, compensation expenses, toxicology studies, 
and preclinical testing of the Company's drug candidates.  During the same 
period the Company also recognized non-cash charges of $11,234  relating to 
the amortization of deferred consulting expenses. Development expenses were 
reduced by approximately $202,000 relating to the reimbursable development 
expenses by the licensor under the agreement for one of the Company's drug 
candidates.  Development expenses for the three months ended September 30, 
1996 consisted primarily of expenses related to the preclinical testing of 
certain of the Company's drug candidates.  During the 

                                       12
<PAGE>

same period the Company also recognized non-cash charges of $18,808 relating 
to the amortization of deferred consulting expenses.  The Company expects its 
development expenses to continue to increase substantially in the future as 
the Company continues to expand its drug development activities, including 
preclinical testing and clinical trials.  In addition, the Company's 
acquisition of rights to additional drug candidates, like DMP-450, will 
increase significantly the Company's development expenses.

    General and administrative expenses totaled $1,471,220  for the three 
months ended September 30, 1997, compared to $998,528 for the same period in 
1996. General and administrative expenses for the three months ended 
September 30, 1997, consisted primarily of compensation expenses, rent 
expense and amounts paid for outside professional services and included 
non-cash charges of $25,544 related to the amortization of deferred 
compensation expenses. The increase in general and administrative expenses 
compared to the three months ended September 30, 1996, is comprised primarily 
of increases in compensation expense, rent expenses associated with office 
and laboratory facilities due to the hiring of additional employees and 
increases in professional fees due to the growth of the Company's operations. 
The Company expects that its general and administrative expenses will 
increase in future periods.

NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996

    The Company had total interest income of $2,584,183 in the nine months 
ended September 30, 1997 compared to $309,955 for the same period in 1996. 
The increase in interest income is due primarily to an increase in 
investments associated with financing activities.  See "-Liquidity and 
Capital Resources."

    License fees totaled $500,000 for the nine months ended September 30, 
1997 and related to the execution of the license agreement with Mitsubishi 
for the anti-HIV drug candidate, MKC-442. License fees totaled $3,246,226 
during the same period in 1996.  The decrease is due primarily to a decrease 
in the number of license agreements executed during the nine month period 
ended September 30, 1997 as compared to the same period in 1996.  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 acquires rights to 
additional drug candidates.

    Purchased research and development totaled $11,261,150 for the nine 
months ended September 30, 1997, and relates to the Company's acquisition of 
Avid on August 28, 1997.  The amount represents a non-recurring charge for 
in-process research and development.

    Development expenses totaled $13,262,108 for the nine months ended 
September 30, 1997, compared to $2,613,322 for the same period in 1996. 
Development expenses consisted primarily of expenses for development work 
relating to drug synthesis, clinical trials, toxicology studies and 
compensation expenses.  The Company also recognized non-cash charges of 
$33,647 related to the amortization of deferred consulting expenses.  The 
increase in development expenses relates to the expansion of drug development 
activities. Development expenses were reduced by approximately $1,168,000 
relating to the reimbursable development expenses by the licensor under the 
agreement for one of the Company's drug candidates.  The Company expects its 
development expenses to continue to increase substantially in the future as 
the Company continues to expand its drug development activities, including 
preclinical testing and clinical trials. In addition, the Company's 
acquisition of rights to additional drug candidates, like DMP-450, will 
increase significantly the Company's development expenses.

    General and administrative expenses totaled $4,935,830 for the nine 
months ended September 30, 1997 compared to $2,488,684  for the same period 
in 1996.  General and administrative expenses for the nine months ended 
September 30, 1997 consisted primarily of compensation expenses, rent expense 
and amounts paid for outside professional services and included non-cash 
charges of $91,818 related to the amortization of deferred compensation 
expenses.  The increase in general and administrative expenses compared to 
the nine months ended September 30, 1996, is comprised primarily of increases 
in compensation expense, rent expenses associated with office and laboratory 
facilities, the hiring of additional employees and increases in professional 
fees.  The increase is due primarily to the growth of

                                       13
<PAGE>

the Company's operations.  The Company expects that its general and 
administrative expenses will increase in future periods.

LIQUIDITY AND CAPITAL RESOURCES

    The Company has financed its operations since inception (July 12, 1995) 
through September 30, 1997 primarily with the net proceeds received from 
private placements of equity securities, which provided aggregate net 
proceeds of approximately $51,700,000, and the Company's initial public 
offering, which provided aggregate net proceeds to the Company totaling 
$42,153,664 before deducting expenses of the offering of approximately 
$1,100,000.

    Through September 30, 1997,  the Company received approximately 
$2,000,000 as reimbursement of certain development expenses under an 
agreement for one of its drug candidates.

    As a result of the acquisition of Avid on August 28, 1997, the Company 
assumed operating and other liabilities of Avid totaling approximately 
$1,250,000 and certain development expenses totaling approximately 
$1,000,000, previously incurred by Avid.  The Company also expects 
development expenses to increase as a result of its acquisition of the Avid 
compounds.

    At September 30, 1997, the Company's principal source of liquidity was 
$45,288,572 in cash and cash equivalents and $21,047,462 in short term 
investments which are "available for sale."  At September 30, 1997, the 
Company had utilized $529,679  of a secured equipment lease-line facility 
for which the ability to borrow additional funds expired on August 9, 1997.

    The Company expects that its capital requirements will increase 
substantially in future periods as the Company's drug development programs 
expand. 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 $43,250,000 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 (if only a single drug candidate is approved for one indication) 
to $49,500,000 (if all drug candidates are approved for all indications) 
under the Company's existing license agreements.  In addition, beginning in 
1998 the Company is required to make an annual payment ranging from $500,000 
to $1,000,000 to maintain the exclusivity of its license to one of it's drug 
candidates.

    The Company believes that its existing cash and investments will be 
adequate to satisfy its anticipated capital requirements through June 1998.  
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 "--Risks and Uncertainties--Future Capital Needs; 
Uncertainty of Additional Funding."

                                       14
<PAGE>

RISKS AND UNCERTAINTIES

    DEVELOPMENT STAGE COMPANY; UNCERTAINTY OF PRODUCT DEVELOPMENT

    Triangle 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, toxic or otherwise fail to receive necessary 
regulatory clearances; that the drug candidates will be uneconomical to 
manufacture, 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.

    HISTORY OF OPERATING LOSSES; ACCUMULATED DEFICIT; UNCERTAINTY OF FUTURE 
PROFITABILITY

    The Company has incurred losses since its inception. As of September 30, 
1997, the Company's consolidated accumulated deficit was approximately $39.3 
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.

    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, the costs of 
seeking and maintaining patent protection for 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 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

                                       15
<PAGE>

drug candidates that the Company would not otherwise desire to relinquish. In 
addition, from time to time, the Company considers the acquisition of 
technologies and drug candidates that, if completed, could increase the 
Company's capital requirements. The Company's inability to fund its capital 
requirements would have a material adverse effect on the Company.

    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 United 
States Food and Drug Administration ("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.

    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 and has only one patent application of 
its own pending, but has obtained licenses to patents, patent applications 
and other proprietary rights from third parties with respect to each of the 
Company's eight 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.

    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

                                       16
<PAGE>

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 
drug candidates that are successfully developed. 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 eight 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. In addition, even 
in the absence of an unfavorable resolution of any of these questions, the 
Company may attempt to obtain licenses from one or more third parties in 
order to reduce or eliminate the risks relating to some or all of these 
matters. There can be no assurance that the Company will elect to obtain any 
such licenses or that such licenses will 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

    FTC belongs to the same general class of nucleosides as 3TC, which  has 
been approved in the United States by the FDA for use in combination with AZT 
for the treatment of HIV and by similar regulatory agencies in Europe for use 
in combination with other nucleoside analogues 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"). 
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.

    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 on which two patents have

                                       17
<PAGE>

issued, one directed to the purified form of FTC and another directed to a 
method for treating antiviral diseases with the purified form of FTC.  The 
PTO has recently declared an interference between the latter BioChem Pharma 
patent and a patent application filed by Emory. There can be no assurance, 
however, that Emory will prevail in the interference proceeding, or that the 
interference proceeding will not delay the decision of the PTO regarding 
Emory's patent application.  BioChem Pharma has also filed patent 
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 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 disadvantage 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.  Further, BioChem 
Pharma has filed for patent protection on FTC and its uses in certain 
countries in which Emory did not file for patent protection.  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 granted to Emory in Japan and Australia.  Emory has 
opposed patent claims on FTC granted to BioChem Pharma in Norway.  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

                                       18
<PAGE>

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. The PTO has recently declared an interference 
between the BioChem Pharma patent and a patent application filed by Yale. 
There can be no assurance, however, that Yale will prevail in the 
interference proceeding, or that the interference proceeding will not delay 
the decision of the PTO regarding Yale's patent application.  In addition, 
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 
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.  Patent claims granted to Emory on a portion 
of the DAPD technology by the Australian Patent Office have been opposed by 
BioChem Pharma. 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.

                                       19
<PAGE>

    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.

    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 and/or delays to the Company.  As indicated above, 
one interference has already been declared by the PTO in connection with the 
FTC technology.  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 ("Regents"), and The Dupont Merck 
Pharmaceutical Company ("Dupont Merck"), Emory, UGARF, the Regents and Dupont 
Merck 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 and/or 
Dupont Merck do not elect to institute or elect to abandon such proceedings. 
In cases where Emory, UGARF and/or the Regents and/or Dupont Merck 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 
and/or Dupont Merck conduct the proceedings. Emory, UGARF and/or the Regents 
and/or Dupont Merck 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 initiation 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.

                                       20
<PAGE>

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. 

    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 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, 
injunctions, 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 or to prevent such marketing 
altogether, 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.

                                       21
<PAGE>

    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 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. 

