TRIMERIS INC, S-1/A, 1997-08-27

TRIMERIS INC
S-1/A, 1997-08-27
COMMERCIAL PHYSICAL & BIOLOGICAL RESEARCH

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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 27, 1997

REGISTRATION NO. 333-31109

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON D.C. 20549

AMENDMENT NO. 1

FORM S-1

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

TRIMERIS, INC.

(Exact name of registrant as specified in its charter)

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<S> <C> <C>
DELAWARE 8733 56-1808663
(State or other jurisdiction (Primary Standard (I.R.S. Employer
of incorporation or Organization) Industrial Code Number) Identification No.)
</TABLE>

4727 UNIVERSITY DRIVE, SUITE 100
DURHAM, NORTH CAROLINA 27707
(919) 419-6050

(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)

DR. M. ROSS JOHNSON
PRESIDENT, CHIEF EXECUTIVE OFFICER
AND CHIEF SCIENTIFIC OFFICER
4727 UNIVERSITY DRIVE, SUITE 100
DURHAM, NORTH CAROLINA 27707
(919) 419-6050

(Name, address, including zip code, and telephone number,
including area code, of agent for service)

COPIES TO:

<TABLE>
<CAPTION>
COUNSEL TO COMPANY COUNSEL TO UNDERWRITERS
<S> <C> <C>
FRED D. HUTCHISON, ESQUIRE JOHN B. WATKINS, ESQUIRE ALEXANDER D. LYNCH, ESQUIRE
HUTCHISON & MASON PLLC WILMER, CUTLER & PICKERING BROBECK, PHLEGER & HARRISON LLP
4011 WESTCHASE BOULEVARD 2445 M ST., N.W. 1633 BROADWAY
SUITE 400 WASHINGTON, D.C. 20037 47TH FLOOR
RALEIGH, NORTH CAROLINA 27607 (202) 663-6000 NEW YORK, NEW YORK 10019
(919) 829-9600 (212) 581-1600
</TABLE>

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

If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. h
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. h
If this Form is a post-effective amendment filed pursuant to Rule 462(b)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. h
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. h

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.

<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with
the Securities and Exchange Commission. These securities may not be sold
nor may offers to buy be accepted prior to the time the registration
statement becomes effective. This prospectus shall not constitute an
offer to sell or the solicitation of an offer to buy, nor shall there be
any sale of these securities in any jurisdiction in which such offer,
solicitation or sale would be unlawful prior to registration or

qualification under the securities laws of any such jurisdiction.

SUBJECT TO COMPLETION, DATED AUGUST 27, 1997

PROSPECTUS

2,500,000 Shares

[LOGO]

Trimeris, Inc.

Common Stock

All of the 2,500,000 shares of Common Stock offered hereby (the
"Offering") are being sold by Trimeris, Inc., a development stage company with a
limited operating history ("Trimeris" or the "Company"). The Company has
incurred losses since its inception, had an accumulated deficit of approximately
$21.4 million as of June 30, 1997, and expects to incur substantial losses for
the foreseeable future. Prior to this Offering, there has been no public market
for the Common Stock of the Company. It is currently estimated that the initial
public offering price will be between $12.00 and $14.00 per share. See
"Underwriting" for a discussion of the factors to be considered in determining
the initial public offering price. The Company has filed an application to have
the Common Stock approved for quotation on the Nasdaq National Market under the
symbol "TRMS."

THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK. SEE "RISK
FACTORS," BEGINNING ON PAGE 6.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

<TABLE>
<CAPTION>
<S> <C> <C> <C>
Price to Underwriting Discounts Proceeds to
Public and Commissions(1) Company(2)
Per Share............................... $ $ $
Total(3)................................ $ $ $
</TABLE>

1. For information regarding indemnification of the Underwriters, see
"Underwriting."
2. Before deducting expenses of the Offering payable by the Company, estimated
at approximately $800,000.
3. The Company has granted the Underwriters an option, exercisable within 30
days from the date hereof, to purchase up to 375,000 additional shares of
Common Stock on the same terms and conditions as set forth above, solely to
cover over-allotments, if any. If such option is exercised in full, total
Price to Public will be $ , Underwriting Discounts and Commissions will
be $ and Proceeds to the Company will be $ . See "Underwriting."