    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). Upon termination of 
the license agreement with Dupont Merck, the Company is required to transfer 
all approved and pending NDA's relating to DMP-450 to Dupont Merck. In 
addition, the license and option agreements with Emory, UGARF, the Regents 
and Dupont Merck provide that Emory, UGARF, the Regents and DuPont Merck are 
primarily responsible for any litigation, interference, opposition or other 
action seeking to obtain patent protection for the technology licensed to the 
Company, and except for litigation expenses incurred by DuPont Merck, 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.   


                                      22
<PAGE>

    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. 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.

    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.

    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.     

                                      23
<PAGE>

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.

    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. 

    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. Except for Dr. Barry, 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.

    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 

                                      24
<PAGE>

reimbursement to the consumer will be available or will be sufficient to 
allow the Company to sell its products on a competitive basis.

    LIMITED 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 currently has 
only limited product liability insurance relating to potential claims arising 
from its clinical trials. The Company intends to expand its insurance 
coverage if and when the Company begins marketing commercial products. There 
can be no assurance, however, that the Company will be able to obtain any 
additional product liability insurance on commercially acceptable terms or 
that the Company will be able to maintain its existing insurance and/or any 
additional insurance it may obtain in the future 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

    As of October 31, 1997 the Company's directors, executive officers and 
their respective affiliates beneficially owned approximately 45% of the 
Company's outstanding Common Stock. As a result, these stockholders are 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.

    VOLATILITY OF STOCK PRICE

    The market price of the Company's 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 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.

    Sales of a substantial number of shares of Common Stock in the public 
market could also adversely affect the market price of the Common Stock. In 
addition, holders of approximately 11,740,000 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.

                                      25
<PAGE>

    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 "Risks and Uncertainties" could have a 
dramatic and adverse impact on the market price of the Common Stock.

    ANTITAKEOVER EFFECTS OF CHARTER, BYLAWS AND DELAWARE LAW

    The Company's Second Restated Certificate of Incorporation (the 
"Certificate") 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 
(the "Bylaws") divide the Board into three classes of directors with each 
class serving a three year term. These and other provisions of the 
Certificate and the 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.

    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.

                                       
                                       







                                      26


<PAGE>

                        TRIANGLE PHARMACEUTICALS, INC.

                          PART II - OTHER INFORMATION


ITEM 2.  CHANGES IN SECURITIES

    c.   Issuance of Unregistered Securities

    On August 28, 1997, Triangle acquired Avid Corporation, through a merger 
(the "Merger") of Triangle's wholly-owned subsidiary, Project Z Corporation, 
a Delaware corporation ("Merger Sub"), with and into Avid. The Merger was 
consummated on the terms set forth in an Agreement and Plan of Reorganization 
dated June 30, 1997, by and among Triangle, Merger Sub and Avid (the "Merger 
Agreement"). As a result of the Merger, Avid is now a wholly-owned subsidiary 
of Triangle.

    In connection with the Merger, on August 28, 1997, the Company issued to 
Avid's stockholders 400,000 shares of the Company's Common Stock and agreed 
to issue up to an additional 2,100,000 shares of its Common Stock contingent 
upon the attainment of certain development milestones with Avid's drug 
candidates.  The shares of the Company's Common Stock were issued to the Avid 
stockholders in exchange for all outstanding capital stock of Avid.  The 
Company also assumed all outstanding options and warrants to acquire Avid 
common stock.  The assumed options and warrants are exercisable for the 
portion of the shares of the Company's Common Stock that the option or 
warrant holder would have received had the option or warrant been exercised 
immediately prior to the Merger.

    The shares issued by Triangle in connection with the Merger are 
restricted and may not be transferred or sold, except pursuant to a 
registration of the shares or an available exemption from registration.  The 
offer and sale of the shares was made pursuant to a claim of exemption under 
Regulation D promulgated by the Securities and Exchange Commission or, 
alternatively, under Section 4(2) of the Securities Act of 1933, as amended.  
The Company did not use any general advertisement or solicitation in 
connection with the offer or sale of the shares to the Avid stockholders.  
The Avid stockholders represented and warranted, among other things, that 
they were purchasing the shares for investment only and not with a view to 
distribution.  Less than 35 of the Avid stockholders were not "accredited 
investors" (as defined in Regulation D), and each of these stockholders was 
represented by a purchaser representative.  Appropriate legends were affixed 
to the certificates for the shares.

                                       27
<PAGE>

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

    a.   Exhibits

         *10.1     License Agreement dated as of December 18, 1996 between
                   Avid Corporation and The Dupont Merck Pharmaceutical Company.

         *10.2     First Amendment to License Agreement between Avid
                   Corporation and The Dupont Merck Pharmaceutical Company, 
                   dated as of August 26, 1997.

          11.1     Computation of Net Loss Per Share and Pro Forma Net Loss
                   Per Share

          27.1     Financial Data Schedule

    b.   Reports on Form 8-K.

         On September 11, 1997 the Company filed a Current Report on Form 8-K 
         dated September 11, 1997 describing the Company's acquisition of 
         Avid Corporation.

         On November 12, 1997, the Company filed Amendment No. 1 to Current 
         Report on Form 8-K, amending its Current Report on form 8-K filed 
         September 11, 1997, to include financial statements of Avid 
         Corporation and pro forma financial statements of the combined 
         companies.


         ---------------
         *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 
          Securities and Exchange Commission without the Mark pursuant to the 
          Company's Application Requesting Confidential Treatment pursuant to 
          Rule 24b-2 under the Securities Exchange Act of 1934, as amended.

                                       28
<PAGE>

                        TRIANGLE PHARMACEUTICALS, INC.
                                  SIGNATURES

          Pursuant to the requirements of the Securities Exchange Act of 
1934, the Registrant has duly caused this Quarterly Report on Form 10-Q to be 
signed on its behalf by the undersigned, hereunto duly authorized.

                                       TRIANGLE PHARMACEUTICALS, INC.


Date:  November 14, 1997                   By:  /s/ David W. Barry 
                                                  ----------------------------
                                                  David W. Barry
                                                  Chairman and Chief 
                                                  Executive Officer


                                       TRIANGLE PHARMACEUTICALS, INC.


Date: November 14, 1997                    By:  /s/ James A. Klein, Jr.
                                                  ----------------------------
                                                  James A. Klein, Jr.
                                                  Chief Financial Officer 
                                                  and Treasurer


                                       29
<PAGE>

                                 EXHIBIT INDEX

EXHIBIT                           DESCRIPTION
- -------                           -----------
*10.1        License Agreement dated as of December 18, 1996 between
             Avid Corporation and The Dupont Merck Pharmaceutical Company.

*10.2        First Amendment to License Agreement between Avid
             Corporation and The Dupont Merck Pharmaceutical Company, dated
             as of August 26, 1997.

 11.1        Computation of Net Loss Per Share and Pro Forma Net Loss
             Per Share

 27.1        Financial Data Schedule

          ------------------------
          * 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
            Securities and Exchange Commission without the Mark pursuant to the
            Company's Application Requesting Confidential Treatment pursuant to
            Rule 24b-2 under the Securities Exchange Act of 1934, as amended.



                                       30

<PAGE>



                                                           EXHIBIT 10.1





                                  LICENSE AGREEMENT

                                       BETWEEN

                             AVID CORPORATION (LICENSEE)

                                         AND

                                   THE DUPONT MERCK
                          PHARMACEUTICAL COMPANY (LICENSOR)











*** Certain confidential portions of this Exhibit were omitted by means
of blackout of the text (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 24b-2
under the 1934 Act.


<PAGE>
                                  TABLE OF CONTENTS

                                                                          Page
                                                                          ----
I.    DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . .  1
      1.01       "Affiliate" . . . . . . . . . . . . . . . . . . . . . . .  2
      1.02       "Agency". . . . . . . . . . . . . . . . . . . . . . . . .  2
      1.03       "Calendar Quarter". . . . . . . . . . . . . . . . . . . .  2
      1.04       "Calendar Year" . . . . . . . . . . . . . . . . . . . . .  2
      1.06       "Field" . . . . . . . . . . . . . . . . . . . . . . . . .  2
      1.07       "First Commercial Sale" . . . . . . . . . . . . . . . . .  2
      1.08       "IND" . . . . . . . . . . . . . . . . . . . . . . . . . .  2
      1.09       "Know-How". . . . . . . . . . . . . . . . . . . . . . . .  3
      1.10       "Licensed Compound" . . . . . . . . . . . . . . . . . . .  3
      1.11       "Licensed Product". . . . . . . . . . . . . . . . . . . .  3
      1.12       "NDA" . . . . . . . . . . . . . . . . . . . . . . . . . .  3
      1.13       "Net Sales" . . . . . . . . . . . . . . . . . . . . . . .  3
      1.14       "Patent Rights" . . . . . . . . . . . . . . . . . . . . .  4
      1.15       "Confidential Information". . . . . . . . . . . . . . . .  4
      1.16       "Sublicensee" . . . . . . . . . . . . . . . . . . . . . .  4
      1.17       "Territory" . . . . . . . . . . . . . . . . . . . . . . .  4
      1.18       "Valid Patent Claim". . . . . . . . . . . . . . . . . . .  4

II.   GRANT OF LICENSE . . . . . . . . . . . . . . . . . . . . . . . . . .  5
      2.01       Grant By DuPont Merck . . . . . . . . . . . . . . . . . .  5
      2.02       Reservation . . . . . . . . . . . . . . . . . . . . . . .  5

III.  PAYMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  5
      3.01       Licensee's Up Front Payment . . . . . . . . . . . . . . .  5
      3.02       Licensee's Milestones . . . . . . . . . . . . . . . . . .  5
      3.03       Licensee's Royalties. . . . . . . . . . . . . . . . . . .  6
      3.04       Licensee's Annual License Preservation Fee to Licensor. .  6
      3.05       In The Event of Sublicense by Licensee. . . . . . . . . .  7
      3.06       Payment and Exchange Rate . . . . . . . . . . . . . . . .  8