The shares of Common Stock offered by the Underwriters are subject to prior
sale, receipt and acceptance by them and subject to the right of the
Underwriters to reject any order in whole or in part and to certain other
conditions. It is expected that delivery of such shares will be made through the
offices of UBS Securities LLC, 299 Park Avenue, New York, New York, on or about
, 1997.

UBS Securities Montgomery Securities

, 1997

<PAGE>
[Model for T-20 inhibition of HIV Fusion and
infection of a host cell as more fully described on page 25]

CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK.
SPECIFICALLY, THE UNDERWRITERS MAY OVERALLOT IN CONNECTION WITH THE OFFERING AND
MAY BID FOR AND PURCHASE SHARES OF THE COMMON STOCK IN THE OPEN MARKET. FOR A
DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."

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PROSPECTUS SUMMARY

THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION AND THE FINANCIAL STATEMENTS AND NOTES THERETO APPEARING ELSEWHERE
IN THIS PROSPECTUS, INCLUDING THE INFORMATION UNDER "RISK FACTORS." THIS
PROSPECTUS CONTAINS FORWARD-LOOKING STATEMENTS WHICH INVOLVE RISKS AND
UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS MAY DIFFER SIGNIFICANTLY FROM THE
RESULTS DISCUSSED IN THESE FORWARD-LOOKING STATEMENTS. FACTORS THAT MIGHT CAUSE
SUCH A DIFFERENCE INCLUDE, BUT ARE NOT LIMITED TO, THOSE SET FORTH UNDER "RISK
FACTORS" AND ELSEWHERE IN THIS PROSPECTUS.

THE COMPANY

Trimeris is a biopharmaceutical company engaged in the discovery and
development of novel therapeutic agents that block viral infection by inhibiting
viral fusion with host cells. Viral fusion is a complex process by which viruses
infect host cells. The Company's lead product candidate, T-20, inhibits fusion
of the Human Immunodeficiency Virus-1 ("HIV") with host cells. T-20 is currently
being tested in a Phase I/II clinical trial in HIV-infected patients in the
United States. T-20 and the Company's other product candidates are designed to
inhibit viral fusion, unlike other currently approved therapeutic agents that
target replicating viruses inside infected cells. The Company has developed a
proprietary technology platform in the field of fusion inhibition which is being
applied to the discovery and development of novel products for the treatment of
a variety of viral diseases.

T-20 is a proprietary 36 amino acid synthetic peptide which has
demonstrated significant inhibition of HIV in preclinical testing. Preliminary
review of the data from the Phase I/II clinical trial indicates that no
drug-induced adverse events have been reported and no dose-limiting toxicities
have been observed. T-20 is being administered by intravenous delivery in the
current Phase I/II clinical trial. The Company is preparing to begin a Phase II
clinical trial in HIV-infected patients in the United States that will compare
delivery of a constant therapeutic dose by a continuous, subcutaneous infusion
pump to delivery by subcutaneous injections. The Company believes that delivery
of a continuous therapeutic dose may inhibit viral fusion more effectively than
other delivery mechanisms. After completion of the continuous, subcutaneous
infusion Phase II trial, the Company intends to begin a Phase II pivotal trial
in a larger population of HIV-infected patients who are either resistant to, or
intolerant of, currently approved antiviral therapies. Concurrently with the
start of the pivotal Phase II clinical trial, the Company intends to begin a
trial of T-20 in HIV-infected pediatric patients. In addition, throughout the
T-20 clinical process, the Company intends to work with the United States Food
and Drug Administration (the "FDA") to design and implement a clinical trial
strategy involving the administration of T-20 to HIV-infected patients in
combination with approved HIV antiviral agents.