IV.   RECORDS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  9
      4.01       Reports . . . . . . . . . . . . . . . . . . . . . . . . .  9
      4.02       Books and Records . . . . . . . . . . . . . . . . . . . .  9
      4.03       Sublicensees. . . . . . . . . . . . . . . . . . . . . . .  9

V.    DEVELOPMENT OF LICENSED PRODUCT. . . . . . . . . . . . . . . . . . . 10
      5.01       Product Development . . . . . . . . . . . . . . . . . . . 10
      5.02       Development Schedule. . . . . . . . . . . . . . . . . . . 10
      5.03       Data Transfer . . . . . . . . . . . . . . . . . . . . . . 10
      5.04       Periodic Updates. . . . . . . . . . . . . . . . . . . . . 11

                                      -i-
<PAGE>

VI.   PATENT MAINTENANCE/PATENT INFRINGEMENT . . . . . . . . . . . . . . . 11
      6.01       Patent Maintenance. . . . . . . . . . . . . . . . . . . . 11
      6.02       Reimbursement By Licensee . . . . . . . . . . . . . . . . 11
      6.03       Notice of Infringement. . . . . . . . . . . . . . . . . . 11
      6.04       Licensor's Right to Bring Suit. . . . . . . . . . . . . . 12
      6.05       Licensee's Right to Bring Suit. . . . . . . . . . . . . . 12
      6.06       Litigation Expenses . . . . . . . . . . . . . . . . . . . 12

VII.  NOTICES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
      7.01       Notices . . . . . . . . . . . . . . . . . . . . . . . . . 13
      7.02       Payments. . . . . . . . . . . . . . . . . . . . . . . . . 13

VIII. INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . . . . . . . . 14
      8.01       Indemnification by Licensee . . . . . . . . . . . . . . . 14
      8.02       Procedure . . . . . . . . . . . . . . . . . . . . . . . . 15
      8.03       Insurance . . . . . . . . . . . . . . . . . . . . . . . . 15
      8.04       Warranty. . . . . . . . . . . . . . . . . . . . . . . . . 15

IX.   TERM; TERMINATION. . . . . . . . . . . . . . . . . . . . . . . . . . 16
      9.01       Term and Expiration . . . . . . . . . . . . . . . . . . . 16
      9.02       Termination for Breach. . . . . . . . . . . . . . . . . . 16
      9.03       Termination by Licensee . . . . . . . . . . . . . . . . . 16
      9.04       Termination by Licensor . . . . . . . . . . . . . . . . . 17
      9.05       On Termination or Expiration. . . . . . . . . . . . . . . 17
      9.06       Survival of Certain Obligations . . . . . . . . . . . . . 17
      9.07       Paid-up License . . . . . . . . . . . . . . . . . . . . . 18

X.    CONFIDENTIALITY. . . . . . . . . . . . . . . . . . . . . . . . . . . 18
      10.01      Nondisclosure Obligation. . . . . . . . . . . . . . . . . 18
      10.02      Use of Confidential Information . . . . . . . . . . . . . 19
      10.03      Publication . . . . . . . . . . . . . . . . . . . . . . . 19

XI.   MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
      11.01      Modifications . . . . . . . . . . . . . . . . . . . . . . 20
      11.02      Waiver. . . . . . . . . . . . . . . . . . . . . . . . . . 20
      11.03      Assignment. . . . . . . . . . . . . . . . . . . . . . . . 20
      11.04      Severability. . . . . . . . . . . . . . . . . . . . . . . 20
      11.05      Headings. . . . . . . . . . . . . . . . . . . . . . . . . 20
      11.06      Applicable Law/Jurisdiction . . . . . . . . . . . . . . . 20
      11.07      Force Majeure . . . . . . . . . . . . . . . . . . . . . . 21
      11.08      Entire Agreement. . . . . . . . . . . . . . . . . . . . . 21
      11.09      Counterparts. . . . . . . . . . . . . . . . . . . . . . . 21
      11.10      Use of Names. . . . . . . . . . . . . . . . . . . . . . . 21
      11.11      Independent Contractors . . . . . . . . . . . . . . . . . 21
      11.12      Representations and Warranties. . . . . . . . . . . . . . 22
      11.13      Publicity . . . . . . . . . . . . . . . . . . . . . . . . 22

                                      -ii-
<PAGE>

                                LICENSE AGREEMENT

    This License Agreement, effective as of the date of last signature, by a 
party hereto (the "Effective Date"), is entered into by and between Avid 
Corporation, a corporation organized and existing under the laws of the 
Commonwealth of Pennsylvania, and its Affiliates (collectively, "Licensee") 
and The DuPont Merck Pharmaceutical Company ("Licensor"), a general 
partnership organized and existing under the laws of the State, of Delaware.

    WHEREAS, Licensor and Licensee entered into that certain Exclusive Option 
Agreement ("Option Agreement") dated March 7, 1996, whereby Licensor granted 
Licensee an exclusive, worldwide option to enter into an exclusive, worldwide 
license Agreement covering the development and commercialization of Licensed 
Compound.

    WHEREAS, Licensee has now exercised the option granted in the Option 
Agreement and duly so notified DuPont Merck in a letter dated November 11, 
1996; and

    WHEREAS, Licensor desires to grant, and Licensee desires to receive, an 
exclusive, worldwide license to make, have made, import, use and sell 
Licensed Product, under the circumstances, set forth below;

    NOW THEREFORE, intending to be legally bound, Licensor and Licensee 
hereby covenant and agree as follows:

                                I.  DEFINITIONS

    The terms in this Agreement with initial letters capitalized, whether used 
    in the singular or plural, shall have the meaning designated below or, if 
    not designated below, the meaning as designated in places throughout this 
    Agreement.

                                      -1-
<PAGE>

1.01   "Affiliate" means any corporation or other entity which controls, is 
       controlled by, or is under common control with a party to this 
       Agreement. A corporation or other entity shall be regarded as in 
       control of another corporation or entity if it owns or directly or 
       indirectly controls fifty percent (50%) or more of the voting stock or 
       other ownership interest of the other corporation or entity, or if it 
       possesses, directly or indirectly, the power to direct or cause the 
       direction of the management and policies of the corporation or other 
       entity or the power to elect or appoint fifty percent (50%) or more of 
       the members of the governing body of the corporation or other entity.

1.02   "Agency" means any governmental regulatory authority responsible for 
       granting health or pricing approvals, registrations, import permits, 
       and other approvals required before Licensed Product may be tested or 
       marketed in any country.

1.03   "Calendar Quarter" means the respective periods of three (3) 
       consecutive calendar months ending on March 31, June 30, September 30 
       and December 31.

1.04   "Calendar Year" means each successive period of twelve (12) months 
       commencing on January 1 and ending on December 31.

1.06   "Field" means prophylactic and/or therapeutic treatment of patients 
       suffering from human immunodeficiency virus ("HIV"), acquired 
       immunodeficiency disease ("AIDS") and/or AIDS-related diseases.

1.07   "First Commercial Sale" means, with respect to a Licensed Product, the 
       first sale for use or consumption by the public of such Licensed 
       Product in a country after all required approvals, including marketing 
       and pricing approvals, have been granted by the governing health 
       authority of such country.

1.08   "IND" means Investigational New Drug application, or the like, as 
       defined in the applicable laws and regulations of the governmental 
       drug regulatory agencies in each country in the Territory.

                                      -2-
<PAGE>

1.09   "Know-How" means all information and materials, including but not 
       limited to, technology, experience, discoveries, improvements, 
       processes, formulae, data (including but not limited to all 
       preclinical, clinical, toxicological, and pharmacological data) and 
       inventions, know-how and trade secrets, patentable or otherwise, which 
       on the Effective Date of this Agreement are in Licensor's possession 
       or control, are not generally known and are necessary or useful for 
       Licensee in the research, development, manufacture, marketing, use or 
       sale of Licensed Product for the Field in the Territory.  Know-How 
       shall not include any such data or information which is available to 
       Licensor under a license pursuant to which Licensor does not have the 
       light to grant sublicenses.

1.10   "Licensed Compound" means Licensor's protease inhibitor for treatment 
       of human immunodeficiency virus ("HIV"), which is known as DMP450, and 
       which has the chemical name, [4R-(4a,5a,6b,7b)]-hexahydro-5,6-
       bis(hydroxy)-1,3-bis[(3-aminophenyl)methyl]-4,7 -bis(phenylmethyl)-
       2H-1,3-diazepin-2-one, bis-methanesulfonic acid salt.

1.11   "Licensed Product" means a formulation for human pharmaceutical use in 
       unit dosage form comprising Licensed Compound the manufacture, import, 
       use or sale of which would infringe a Valid Patent Claim but for the 
       license provided under Article 11 hereinbelow.

1.12   "NDA" means either the accelerated or regular new drug application 
       filed in the U.S. or the corresponding application for authorization 
       for marketing of Licensed Product in any other country, as defined in 
       the applicable laws and regulations and filed with the Agency of a 
       given country in the Territory.

1.13   "Net Sales" means the aggregate gross invoice price of Licensed 
       Product sold by LICENSEE, its Affiliates and Sublicensees to an 
       independent third party after deducting (to the extent not already 
       deducted in the amount invoiced):

                                      -3-
<PAGE>

       (i)    trade and quantity discounts;
       (ii)   returns and allowances; and
       (iii)  rebates, chargebacks and other amounts paid, credited or accrued.

1.14   "Patent Rights" means the patents and patent applications listed on 
       Exhibit A and any and all patents and patent applications owned by or 
       licensed to Licensor as of the Effective Date, which contain one or 
       more claims directed to Licensed Product for the Field, and any and 
       all divisions, continuations, continuations-in-part, reissues, 
       renewals, extensions or the like of any such patents and patent 
       applications and all foreign equivalents thereof.  Patent Rights shall 
       not include any patents or patent rights available to Licensor under a 
       license pursuant to which Licensor does not have the light to grant 
       sublicenses.  It is understood that Licensor shall not assert against 
       Licensee any other patent rights it may now possess or it acquires in 
       the future as they relate to the manufacture, importation, use or and 
       sale of Licensed Compound and Licensed Product.