HIV infection causes Acquired Immunodeficiency Syndrome ("AIDS"), which is
the leading cause of death in the United States and Western Europe of men and
women between the ages of 25 and 44. Currently approved HIV antivirals inhibit
reverse transcriptase ("RT") and protease, two viral enzymes which are required
for HIV replication. RT and protease inhibitors must penetrate HIV-infected host
cells in order to be effective. HIV is prone to mutations that produce
resistance to RT and protease inhibitors. In an effort to overcome drug
resistance, physicians have begun to use RT and protease inhibitors in various
combinations. While combination therapy with RT and protease inhibitors
represents an advance in the treatment of HIV infection, it has not yet proven
to be a cure. Moreover, although these combinations have slowed the emergence of
resistance, new mutant strains have been identified which are resistant to
several of the drugs currently used in combination therapy. Due to the
complexity of the dosing regimens for many combination therapies, which can
include 14-16 pills taken at six to eight specific times during the day, and the
toxic side effects that can result from the use of such drugs, many patients are
unable to, or fail to, follow the recommended dosing regimens. Such
noncompliance leads to a reduction in the effectiveness of such drugs and an
increased opportunity for the development of resistance.

The Company believes that T-20 may offer a new paradigm for the treatment
of HIV. Preclinical testing and early clinical trial results suggest that T-20
is less toxic than currently approved HIV antivirals. The Company believes that
T-20's reduced toxicity is due to its unique extracellular mechanism of action
and its chemical structure. Furthermore, the Company believes that the delivery
of a continuous therapeutic dose of T-20 by subcutaneous infusion will enhance
patient compliance, thereby reducing the likelihood of the development of
resistance.

Through its study of the HIV fusion process, the Company has developed a
proprietary technology platform aimed at discovering antiviral compounds to
treat other diseases. The cornerstone of this platform is the Company's
Computerized Anti-Fusion Searching Technology ("CAST"), a proprietary computer
algorithm which identifies target sequences within certain viral proteins that
have the potential to interact during the fusion process. CAST has enabled the
Company to design product candidates for Respiratory Syncytial Virus ("RSV") and
Human Parainfluenza Virus ("HPIV") fusion inhibition. The

<PAGE>
Company has identified, and filed patent applications disclosing, numerous
discrete peptide sequences, which include potential fusion targets in other
viruses such as hepatitis B and C, influenza and herpes.

T-786 is the Company's lead product candidate for treatment of RSV
infection, which is a significant cause of pediatric bronchiolitis and
pneumonia. T-786 is a proprietary 36 amino acid synthetic peptide which shows
potent, specific and selective inhibition of RSV infection IN VITRO. T-786
significantly reduced the level of viral infection in an animal model.
Preclinical testing of T-786 is currently in progress. Upon successful
completion of these preclinical tests, the Company anticipates that it will
begin clinical trials with T-786 in 1998.

The Company was incorporated under Delaware law as SL-1 Pharmaceuticals,
Inc. on January 7, 1993 and changed its name to Trimeris, Inc. on February 11,
1993. The Company's principal executive office is located at 4727 University
Drive, Durham, North Carolina 27707, and its telephone number is (919) 419-6050.

UNLESS OTHERWISE INDICATED, ALL INFORMATION IN THIS PROSPECTUS (I) ASSUMES
THE UNDERWRITERS' OVER-ALLOTMENT OPTION IS NOT EXERCISED, (II) REFLECTS THE
AUTOMATIC CONVERSION UPON THE COMPLETION OF THIS OFFERING OF ALL OUTSTANDING
SHARES OF PREFERRED STOCK INTO 6,261,615 SHARES OF COMMON STOCK (THE "PREFERRED
STOCK CONVERSION"), AND (III) REFLECTS THE FILING OF A THIRD AMENDED AND
RESTATED CERTIFICATE OF INCORPORATION OF THE COMPANY WHICH, AMONG OTHER THINGS,
WILL AUTHORIZE 10,000,000 SHARES OF UNDESIGNATED PREFERRED STOCK. SEE
"DESCRIPTION OF CAPITAL STOCK," "CAPITALIZATION" AND "UNDERWRITING."