1.15   "Confidential Information" means and includes, without limitation, 
       information and data of one party supplied to the other, know-how, and 
       all other scientific, clinical, regulatory, marketing, financial and 
       commercial information or data, whether communicated in writing or 
       orally or by other means, which is provided by one party to the other 
       party in connection with this Agreement.

1.16   "Sublicensee" means a business entity which is sublicensed by Licensee 
       under this Agreement.

1.17   "Territory" means the entire world.

1.18   "Valid Patent Claim" means a claim of an issued and unexpired patent 
       included within Patent Rights which, but for the license provided 
       under Article II hereof, would be infringed by Licensee's manufacture, 
       use, sale or import of Licensed Product, and which has not been 
       revoked or held unenforceable or invalid by a decision of a court

                                      -4-
<PAGE>

       or other governmental agency of competent jurisdiction, unappealable 
       or unappealed within the time allowed for appeal, or which has not 
       been disclaimed, denied or admitted to be invalid or unenforceable 
       through reissue or disclaimer or otherwise.

                              II. GRANT OF LICENSE

2.01   GRANT BY DUPONT MERCK  Subject to the reservation of Section 2.02, 
       Licensor hereby grants Licensee an exclusive license, with right to 
       sublicense, for the Field under the Patent Rights and Know-How to 
       make, have made, import, use and sell Licensed Compound and Licensed 
       Product in the Territory.

2.02   RESERVATION  DuPont Merck expressly reserves the right to make and use 
       Licensed Compound in its internal research programs.

                                III.  PAYMENTS

3.01   LICENSEE'S UP FRONT PAYMENT - In consideration of the rights granted 
       Licensee in 2.01 hereinabove, Licensee shall pay Licensor an initial 
       license fee equal to one million seven hundred fifty thousand dollars 
       ($1,750,000.00)(the "Initial License Fee").  Said Initial License Fee 
       shall be due on the Effective Date, and shall not be returnable in any 
       event, nor shall it be creditable against earned royalties.

3.02   LICENSEE'S MILESTONES - Licensee shall make the following payments to 
       Licensor on achievement of the following milestones:

                             ***

                             ***

                             ***



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    Confidential Treatment and filed separately with the commission.

                                      -5-
<PAGE>

                             ***
                             ***
                             ***
                             ***
                             ***

                             ***
                             ***

                             ***
                             ***

       ***   of all milestone payments shall be             ***              
       but no single royalty payment shall be reduced by more than    ***   
       Licensee shall notify Licensor in writing within thirty (30) days upon 
       the achievement of each milestone event and such milestone payment 
       shall be paid no later than        ***    following achievement of the 
       milestone event.

3.03   LICENSEE'S ROYALTIES - As further consideration for the rights and 
       licenses granted herein, Licensee shall pay Licensor a royalty equal 
       to        ***   of Licensee's and/or Licensee's Affiliates annual Net 
       Sales following First Commercial Sale of License Product, the 
       manufacture, importation, use or sale of which would, but for the 
       licenses granted hereunder, infringe a Valid Patent Claim.

3.04   LICENSEE'S ANNUAL LICENSE PRESERVATION FEE TO LICENSOR - In the event 
       that Licensee's total payments to Licensor in any calendar year 
       commencing with 1998, whether in the form of royalties, milestones, or 
       Additional Payment (as this term defined below), do not at least equal 
       the Annual License Preservation Fees set forth below, Licensee, as a 
       condition of maintaining the exclusivity of the licenses granted 
       hereunder, shall by the end of the calendar year in question pay the 
       difference between the Annual License


*** Portions of this page have been omitted pursuant to a request for 
    Confidential Treatment and filed separately with the commission.

                                      -6-
<PAGE>

       Preservation Fee specified below and the total of royalties, 
       milestones and Additional Payments made to Licensor that year 
       (hereafter, the "Unpaid Difference");

       Annual License Preservation Fee              Calendar Year
       -------------------------------              -------------

                ***                                 ***


                ***                                 ***

                ***                                 ***

                ***                                 ***




       The Unpaid Difference in any given calendar year shall be Paid by 
       Licensee to Licensor in cash, provided however, that up to     ***   
       of the Unpaid Difference in each of             ***            
       may, at Licensee's election, be paid to Licensor in the form of 
       Licensee's stock valued at the then prevailing fair market price for 
       such stock and having those rights and preferences as mutually agreed 
       upon by the parties.  The fair market price will be determined as the 
       average price of Licensee's stock for the prior thirty (30) days if 
       Licensee stock is on a major exchange.  If Licensee's stock is not 
       traded on a major exchange, the fair market price will be the price of 
       Licensee's stock as determined in its most recent private placement.  
       If royalties, milestones or Additional Payments in any given year 
       exceed the Annual License Preservation Fee, the excess shall be 
       carried over and applied against the ensuing year(s)' Annual License 
       Preservation Fee.


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                                      -7-
<PAGE>

3.05   IN THE EVENT OF SUBLICENSE BY LICENSEE - Licensee has the right to 
       sublicense the rights granted it hereunder to unrelated, unaffiliated 
       third parties, after obtaining the prior written consent of DuPont 
       Merck, such consent not to be unreasonably withheld.  In the event 
       Licensee enters into such a sublicense agreement, then Licensee shall 
       pay Licensor     ***    of the cash equivalent of any license fee and 
       technology premium equity payment that Licensee receives from its 
       Sublicensee ("Additional Payment"). As used herein, technology premium 
       equity payment means A(B-C), where A is the number of shares of 
       Licensee's stock purchased by the Sublicensee, B is the share price 
       paid by the Sublicensee, and C is the share price paid by the most 
       recent non-pharmaceutical investor to purchase at least        *** 
             ***   of the same type of Licensee stock, or, if Licensee is 
       publicly traded, then C is the average trading price of Licensee's 
       stock for the ten business days immediately prior to the transaction.  
       Moreover, Licensee shall pay Licensor     ***      of all milestones 
       that licensee receives from its Sublicensee.  This     ***      share 
       shall be applied against, but will not excuse Licensee from, the above 
       milestone obligations (i.e. Licensor shall receive the greater of its  
          ***    share of Licensee's milestones or the milestones specified 
       above).  Also, Licensee shall pay Licensor a royalty equal to the 
       greater of       ***      of the royalties that Licensee receives from 
       its Sublicensee(s) or     ***        of the Sublicensee(s)' Net Sales 
       following First Commercial Sale of Licensed Product, the manufacture, 
       importation, use or sale of which would, but for the licenses granted 
       hereunder, infringe a Valid Patent Claim.

3.06   PAYMENT AND EXCHANGE RATE - All payments to be made under this 
       Agreement shall be made in United States dollars and shall be paid by 
       bank wire transfer in immediately available funds as provided in 
       Section 7.02 hereinbelow or to such other bank account in the United 
       States designated in writing by DuPont Merck.  In the case of sales 
       outside the United States, the rate of exchange to be used in 
       computing the amount of currency equivalent in United States dollars 
       due shall be the month-end exchange rate applicable for the month in 
       which the sales are recorded.  Such month-end rate of


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                                      -8-
<PAGE>

       exchange shall be the rate prevailing at the close of the last 
       business day of the month as identified by THE WALL STREET JOURNAL. If 
       royalties are paid outside the U.S., Licensee shall use all reasonable 
       efforts to help Licensor obtain the lowest tax rate possible under the 
       applicable international treaty with the U.S.

                                 IV.  RECORDS

4.01   REPORTS - During the term of the Agreement following the First 
       Commercial Sale of a Licensed Product, Licensee shall furnish to 
       Licensor a quarterly written report for the Calendar Quarter stating 
       the gross sales price and the Net Sales (including a listing of 
       deductions) of all Licensed Product(s) sold by Licensee, its 
       Affiliates and its Sublicensees in the Territory during the reporting 
       period and the royalties payable under this Agreement.  Reports shall 
       be due on the      ***     following the close of each Calendar 
       Quarter.  Royalties shown to have accrued by each royalty report shall 
       be due and payable on the date such royalty report is due.

4.02   BOOKS AND RECORDS - Licensee agrees to keep full and accurate books of 
       account, records, data and memoranda regarding the sales of the 
       Product in sufficient detail to enable the payments due to Licensor 
       hereunder to be determined.  Licensee grants Licensor the right, at 
       its own expense, to examine said books and records insofar as they 
       concern the Product once in any calendar year for the purpose of 
       verifying the reports provided for in this Agreement.  Licensee shall 
       retain such records for  ***   ***.  If Licensor examines the records, 
       documents and materials in the possession or under the control of 
       Licensee, such examination shall be conducted during normal business 
       hours in such manner as to not unduly interfere with Licensee's 
       business.  Licensor and its representatives shall not disclose to any 
       other person, firm, or corporation any information acquired as a 
       result of any such examination, provided, however. that nothing 
       contained herein shall be construed to prevent Licensor and/or its 
       duly authorized representatives from testifying in any court or 
       tribunal of competent


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                                      -9-
<PAGE>

       jurisdiction with respect to the information obtained as a result of 
       such examination in any action instituted to enforce Licensor's rights 
       under the terms of this Agreement.  If any audit by Licensor discloses 
       a discrepancy of more than    ***    in the amount paid to Licensor 
       and the amount actually owed to Licensor, Licensee shall reimburse 
       Licensor for the reasonable actual costs of such audit and shall 
       promptly pay the discrepancy to Licensor, plus interest thereon at 
            ***       from the date such amount was originally due.

4.03   SUBLICENSEES. - Licensee shall include in each sublicense granted by 
       it pursuant to this Agreement a provision requiring the Sublicensee to 
       make reports to Licensee, to keep and maintain records of sales made 
       pursuant to such sublicense and to grant access to such records by 
       Licensor's independent accountant to the same extent required of 
       Licensee under this Agreement.