THE COMPANY HAS FILED FOR REGISTRATION OF "TRIMERIS" AND THE COMPANY'S LOGO
AS TRADEMARKS AND SERVICE MARKS OF THE COMPANY. THIS PROSPECTUS ALSO INCLUDES
TRADEMARKS AND TRADE NAMES OF COMPANIES OTHER THAN THE COMPANY.

<PAGE>
THE OFFERING

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<S> <C>
Common Stock Offered.................................. 2,500,000 shares
Common Stock Outstanding after this Offering.......... 9,864,676 shares (1)
Use of Proceeds....................................... To fund increased research and development activities, to fund the
expansion of facilities, to provide working capital and to fund other
general corporate purposes. See "Use of Proceeds."
Proposed Nasdaq National Market Symbol................ TRMS
</TABLE>

SUMMARY FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)

TRIMERIS, INC.
(A DEVELOPMENT STAGE COMPANY)

<TABLE>
<CAPTION>
PERIOD FROM INCEPTION FOR THE CUMULATIVE
(JANUARY 7, 1993) FOR THE SIX MONTHS ENDED FROM INCEPTION
THROUGH YEARS ENDED DECEMBER 31, JUNE 30, (JANUARY 7, 1993)
DECEMBER 31, 1993 1994 1995 1996 1996 1997 TO JUNE 30, 1997
<S> <C> <C> <C> <C> <C> <C> <C>
(UNAUDITED) (UNAUDITED)
STATEMENT OF OPERATIONS DATA:
Revenue....................... $ -- $ -- $ 104 $ 55 $ -- $ 212 $ 371
Research and development
expenses.................... 691 2,747 4,012 5,146 2,278 2,859 15,455
Operating loss................ (1,322) (3,694) (5,428) (6,852) (3,080) (3,433) (20,730)
Other income (expenses)....... 11 (250) (311) (120) (54) (45) (713)
Net loss...................... (1,311) (3,944) (5,739) (6,972) (3,134) (3,478) (21,443)
Pro forma net loss per share
(2) (3)..................... $ (1.48) $ (0.59)
Pro forma weighted average
shares used in computing pro
forma net loss per share (2)
(3)......................... 4,705 5,880
</TABLE>

<TABLE>
<CAPTION>
AS OF JUNE 30, 1997
(UNAUDITED)
PRO PRO FORMA AS
ACTUAL FORMA (3) ADJUSTED (4)
<S> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents............................................................... $ 8,912 $ 8,912 $ 38,337
Working capital......................................................................... 8,019 8,019 37,444
Total assets............................................................................ 10,585 10,585 40,010
Notes payable and capital lease obligations, less current portion....................... 488 488 488
Accumulated deficit..................................................................... (21,443) (21,443) (21,443)
Total stockholders' equity.............................................................. 8,847 8,847 38,272
</TABLE>

(1) Based on the number of shares outstanding as of June 30, 1997. Excludes (i)
260,361 shares of Common Stock reserved for issuance pursuant to stock
options outstanding as of June 30, 1997 and (ii) an aggregate of 56,684
shares of Common Stock issuable upon the exercise of warrants outstanding as
of June 30, 1997. Also excludes an aggregate of 254,188 shares of Common
Stock reserved for future issuance as of June 30, 1997 under the Company's
New Stock Option Plan (the "Stock Option Plan"). See "Management -- Stock
Option Plans," "Description of Capital Stock" and Note 5 of Notes to
Financial Statements.

(2) Computed on the basis described in Note 1 of Notes to Financial Statements.

(3) Pro forma to give effect to the automatic conversion upon the completion of
this Offering of all outstanding shares of the Company's Series A, B, C and
D Preferred Stock, par value $.001 per share (the "Preferred Stock"), into
6,261,615 shares of Common Stock.

(4) Adjusted to give effect to the sale of 2,500,000 shares of Common Stock
offered hereby at an assumed initial public offering price of $13.00 per
share after deducting the underwriting discounts and commissions and
estimated offering expenses payable by the Company. See "Use of Proceeds"
and "Capitalization."