                     V.  DEVELOPMENT OF LICENSED PRODUCT

5.01   PRODUCT DEVELOPMENT - Licensee shall be responsible, at its own cost 
       and expense, for the development and commercialization of Licensed 
       Product. Licensee shall use its    ***  to develop the Licensed 
       Product.  As used herein the term          ***           
                             ***
                             ***
       ***  Licensee shall diligently perform or cause to be performed     
       all research and development necessary to obtain and maintain in full 
       force     and effect Agency approval in                ***
                             ***
                             ***

       ***  Licensee shall at the earliest possible time, consistent with 
       sound scientific and business principles, Cite applications for Agency 
       approval to sell Licensed Products in                  ***
                             ***
                             ***

*** Portions of this page have been omitted pursuant to a request for 
    Confidential Treatment and filed separately with the commission.

                                      -10-
<PAGE>

5.02   DEVELOPMENT SCHEDULE - Attached hereto as Exhibit B is an initial 
       Development Schedule outlining the Licensed Product development plan 
       for the United States market.  The Development Schedule may be 
       modified periodically as mutually agreed to, in writing, by the 
       parties.  Licensee's substantial compliance with the Development 
       Schedule, as it may be amended from time to time, shall be deemed to 
       satisfy the ***           ***          referred to in Section 5.01, 
       above.

5.03   DATA TRANSFER - To the extent not provided during the term of the 
       Option Agreement, Licensor shall provide Licensee with existing 
       pre-clinical and clinical data.  Such data will include the 
              ***               Licensor shall also provide reasonable 
       technical assistance to facilitate an orderly transfer of the project, 
       provided that such assistance shall not be at a level that is unduly 
       burdensome to Licensor.  At the request of Licensee, Licensor may, in 
       its sole discretion, provide additional assistance at Licensee's 
       expense.  Promptly after the Effective Date, Licensor shall notify the 
       FDA that Licensee has acquired exclusive rights to Licensed Product, 
       and so should have access to relevant data relating to Licensed 
       Product on file at the FDA.

5.04   PERIODIC UPDATES - Licensee will update Licensor in writing not less 
       frequently than   ***       on the development status of the Licensed 
       compound.



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    Confidential Treatment and filed separately with the commission.

                                      -11-
<PAGE>

                 VI.  PATENT MAINTENANCE/PATENT INFRINGEMENT

6.01   PATENT MAINTENANCE,  Licensor shall be responsible for prosecuting and 
       maintaining the Patent Rights.  In meeting such responsibility, 
       Licensor will rely on its staff attorneys to the same extent it 
       usually does in prosecuting similar patents and patent applications 
       owned by Licensor.

6.02   REIMBURSEMENT BY LICENSEE,  Licensee shall reimburse Licensor for all 
       costs incurred by Licensor in filing, prosecuting and maintaining the 
       Patent Rights during the term of this Agreement, except for those 
       costs relating to efforts of Licensor's staff attorneys.  In the event 
       that Licensee determines that it does not make commercial sense to 
       pursue filing, prosecuting and maintaining the Patent Rights in a 
       particular country and no longer desires to reimburse Licensor for 
       associated costs in such country, then Licensee shall so notify 
       Licensor, and Licensor may, in Licensor's discretion, maintain or 
       abandon the Patent Rights in that particular country.

6.03   NOTICE OF INFRINGEMENT,   Each party shall immediately give notice to 
       the other of any potential infringement or infringement by a third 
       party of any Patent Rights of which they become aware or of any 
       certification of which they become aware filed under the United States 
       "Drug Price Competition and Patent Term Restoration Act of 1984" 
       claiming that Patent Rights covering the Licensed Product are invalid 
       or unenforceable or that infringement will not arise from the 
       manufacture, use or sale of Licensed Product by a third party.

6.04   LICENSOR'S RIGHT TO BRING SUIT,  Licensor will have the right to 
       settle with the infringer or to bring suit or other proceeding at its 
       expense against the infringer in its own name

                                      -12-
<PAGE>

       or in the name of Licensee where necessary, after consultation with 
       Licensee.  Licensee shall be kept advised at all times of such suit or 
       proceedings brought by Licensor.  Licensee may, in its discretion, 
       join Licensor as party to the suit or other proceeding, provided that 
       Licensor shall retain control of the prosecution of such suit or 
       proceedings in such event.  Licensee agrees to cooperate with Licensor 
       in its efforts to protect Patent Rights, including joining as a party 
       where necessary. Licensor agrees to prosecute diligently any 
       litigation it initiates under this Section 6.04.

6.05   LICENSEE'S RIGHT TO BRING SUIT,  If within ninety (90) days after 
       receiving notice under Section 6.03 hereinabove, Licensor does not 
       settle with the infringer or bring suit or other proceeding against 
       the infringer, Licensee may in its discretion, bring suit or other 
       proceeding at its expense against the infringer, provided however, 
       that Licensee shall first consult with Licensor as to whether such 
       act(s) by a third party reasonably constitute infringement and whether 
       it is commercially advisable to bring such suit or proceeding, as 
       reasonably determined by Licensor.  Licensor shall be kept advised at 
       all times of such suit or proceedings brought by Licensee.  Licensor 
       may, in its discretion, join Licensor as party to the suit or other 
       proceeding, provided that Licensee shall retain control of the 
       prosecution of such suit or proceedings in such event.  Licensor 
       agrees to cooperate with Licensee in its efforts to protect Patent 
       Rights, including joining as a party where necessary.  Licensee agrees 
       to prosecute diligently any litigation it initiates under this Section 
       6.05.

6.06   LITIGATION EXPENSES,  Each party will bear its own expenses with 
       respect to any suit or other proceeding against an infringer.  Any 
       recovery in connection with such suit or proceeding will first be 
       applied to reimburse Licensee and Licensor for their out-of-pocket 
       expenses, including attorney's fees.  Any remaining recovery shall be 
       divided by the parties as follows: (i) if the damages awarded the 
       party controlling the suit include an amount based on          ***     
       then Licensor shall retain     ***     ***  and Licensee shall retain
                    ***             of said amount after first subtracting 
       from the award those amounts not based on         ***      
       (ii) if the damages awarded the party controlling the suit include an 
       amount based on  ***           ***     then, Licensee shall retain 
               ***      and Licensor       ***      of the award after first


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                                      -13-
<PAGE>

       subtracting from the award those amounts not based on       ***    
            ***    (iii) if the damages awarded the party controlling the suit 
       includes an amount based           ***                  ***            
       then the parties will each retain           ***        of such amount 
       and (iv) if the damages awarded the party controlling the suit 
       includes an amount not contemplated by (i)-(iii) above, then the 
       parties will each retain      ***      of such amount.

                           VII.  NOTICES; PAYMENTS

7.01   NOTICES,  Any notice required or permitted to be given hereunder 
       shall, except where specifically provided otherwise, be given in 
       writing to the person listed below by personal delivery, registered or 
       certified mail, return receipt requested, NEXT DAY AIR, telegram, 
       telex, or telecopier, and the date upon which such notice is so 
       personally delivered (or if notice is given by registered or certified 
       mail, the date that is three (3) business days from sending, or if by 
       NEXT DAY AIR, telegram, or telex or telecopier, the date of receipt at 
       the designated address) shall be deemed to be the date of such notice, 
       irrespective of the date appearing thereon:

       The DuPont Merck Pharmaceutical Company           Avid Corporation
       DuPont Merck Plaza, Walnut Run                    1667 Davis Street
       974 Centre Road                                   Camden, NJ 08029
       Wilmington, DE 19805                              Attn: Executive VP
       Attn:  Vice President, Business Development


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                                      -14-
<PAGE>

7.02   PAYMENTS,  Payments made to Licensor under Article II shall be wire to

             Licensor's account as follows:

             Mellon Bank, N.A.
             Independence Center
             701 Market Street
             Philadelphia, PA 19016
                  ***        
                  ***            

                VIII.  INDEMNIFICATION; INSURANCE; WARRANTIES

8.01   INDEMNIFICATION BY LICENSEE - Licensee shall at all times during the 
       term of this Agreement and thereafter, indemnify, defend and hold 
       Licensor, its officers, employees, parent companies and Affiliates, 
       from and against any and all claim, loss, damage, liability, injury, 
       cost or expense, including without limitation expenses of litigation 
       and reasonable attorneys' fees, in connection with any claims made or 
       suits brought by third parties against Licensor relating to this 
       Agreement including, without limitation, those arising out of the 
       death of or injury to any person or persons or out of any damage to 
       property and resulting from the production, manufacture, sale, use, 
       lease, consumption or advertisement of Licensed Product and those 
       arising from the negligence, willful misconduct, or material breach of 
       this Agreement by Licensee, its Affiliates, subcontractors or agents.

8.02   PROCEDURE. - Should Licensor or any of its officers, agents, parent 
       companies, affiliates, or employees (the "Indemnitee") intend to claim 
       indemnification under this Article VIII, such Indemnitee shall 
       promptly notify the Licensee (the "Indemnitor") in writing of any 
       loss, claim, damage, liability or action in respect of which the 
       Indemnitee intends to claim such indemnification, and the Indemnitor 
       shall be entitled to assume the defense thereof with counsel selected 
       by the Indemnitor and approved by the


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                                      -15-
<PAGE>

       Indemnitee, such approval not to be unreasonably withheld, PROVIDED, 
       HOWEVER, that if representation of Indemnitee by such counsel first 
       selected by the Indemnitor would be inappropriate due to a conflict of 
       interest between such Indemnitee and any other party represented by 
       such counsel, then Indemnitor shall select other counsel for the 
       defense of Indemnitee, with the fees and expenses to be paid by the 
       Indemnitor, such other counsel to be approved by Indemnitee and such 
       approval not to be unreasonably withheld.  The indemnity agreement in 
       this Article VIII shall not apply to amounts paid in settlement of any 
       loss, claim damage, liability or action if such settlement is effected 
       without the consent of the Indemnitor, which consent shall not be 
       withheld unreasonably.  The failure to deliver notice to the 
       Indemnitor within a reasonable time after the commencement of any such 
       action, if prejudicial to its ability to defend such action, shall 
       relieve such Indemnitor of any liability to the Indemnitee under this 
       Article VIII, but the omission so to deliver notice to the Indemnitor 
       will not relieve it of any liability that it may have to any 
       Indemnitee otherwise than under this Article VIII.  The Indemnities 
       under this Article VIII, its employees and agents, shall cooperate 
       fully with the Indemnitor and its legal representatives in the 
       investigation of any action, claim or liability covered by this 
       indemnification.

8.03   INSURANCE. - Licensee shall use best efforts to obtain liability 
       insurance promptly after the Effective Date and in no event later than 
       thirty (30) days after the Effective Date.  Such liability insurance 
       shall protect Licensee and Licensor in regard to events covered by 
       Section 8.01, and the nature and extent of the insurance coverage 
       shall be commensurate with usual and customary industry practices.  
       Thereafter, for the term of this Agreement, upon the commencement of 
       production, sale, or transfer, whichever occurs first, of any Licensed 
       Product, Licensee shall obtain and carry in full force and effect 
       liability insurance which shall protect Licensee and Licensor in 
       regard to events covered by Section 8.01, the nature and extent of 
       which insurance coverage shall be commensurate with usual and 
       customary industry practices.  Licensee shall name Licensor as an 
       additional insured and provide Licensor a certificate of insurance 
       evidencing coverage.

                                      -16-
<PAGE>

8.04   WARRANTY. - Except as otherwise expressly set forth in this Agreement, 
       LICENSOR MAKES NO REPRESENTATIONS AND EXTENDS NO WARRANTIES OF ANY 
       KIND, EITHER EXPRESS OR IMPLIED, INCLUDING BUT NOT LIMITED TO 
       WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, AND 
       VALIDITY OF PATENT RIGHTS' CLAIMS, ISSUED OR PENDING.

                            IX.  TERM; TERMINATION

9.01   TERM AND EXPIRATION. - This Agreement shall be effective as of the 
       Effective Date and unless terminated earlier pursuant to Section 9.02, 
       9.03 or 9.04 below, the terms of this Agreement shall continue in 
       effect on a                    ***                       
                                  ***                           

9.02   TERMINATION FOR BREACH - In the event of a material breach by either 
       Licensor or Licensee of any of the obligations contained in this 
       Agreement, the other party shall be entitled to terminate this 
       Agreement by notice in writing under Section 7.01 provided that such 
       notice shall specify the complained of breach or breaches.  If the 
       said breach or breaches are capable of remedy, the party committing 
       such breach or breaches shall be entitled to a period of     ***      
       from the delivery of such notice in which to remedy or to undertake to 
       remedy the same.  In the case the defaulting party shall fail to 
       remedy the breach or to undertake to remedy the breach to the 
       satisfaction of the injured party, the injured party shall have the 
       right                ***                           ***            
       Failure of a party to exercise its rights under this Section 9.02 
       shall not be construed as a waiver as to future breaches whether or 
       not they are similar.


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                                      -17-
<PAGE>

9.03   TERMINATION BY LICENSEE - Licensee may terminate this Agreement, with 
       respect to:

              ***

              ***

       Licensee will disclose to Licensor its reasons for any such 
       termination.

9.04   TERMINATION BY LICENSOR - Licensor shall have the further right to 
       terminate this Agreement      ***      on written notice to License if:

                   ***
                   ***
                   ***
                   ***

9.05   ON TERMINATION - Licensee shall, upon termination of this Agreement:

       (a)  Immediately cease manufacture, use, importation and sale of 
            License Product;

       (b)  return to Licensor all copies of documents containing 
            Confidential Data and any materials received from Licensor under 
            confidentiality concerning compound, except that Licensee may 
            retain one (1) copy in its legal files to meet its obligations 
            hereunder that continue after termination under this Agreement;

       (c)  make no further use of any kind of any and all technology or 
            Confidential Data disclosed hereunder by Licensor with respect to
            Licensed Product, except to the 

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                                      -18-
<PAGE>

            extent such information has become public knowledge other than 
            through fault of Licensee;

       (d)  transfer to Licensor all approved and pending NDAs for all 
            countries within the Territory.

9.06   SURVIVAL OF CERTAIN OBLIGATIONS - The obligations set forth in 
       Sections 8.01 and 8.02, and Article X, and any obligations otherwise 
       accrued hereunder as of the date of termination shall survive 
       termination of this Agreement.

9.07   PAID-UP LICENSE - For each country, upon expiration of Licensee's 
       obligation to pay royalties pursuant to Section 3.03, License shall 
       have a fully paid-up, nonexclusive license under any Know-How, to 
       make, have made, use and sell Licensed Product in that country.

                             X.  CONFIDENTIALITY

10.01  NONDISCLOSURE OBLIGATION. - The parties hereto entered into a 
       Confidential Disclosure Agreement ("CDA") on December 18, 1995.  The 
       parties hereby agree that this Article X shall supersede and take the 
       place of the CDA, and that all Confidential Information disclosed by 
       one party to another, whether in the past or in the future, shall be 
       governed by the terms and conditions of this Article X. Confidential 
       Information includes but is not limited to compounds, intermediates, 
       data, designs, methods and processes, know-how, marketing strategies, 
       product plans, plans for research, developmental or experimental work, 
       development tools, financial information, test and safety data, and 
       supplier lists and information relating to Licensed Product.  The 
       parties hereto agree that all Confidential Information shall be 
       maintained in confidence by the recipient and shall not be disclosed 
       by the recipient to any other natural person, or any corporation, 
       firm, partnership or other business entity, or any government or any 
       agency or political subdivision thereof, without the prior written 
       consent of the other party, except to the extent that such 
       Confidential Information:

                                      -19-
<PAGE>

       (a)  is known by recipient at the time of its receipt, and not through 
            a prior disclosure by the disclosing party, as documented by 
            business records;

       (b)  is properly in the public domain;

       (c)  is subsequently disclosed to the receiving party by a third party 
            who may lawfully do so and is not under an obligation of 
            confidentiality to the disclosing party;

       (d)  is developed by the receiving party independently of Proprietary 
            Information or other information received from the other party;

       (e)  is disclosed to governmental or other regulatory agencies in 
            order to obtain patents or to gain approval to conduct clinical 
            trials or to market Licensed Product, but such disclosure may be 
            only to the extent reasonably necessary to obtain patents or 
            authorizations;

       (f)  is necessary or useful to be disclosed to prospective investors, 
            Sublicensees, agents, consultants, Affiliates and/or other third 
            parties for the research and development, manufacturing, 
            marketing and or sale of Licensed Product (or for such parties to 
            determine their interest in performing such activities) in 
            accordance with this Agreement on the condition that such third 
            parties agree to be bound by the confidentiality obligations 
            contained in this Agreement, provided that the term of 
            confidentiality for such third parties shall be no less than ten 
            (10) years; or

       (g)  is required to be disclosed by law or court order, provided that 
            notice is promptly delivered to the other party in order to 
            provide an opportunity to challenge or limit the disclosure, 
            obligations.

                                      -20-
<PAGE>

10.02  USE OF CONFIDENTIAL INFORMATION.  Both parties agree that the 
       Confidential Information shall only be used in connection with the 
       parties' respective rights and obligations under this Agreement.

10.03  PUBLICATION.  During the term of this Agreement, Licensee and Licensor 
       each acknowledge the other party's interest in publishing its results 
       to obtain recognition within the scientific community and to advance 
       the state of scientific knowledge.  Each party also recognizes the 
       mutual interest in obtaining valid patent protection and in protecting 
       business interests and trade secret information, Consequently, each 
       party agrees not to disclose Confidential Information of the other 
       party in publications without the express written consent of the other 
       party.  In addition, the contributions of the parties to the research 
       shall be expressly noted in such publications or other public 
       disclosures by acknowledgment or co-authorship, whichever is 
       appropriate.

                              XI.  MISCELLANEOUS

11.01  MODIFICATIONS - The terms and conditions of this Agreement may not be 
       amended or modified, except in a writing signed by both parties.

11.02  WAIVER - No failure or delay of either party to exercise any rights or 
       remedies under this Agreement shall operate as a waiver thereof nor 
       shall any single, or partial exercise or any rights or remedies 
       preclude any further or other exercise of the same or any other rights 
       or remedies with respect to any circumstances to be construed as a 
       waiver thereof with respect to any other circumstances.

11.03  ASSIGNMENT - Licensee may not assign any of its rights or delegate any 
       of its duties pursuant to this Agreement without the prior written 
       consent of Licensor and any attempted assignment without such consent 
       shall be void.

                                      -21-
<PAGE>

11.04  SEVERABILITY - In the event that any provision of this Agreement is 
       held invalid or unenforceable in any circumstance by a court of 
       competent jurisdiction, the remainder of this Agreement, and 
       application of such provision in any other circumstances, shall not be 
       affected thereby.

11.05  HEADINGS - The headings of articles and sections of this Agreement are 
       for convenience of reference only and shall not affect the meaning or 
       interpretation of this Agreement in any way.

11.06  APPLICABLE LAW/JURISDICTION - This Agreement shall be governed by and 
       construed in accordance with the laws of the        ***        without 
       regard to its conflicts of laws principles.  Any litigation regarding 
       this Agreement or performance of obligations in connection therewith 
       shall be in the courts of the                 ***
                     ***

11.07  FORCE MAJEURE - Neither party shall be responsible for any loss or 
       damage resulting from any delay in performing or failure to perform 
       any provisions of this Agreement, so long as any such failure or delay 
       arises from fires, floods, storms, earthquakes, civil commotion's, 
       strikes or other differences with workers or unions, or from any delay 
       or failure in delivery when the supplies of either party or the 
       facilities of production, manufacture, transportation or distribution 
       which otherwise would be available to either party are impaired by 
       mechanical breakdown or by causes beyond its control or by the order, 
       requisition, request, or recommendation of any governmental agency or 
       acting governmental authority, or either party's compliance therewith, 
       or by governmental regulation.