<PAGE>
RISK FACTORS

PROSPECTIVE INVESTORS IN THE SHARES OFFERED HEREBY SHOULD CAREFULLY
CONSIDER THE FOLLOWING RISK FACTORS, IN ADDITION TO THE OTHER INFORMATION
CONTAINED IN THIS PROSPECTUS. THIS PROSPECTUS CONTAINS FORWARD-LOOKING
STATEMENTS WHICH INVOLVE RISKS AND UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS
COULD DIFFER MATERIALLY FROM THOSE ANTICIPATED IN THESE FORWARD-LOOKING
STATEMENTS AS A RESULT OF CERTAIN FACTORS, INCLUDING THOSE SET FORTH IN THE
FOLLOWING RISK FACTORS AND ELSEWHERE IN THIS PROSPECTUS.

DEVELOPMENT STAGE COMPANY. The Company commenced operations in January 1993
and is subject to all of the business risks associated with a biopharmaceutical
company in the early stage of development, including constraints on the
Company's financial, personnel and other resources, and uncertainties regarding
the Company's novel product discovery and development programs. Prospective
investors, therefore, have limited historical financial information about the
Company upon which to base their evaluation of the Company's performance and an
investment in the shares offered hereby. Since its inception, substantially all
of the Company's resources have been dedicated to the development, patenting,
preclinical testing and Phase I/II clinical trials of T-20, the development of
its proprietary technology platform, and research and development and
preclinical testing of other potential product candidates and compounds
discovered by the Company. The Company has yet to generate any revenues from
product sales or royalties, and there can be no assurance that it will be able
to generate any such revenues or royalties in the future. Product candidates and
compounds discovered by the Company and developed through the Company's product
development programs will require significant additional, time-consuming and
costly research and development, preclinical testing and extensive clinical
trials prior to submission of any regulatory application for commercial use. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Overview."

HISTORY OF OPERATING LOSSES; ACCUMULATED DEFICIT; UNCERTAINTY OF FUTURE
PROFITABILITY. The Company has incurred losses since its inception. As of June
30, 1997, the Company's accumulated deficit was approximately $21.4 million.
Such losses have resulted principally from expenses incurred in the Company's
research and development activities associated with the development, patenting,
preclinical testing and Phase I/II clinical trials of T-20, the development of
its proprietary technology platform, research and development and preclinical
testing of other potential product candidates and compounds discovered by the
Company, and from general and administrative expenses. The Company expects to
incur substantial losses for the foreseeable future and expects losses to
increase as the Company's research and development, preclinical testing and
clinical trial efforts expand. The amount and timing of the Company's operating
expenses will depend on several factors, including the status of the Company's
research and development activities, product candidate and compound discovery
and development efforts, including preclinical testing and clinical trials, the
timing of regulatory actions, the costs involved in preparing, filing,
prosecuting, maintaining, protecting and enforcing patent claims and other
proprietary rights, the ability of the Company to establish, internally or
through relationships with third parties, manufacturing, sales, marketing and
distribution capabilities, technological and other changes in the competitive
landscape, changes in the Company's existing research and development
relationships and strategic alliances, evaluation of the commercial viability of
potential product candidates and other factors, many of which are outside of the
Company's control. As a result, the Company believes that period-to-period
comparisons of financial results in the future are not necessarily meaningful
and results of operations in prior periods should not be relied upon as an
indication of future performance. Any deviations in results of operations from
levels expected by securities analysts and investors could have a material
adverse effect on the market price of the Common Stock. The Company's ability to
achieve profitability will depend, in part, upon its or its collaborative
partners' ability to successfully develop and obtain regulatory approval for
T-20 and other product candidates and compounds discovered by the Company, and
to develop the capacity, either internally or through relationships with third
parties, to manufacture, sell, market and distribute approved products, if any.
There can be no assurance that the Company will ever generate significant
revenues or achieve profitable operations. See "Use of Proceeds," "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Overview" and "Business -- Programs and Product Candidates Under
Development."