11.08  ENTIRE AGREEMENT - This Agreement constitutes the entire agreement 
       between Licensor and Licensee with respect to the subject matter 
       hereof, and supersedes all proposals,


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                                      -22-
<PAGE>

       oral or written, purchase orders, confidentiality agreements, and all 
       other communications between the parties with respect to such subject 
       matter, subject to any moneys due under the purchase orders between 
       the parties as of the date hereof.

11.09  COUNTERPARTS - This Agreement may be executed in counterparts, and 
       when each party has signed and delivered at least one counterpart, 
       each counterpart shall be deemed an original, and, when taken together 
       with other signed counterparts, shall constitute one Agreement, which 
       shall be binding upon and effective as to both parties.

11.10  USE OF NAMES - This Agreement does not confer any right to use the 
       name, tradename, trademark or other designation of either party.

11.11  INDEPENDENT CONTRACTORS - At all times during the term of this 
       Agreement, each party shall act as an independent contractor and 
       neither the making of this Agreement nor the performance of any of the 
       provisions hereof shall be construed to make one party an agent, 
       employee or legal representative of another party for any purpose, nor 
       shall this Agreement be deemed to establish a joint venture or 
       partnership.

11.12  REPRESENTATIONS AND WARRANTIES - Each party represents and warrants to 
       the other that it has the full right and authority to enter into this 
       Agreement, and that it is not aware of any impediment which would 
       inhibit its ability to perform the terms and conditions imposed on it 
       by such Agreement.

11.13  PUBLICITY - Each party will provide the other with a copy of any draft 
       press release covering the subject matter of this Agreement at least 
       one business day before issuance and in the case of a press release 
       covering the initial announcement of this Agreement, at least three 
       (3) business days before issuance - unless in the opinion of counsel 
       such delay in the issuance of the press release would result in a 
       violation of the securities law or other applicable law.  Each party 
       will give due regard to comments, if any, made by the other party in 
       response to a draft release.  Neither party may use the

                                      -23-
<PAGE>

       name of the other party or the other party's divisions affiliates, 
       subsidiaries, or products to imply an endorsement, without the written 
       consent of such other party.

IN WITNESS WHEREOF, the parties intending to be bound have duly executed this 
Agreement in duplicate by their appropriate authorized representative.

THE DUPONT MERCK                       AVID CORPORATION
PHARMACEUTICAL COMPANY


/s/ illegible                          /s/ illegible            
- -----------------------------          -----------------------------
By                                     By

President and CEO                      Executive Vice Pres      
- -----------------------------          -----------------------------
Title                                  Title

December 18, 1996                      December 18, 1996        
- -----------------------------          -----------------------------
Date                                   Date


                                      -24-
<PAGE>

                                      SCHEDULE A

DOCKET NO.:   DM-6566-E
TITLE:   Substituted Cyclic Carbonyls and Derivatives Thereof Useful as
         Retroviral Protease Inhibitors

- -------------------------------------------------------------------------------
COUNTRY  APPLN NO.   APPLN DATE   STATUS   PATENT NO.  ISSUE DATE   EXPIRY DATE
- -------------------------------------------------------------------------------
US       08/197,630   2/16/94    Allowed             
- -------------------------------------------------------------------------------

                                     1 of 6
<PAGE>

                                   SCHEDULE A

DOCKET NO.:   DM-6566-B
TITLE:   Substituted Cyclic Carbonyls and Derivatives Thereof Useful as
         Retroviral Protease Inhibitors

FOREIGN FAMILY FOR DM-6566-E

- -------------------------------------------------------------------------------
COUNTRY  APPLN NO.   APPLN DATE   STATUS   PATENT NO.  ISSUE DATE   EXPIRY DATE
- -------------------------------------------------------------------------------
ASTL     94/061808    10/13/92   Pending             
- -------------------------------------------------------------------------------
ATRA     unknown      10/13/92   Pending             
- -------------------------------------------------------------------------------
BELG     unknown      10/13/92   Pending             
- -------------------------------------------------------------------------------
BRAZ     PI9206623-2  10/13/92   Pending             
- -------------------------------------------------------------------------------
CANA     2120925      10/13/92   Pending             
- -------------------------------------------------------------------------------
CZEC     PV00814-94   10/13/92   Pending             
- -------------------------------------------------------------------------------
DENM     unknown      10/13/92   Pending             
- -------------------------------------------------------------------------------
EPC      92922262.8   10/13/92   Pending             
- -------------------------------------------------------------------------------
FINL     94/001649    10/13/92   Pending             
- -------------------------------------------------------------------------------
FRAN     unknown      10/13/92   Pending             
- -------------------------------------------------------------------------------
GBRI     unknown      10/13/92   Pending             
- -------------------------------------------------------------------------------
GERM     unknown      10/13/92   Pending             
- -------------------------------------------------------------------------------
GREC     unknown      10/13/92   Pending             
- -------------------------------------------------------------------------------
HUNG     P94/01020    10/13/92   Pending             
- -------------------------------------------------------------------------------
IREL     unknown      10/13/92   Pending             
- -------------------------------------------------------------------------------
ITAL     unknown      10/13/92   Pending             
- -------------------------------------------------------------------------------
JAPA     93/507244    04/11/94   Pending             
- -------------------------------------------------------------------------------
KORS     94/701169    10/13/92   Pending             
- -------------------------------------------------------------------------------
LUXE     unknown      10/13/92   Pending             
- -------------------------------------------------------------------------------
NETH     unknown      10/13/92   Pending             
- -------------------------------------------------------------------------------
NORW     94/001278    10/13/92   Pending             
- -------------------------------------------------------------------------------
PCT      US92/08749   10/13/92   (Pending)           
- -------------------------------------------------------------------------------
RUSS     94/031126    10/13/92   Pending             
- -------------------------------------------------------------------------------
SLVK     PV00407-94   10/13/92   Pending             
- -------------------------------------------------------------------------------
SPAI     unknown      10/13/92   Pending             
- -------------------------------------------------------------------------------
SWED     unknown      10/13/92   Pending             
- -------------------------------------------------------------------------------
SWIT     unknown      10/13/92   Pending             
- -------------------------------------------------------------------------------

                                     2 of 6
<PAGE>

                                   SCHEDULE A

DOCKET NO.:   DM-6681
TITLE:   Method of Treating Human Immunodeficiency Virus Infection Using a
         Cyclic Protease Inhibitor in Combination with a Reverse Transcriptase
         Inhibitor

- -------------------------------------------------------------------------------
COUNTRY  APPLN NO.   APPLN DATE   STATUS   PATENT NO.  ISSUE DATE   EXPIRY DATE
- -------------------------------------------------------------------------------
US       08/110,603    8/26/93   Allowed             
- -------------------------------------------------------------------------------


                                     3 of 6
<PAGE>

                                   SCHEDULE A

DOCKET NO.:   DM-6663
TITLE:   Improved Pharmaceutical Formulations of Cyclic Urea Type Compounds

- -------------------------------------------------------------------------------
COUNTRY  APPLN NO.   APPLN DATE   STATUS   PATENT NO.  ISSUE DATE   EXPIRY DATE
- -------------------------------------------------------------------------------
US       08/208,243    3/9/94    Granted   5,559,110     9/24/96     3/9/2014
- -------------------------------------------------------------------------------


                                     4 of 6
<PAGE>

                                   SCHEDULE A


DOCKET NO.:   DM-6751
TITLE:   Method for Preparing N,N'-Disubstituted Cyclic Ureas

- -------------------------------------------------------------------------------
COUNTRY  APPLN NO.   APPLN DATE   STATUS   PATENT NO.  ISSUE DATE   EXPIRY DATE
- -------------------------------------------------------------------------------
US       08/469409     6/6/95    Granted   5,532,356     7/2/96      6/6/2015
- -------------------------------------------------------------------------------


                                     5 of 6
<PAGE>
                                   SCHEDULE A

DOCKET NO.:   ***
TITLE:           ***

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- -------------------------------------------------------------------------------
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                                     6 of 6
<PAGE>

                                   SCHEDULE B


                        DMP 450 DEVELOPMENT TIME LINE (1)



                                      ***
                                      ***
                                      ***
                                      ***
                                      ***



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<PAGE>

                                                            EXHIBIT 10.2


                         AMENDMENT TO LICENSE AGREEMENT


    This Amendment to License Agreement ("Amendment") is entered into as of 
August 26, 1997, by and between Avid Corporation, a Pennsylvania corporation 
("Licensee"), and The DuPont Merck Pharmaceutical Company, a Delaware general 
partnership ("Licensor"), and amends certain terms of that certain License 
Agreement dated December 18, 1996, between Licensee and Licensor (the 
"Agreement").  Capitalized terms not defined herein shall have the meanings 
given to them in the Agreement.

                                    RECITALS

    A.   Licensee and Licensor have previously entered into the Agreement, 
pursuant to which Licensor has licensed certain technology to Licensee.