DEPENDENCE ON A SINGLE PRODUCT CANDIDATE. T-20 is the only product
candidate developed by the Company which has been tested in humans. The
Company's success will depend, in significant part, upon the ability of the
Company to establish the safety and effectiveness of T-20 in humans, to obtain
the requisite regulatory approvals for the commercialization of T-20, to
establish relationships for the commercial-scale production of T-20 at
acceptable cost and with appropriate quality, to successfully market T-20, and
to achieve market acceptance of T-20 by the medical community, including health
care providers and third-party payors. Failure of the Company or its
collaborative partners to successfully develop and commercialize T-20 would have
a material adverse effect on the Company's business, financial condition and
results of operations. See "Business -- Programs and Product Candidates Under
Development."

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TECHNOLOGICAL UNCERTAINTY. The Company's product development programs are
based upon a novel technology designed to facilitate the discovery of product
candidates and compounds which are designed to treat viral infection through the
inhibition of viral fusion. The Company is not aware of any other approved
antiviral pharmaceutical products which target the inhibition of viral fusion.
Accordingly, product development utilizing the Company's novel mechanism of
action involves a high degree of risk, is highly uncertain, and could result in
unanticipated developments, clinical or regulatory delays, unexpected adverse
side effects or inadequate therapeutic effectiveness, any of which could slow or
suspend the Company's product development efforts which could have a material
adverse effect on the Company's business, financial condition and results of
operations. There can be no assurance that the Company's technologies will lead
to the discovery and development of any commercially viable products, that the
Company's research or product development efforts as to any particular product
candidate or compound will be successfully completed, that any such product
candidates or compounds will be proven to be safe and effective, or that
required regulatory approvals will be obtained. The Company's development
programs are subject to the risks inherent in the development of new products
using new technologies and approaches. There can be no assurance that unforeseen
problems will not develop with these technologies or applications, that the
Company will be able to address successfully technological challenges it
encounters in its research and development programs or that commercially
feasible product candidates or compounds will ultimately be developed by the
Company. See "Business -- Programs and Product Candidates Under Development" and
" -- Clinical Development Programs."

UNCERTAINTIES RELATED TO CLINICAL TRIALS AND CLINICAL TRIAL STRATEGY.
Before obtaining required regulatory approvals for the commercial sale of any of
its product candidates or compounds, the Company must demonstrate through
preclinical testing and clinical trials that each product candidate or compound
is safe and effective for use in humans for each target indication. To date, the
Company has conducted initial preclinical testing of certain of its product
candidates and is conducting a Phase I/II clinical trial of T-20. After
completion of the Phase I/II clinical trial, the Company intends to conduct a
Phase II clinical trial and a pivotal clinical trial of T-20. These clinical
trials will involve a relatively small patient population. No assurance can be
given that the results of early clinical trials will support the commencement of
further clinical trials of T-20, that the results of the clinical trials will
support the Company's applications for regulatory approval, or that regulatory
authorities will not require the Company to conduct additional clinical trials
either prior to, or after, regulatory approval is obtained. The Company may
find, at any stage of this complex process, that potential product candidates or
compounds that appeared promising in preclinical testing and early clinical
trials do not demonstrate safety or effectiveness on a larger scale in advanced
clinical trials or do not receive the requisite regulatory approvals.
Accordingly, any product development program undertaken by the Company may be
curtailed, redirected or eliminated at any time, which could result in delays in
conducting further preclinical testing and clinical trials, in unexpected
adverse events in further preclinical testing and clinical trials, and in
additional development expenses. Furthermore, administration of the Company's
potential product candidates or compounds may prove to have undesirable or
unintended side effects in humans. The occurrence of side effects could
interrupt, delay or halt clinical trials of each such product candidate or
compound and could delay or prevent its approval by the FDA or foreign
regulatory authorities for any and all targeted indications. The Company or the
FDA may suspend or terminate clinical trials at any time if it is believed that
the trial participants are being exposed to unacceptable health risks. In
addition, this Prospectus reflects the Company's estimates regarding the timing
of future preclinical testing and clinical trials. Such preclinical testing and
clinical trials may be delayed or cancelled for a number of reasons, including
the receipt of unanticipated, adverse or ambiguous results from preclinical
testing or clinical trials, the demonstration of undesirable or unintended side
effects, the inability to locate, recruit and qualify sufficient numbers of
patients, lack of funding, the inability to locate or recruit scientists to
undertake or complete planned preclinical testing or clinical trials, the
redesign of the Company's preclinical testing or clinical trial programs, the
inability to manufacture or acquire sufficient quantities of the particular
product candidate or any other components required for preclinical testing or
clinical trials, regulatory delays or other regulatory actions, changes in focus
of the Company's or its collaborators' development efforts, and the disclosure
of clinical trial results by competitors. Accordingly, no assurance can be given
that the Company's preclinical testing or clinical trials will commence on their
target dates, or at all. Delays in such testing and trials could delay
regulatory approval for the Company's product candidates, delay
commercialization of the Company's product candidates, increase operating
expenses, result in the expenditure of additional capital, cause the diversion
of management time and attention, or create adverse market perception about the
Company and its product candidates, any of which could have a material adverse
effect on the Company's business, financial condition and results of operations.

The rate of completion of the Company's clinical trials will depend upon,
among other factors, obtaining or manufacturing adequate amounts of the
Company's product candidates from third-party manufacturers and sufficient
patient enrollment. See "Business -- Lack of Manufacturing Capabilities" for a
description of certain risks associated with the manufacturing of the Company's
product candidates and compounds. 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

<PAGE>
clinical trial. Delays in planned patient enrollment may result in increased
costs or delays or both, which could have a material adverse effect on the
Company's business, financial condition and results of operations. See
"Business -- Programs and Product Candidates Under Development" and
" -- Government Regulation."

DEPENDENCE ON COLLABORATIONS AND LICENSES WITH OTHERS. The Company intends
to consider entering into collaborative and license arrangements with
collaborative partners, licensees and third parties to seek regulatory approval
of and to manufacture and commercialize certain of its existing and potential
product candidates and compounds. Accordingly, the Company's success will
depend, in part, upon the subsequent success of such third parties in performing
preclinical testing and clinical trials, obtaining the requisite regulatory
approvals, scaling up manufacturing, successfully commercializing the licensed
product candidates or compounds and otherwise performing their obligations.
There can be no assurance that the Company will be able to maintain its existing
arrangements or enter into acceptable collaborative and license arrangements in
the future on acceptable terms, if at all, that such arrangements will be
successful, that the parties with which the Company has or may establish
arrangements will perform their obligations under such arrangements, or that
potential collaborators will not compete with the Company by seeking alternative
means of developing therapeutics for the diseases targeted by the Company. There
can also be no assurance that the Company's existing or any future arrangements
will lead to the development of product candidates or compounds with commercial
potential, that the Company will be able to obtain proprietary rights or
licenses for the proprietary rights with respect to any technology or product
candidates or compounds developed in connection with these arrangements, or that
the Company will be able to ensure the confidentiality of any proprietary rights
and information developed in such arrangements or prevent the public disclosure
thereof. The Company currently has a license from Duke University, and in the
future may require additional licenses from these or other parties, to
effectively develop potential product candidates and compounds. Pursuant to a
license agreement with Duke University (the "Duke License"), the Company has
obtained an exclusive, worldwide license to existing and certain future
technologies in the field of antiviral therapeutics developed by several
researchers at Duke University for the life of each particular patent filed in
connection with such technologies. Unless the Duke License is renewed, the
Company will not be entitled to any additional technologies developed after 2000
or after any earlier termination. None of the technologies licensed by the
Company from Duke University is the subject of a separate individual license
agreement. Rather, the Company's rights to such technologies are licensed solely
pursuant to the Duke License. The early termination of the Duke License due to
the Company's failure to develop the licensed technologies or the failure of the
Company to renew the Duke License on acceptable terms, or at all, could have a
material adverse effect on the Company's business, financial condition and
results of operations. Pursuant to a Cooperative and Strategic Alliance
Agreement (the "MiniMed Agreement"), the Company and MiniMed Inc. ("MiniMed")
have agreed to jointly design, develop and implement a system for the continual
delivery of T-20 utilizing the MiniMed continuous infusion pump. The failure of
the Company and MiniMed to achieve their collective objectives could have a
material adverse effect on the Company's business, financial condition and
results of operations. In addition, the Company has received two Small Business
Innovation Research ("SBIR") grants and entered into an investigative contract
with a third party to identify certain pharmaceutical compounds. There can be no
assurance that the funding provided by such SBIR grants will be sufficient to
complete the studies contemplated by such programs or that the Company will
receive any additional future grants or funding under any of these programs.
There can be no assurance that such license or agreements can be maintained or
that additional licenses can be obtained on acceptable terms, if at all, or will
be renewable if obtained, or that the patents underlying such licenses, if any,
will be valid and enforceable, or that the proprietary nature of the patented
technology underlying such licenses will remain proprietary. See
"Business -- License and Collaborative Agreements."