    B.   Licensee and Licensor desire to amend certain terms of the Agreement 
as set forth in this Amendment.

    NOW, THEREFORE, for good and valuable consideration, Licensee and 
Licensor hereby agree as follows:

    1.   AMENDMENTS.  The Agreement is hereby amended as follows:

         a.   SECTION 1.10.  In Section 1.10, the words "bismethanesulfonic 
acid salt" in the fourth and fifth lines are hereby deleted, and the words 
"and all salts thereof, and all esters of the vicinal dihydroxy group and all 
salts thereof" are hereby inserted after the word "3-diazepin-2-one," in the 
fourth line.

         b.   SECTION 3.05.  In Section 3.05, the first two sentences are 
hereby deleted, and the following sentences are hereby added to the beginning 
of Section 3.05: "Licensee has the right to sublicense the rights granted it 
pursuant to this Agreement to any unrelated, unaffiliated third party after 
obtaining Licensor's prior written consent.  Licensor agrees to consider any 
request for consent to sublicense in good faith and shall not unreasonably 
withhold or delay such consent.  In the event Licensee sublicenses the rights 
granted it hereunder to any unrelated, unaffiliated third party, then 
Licensee shall pay Licensor      ***       of the cash equivalent of any 
license fee and technology premium equity payment that Licensee receives it 
from its Sublicensee ("Additional Payment").


*** Portions of this page have been omitted pursuant to a request for 
    Confidential Treatment and filed separately with the commission.

<PAGE>

         c.   SECTION 6.01:    In Section 6.01, insert the subsection 
designation "(i)" after the section heading and before the first sentence and 
add the following sentences as a new Section 6.01 (ii):

         "(ii) Licensor shall reasonably cooperate with Licensee and shall 
         provide Licensee with copies of material filings and correspondence 
         pertaining to the prosecution and maintenance of the Patent Rights 
         ("Patent Prosecution Activities") and give Licensee an opportunity to 
         comment thereon.  Licensor shall consider requests made by Licensee to 
         pursue Patent Prosecution Activities, and shall make a good faith 
         determination of whether to pursue such Patent Prosecution Activities. 
         Licensor shall provide notice to Licensee of any decision by Licensor 
         to discontinue or to not pursue Patent Prosecution Activities in a 
         particular country promptly upon reaching such decision and, in the 
         case of a decision to discontinue Patent Prosecution Activities, no 
         less than       ***     before the discontinuance thereof.  Upon 
         receipt of such notice, or in the event that Licensor fails to timely 
         pursue Patent Prosecution Activities, Licensee shall be free at its 
         own expense, to pursue, continue or discontinue any or all of the 
         Patent Prosecution Activities in that particular country.  Upon the 
         request of Licensee, Licensor shall consider in good faith filing for 
         reissue patents with claims specifically directed to the Licensed 
         Compound and methods for its therapeutic use.  Notwithstanding 
         anything to the contrary, failure by Licensor to perform any of its 
         obligations described in this Section 6.01 (ii) shall not be 
         considered a breach of this Agreement."

         d.   SECTION 11.03.  Section 11.03 is hereby amended in its entirety 
to read as follows:

    "Both Licensor and Licensee may freely transfer or assign their rights and 
    obligations under this Agreement to any Affiliate without the prior consent 
    of the other party.  Licensee may not assign its rights and obligations 
    under this Agreement to any unrelated, unaffiliated third party without the 
    prior written consent of Licensor and any attempted assignment without such 
    consent shall be void.  Licensor agrees to consider any request for such an 
    assignment in good faith and shall not unreasonably withhold or delay its 
    consent thereto.  As a condition to any transfer or assignment, the 
    transferee must agree to be bound by the obligations of the transferor. 
    Subject to the foregoing, this Agreement shall bind and inure to the 
    benefit of the parties and their respective successors and assigns." 

         e.   SCHEDULE B.  Schedule B is hereby amended in its entirety and 
replaced with Schedule B in the form attached to this Amendment.


*** Portions of this page have been omitted pursuant to a request for 
    Confidential Treatment and filed separately with the commission.

<PAGE>

    2.   ACKNOWLEDGEMENT.  Licensor hereby acknowledges that, as of the date 
hereof, Licensee has substantially complied with the Development Schedule and 
has satisfied its         ***      under Section 5.01 of the Agreement.

    3.   GENERAL TERMS.  The Agreement, as amended by this Amendment, 
constitutes the entire agreement between Licensee and Licensor regarding the 
subject matters contained therein and herein.  In the event of any conflict 
between the provisions of the Agreement and this Amendment, the provisions of 
this Amendment shall govern and control.  This Amendment shall be governed 
by, and construed in accordance with, the laws of the      ***      without 
regard to its conflicts of laws principles.  This Amendment may be executed 
in any number of counterparts, each of which shall be deemed an original and 
all of which shall constitute one and the same instrument.  If any provision 
of this Amendment is for any reason held to be ineffective, unenforceable or 
illegal, such condition shall not affect the validity or enforceability of 
any of the remaining portions hereof-, provided, further, that the parties 
shall negotiate in good faith to replace any ineffective, unenforceable or 
illegal provision with an effective replacement as soon as is practical.

    IN WITNESS WHEREOF, Licensee and Licensor have each executed this 
Amendment through an authorized officer as of the date written below.

                                   AVID CORPORATION


                                   By: /s/  illegible
                                       ---------------------------------------

                                   Its: Executive Vice Pres & General Counsel
                                        --------------------------------------

                                   Date:     August 26, 1997               
                                         -------------------------------------


                                   THE DUPONT MERCK
                                   PHARMACEUTICAL COMPANY


                                   By: /s/  illegible                   
                                       ---------------------------------------

                                   Its: President                      
                                        --------------------------------------
 
                                   Date: August 26, 1997               
                                         -------------------------------------


*** Portions of this page have been omitted pursuant to a request for 
    Confidential Treatment and filed separately with the commission.


<PAGE>

                                   SCHEDULE B



                                      ***
                                      ***
                                      ***
                                      ***


*** Portions of this page have been omitted pursuant to a request for 
    Confidential Treatment and filed separately with the commission.


<PAGE>

                                    EXHIBIT 11.1
                                           
                            TRIANGLE PHARMACEUTICALS, INC.
                            (A DEVELOPMENT STAGE COMPANY) 
          COMPUTATION OF NET LOSS PER SHARE AND PRO FORMA NET LOSS PER SHARE
                                     (UNAUDITED)
                                           
<TABLE>
                                    THREE MONTHS    NINE MONTHS     THREE MONTHS    NINE MONTHS
                                       ENDED           ENDED           ENDED           ENDED
                                    SEPTEMBER 30,   SEPTEMBER 30,   SEPTEMBER 30,   SEPTEMBER 30, 
                                    -------------   -------------   -------------   -------------
                                      1996 (1)        1996 (1)        1997 (2)        1997 (2) 
                                    -------------   -------------   -------------   -------------
<S>                                 <C>             <C>             <C>             <C>     
Historical weighted average 
 shares...........................                                    19,988,451     18,554,524
Pro forma historical weighted 
average shares outstanding........    4,107,643       4,925,945               --             --
 Series A preferred stock, 
 convertible to Common Stock at   
 consummation of the initial 
 public offering..................    5,231,671       5,231,671               --             --
Series B preferred stock, 
 convertible to Common Stock at 
 consummation of the initial 
 public offering..................    3,706,234       3,706,234               --             --
Common stock equivalents for 
 preferred stock warrants 
 outstanding......................           --              --               --             --
Common stock equivalents for 
 options outstanding..............           --              --               --             --
                                    -----------     -----------     ------------   ------------
Shares used in computing pro 
 forma net loss per share.........   13,045,548      13,863,850       19,988,451     18,554,524
                                    -----------     -----------     ------------   ------------
                                    -----------     -----------     ------------   ------------

Net Loss..........................  $(2,538,859)    $(8,038,277)    $(18,214,006)  $(27,374,905)
                                    -----------     -----------     ------------   ------------
                                    -----------     -----------     ------------   ------------

Pro forma net loss per share......  $     (0.19)    $     (0.58)    $      (0.91)  $      (1.48)
                                    -----------     -----------     ------------   ------------
                                    -----------     -----------     ------------   ------------
</TABLE>

    (1)  Weighted average common stock outstanding during the period including
         all common stock issued at prices below the public offering price
         during the twelve month period preceding the offering as if it was
         outstanding at inception (July 12, 1995).  Issuance of convertible
         preferred stock, preferred stock warrants and common stock options at
         prices below the public offering price during the twelve month period
         preceding the offering have been included as common stock equivalent
         as if they had been issued as common stock as of July 12, 1995.

    (2)  The weighted average shares outstanding used in the calculation of net
         loss per share do not include common stock equivalents because they
         have the effect of reducing net loss per share.



<TABLE> <S> <C>

<PAGE>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-Q FOR
THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1997 AND IS QUALIFIED IN IT'S ENTIRETY 
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
       
<S>                             <C>
<PERIOD-TYPE>                   9-MOS
<FISCAL-YEAR-END>                          DEC-31-1997
<PERIOD-START>                             JAN-01-1997
<PERIOD-END>                               SEP-30-1997
<CASH>                                      45,288,572
<SECURITIES>                                21,047,462
<RECEIVABLES>                                  320,358
<ALLOWANCES>                                         0
<INVENTORY>                                          0
<CURRENT-ASSETS>                            66,981,727
<PP&E>                                       1,689,761
<DEPRECIATION>                                       0
<TOTAL-ASSETS>                              68,758,389
<CURRENT-LIABILITIES>                        5,333,306
<BONDS>                                              0
                                0
                                          0
<COMMON>                                        19,995
<OTHER-SE>                                  63,061,006
<TOTAL-LIABILITY-AND-EQUITY>                68,758,389
<SALES>                                              0
<TOTAL-REVENUES>                                     0
<CGS>                                                0
<TOTAL-COSTS>                                        0
<OTHER-EXPENSES>                            29,959,088
<LOSS-PROVISION>                                     0
<INTEREST-EXPENSE>                                   0
<INCOME-PRETAX>                           (27,374,905)
<INCOME-TAX>                                         0
<INCOME-CONTINUING>                       (27,374,905)
<DISCONTINUED>                                       0
<EXTRAORDINARY>                                      0
<CHANGES>                                            0
<NET-INCOME>                              (27,374,905)
<EPS-PRIMARY>                                        0
<EPS-DILUTED>                                        0
        

</TABLE>


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