FUTURE CAPITAL NEEDS; UNCERTAINTY OF ADDITIONAL FUNDING. The Company has
experienced negative cash flows from operations since its inception and does not
anticipate generating sufficient positive cash flows to fund its operations in
the foreseeable future. The Company has expended, and expects to continue to
expend in the future, substantial funds to pursue its product candidate and
compound discovery and development efforts, including expenditures for continued
clinical trials of T-20, research and development and preclinical testing of
other potential product candidates and compounds discovered by the Company and
the development of its proprietary technology platform. The Company expects that
its existing capital resources, together with the net proceeds of this Offering
and the interest earned thereon, will be adequate to fund its capital
requirements through 1998. However, the Company's future capital requirements
and the adequacy of available funds will depend on many factors, including the
results of the clinical trials relating to T-20, the progress and scope of the
Company's product development programs, the magnitude of these programs, the
results of preclinical testing and clinical trials, the need for additional
facilities based on the results of these clinical trials and other product
development programs, changes in the focus and direction of the Company's
product development programs, the costs involved in preparing, filing,
prosecuting, maintaining, protecting and enforcing patent claims and other
intellectual property rights, competitive factors and technological advances,
the cost, timing and outcome of regulatory reviews, changes in the requirements
of the FDA, administrative and legal expenses, evaluation of the commercial
viability of potential product candidates and compounds, the establishment of

<PAGE>
capacity, either internally or through the establishment of relationships with
third parties, for manufacturing, sales, marketing and distribution functions
and other factors, many of which are outside of the Company's control. Thus,
there can be no assurance that the net proceeds of this Offering, together with
the interest earned thereon, will be sufficient to fund the Company's capital
requirements during the period discussed above. The Company believes that
substantial additional funds will be required to continue to fund its operations
and that the Company will be required to obtain additional funds through equity
or debt financings or licenses, agreements or other arrangements with partners
and others, or from other sources. The terms of any such equity financings may
be dilutive to stockholders, and the terms of any debt financings may contain
restrictive covenants which limit the Company's ability to pursue certain
courses of action. There can be no assurance that such funds will be available
to the Company on acceptable terms, if at all, or that any such financings will
be adequate to meet the Company's future capital requirements. If adequate funds
are not available, the Company may be required to delay, scale-back or eliminate
certain aspects of its preclinical testing, clinical trials and research and
development programs or attempt to obtain funds through arrangements with
collaborative partners or others that may require the Company to relinquish
rights to certain of its technologies or product candidates or compounds, which
could have a material adverse effect on the Company's business, financial
condition and results of operations. See "Use of Proceeds" and "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."

UNCERTAINTY REGARDING PATENTS AND PROPRIETARY RIGHTS. The Company's success
will depend, in part, on its ability, and the ability of its collaborators or
licensors, to obtain protection for its products and technologies under United
States and foreign patent laws, to preserve its trade secrets, and to operate
without infringing the proprietary rights of third parties. Because of the
substantial length of time and expense associated with bringing new products
through development to the marketplace, the pharmaceutical and biotechnology
industries place considerable importance on obtaining, and maintaining, patent
and trade secret protection for new technologies, products and processes.

The Company has obtained rights to certain patents and patent applications
and may, in the future, seek rights from third parties to additional patents and
patent applications. There can be no assurance that patent applications relating
to the Company's potential products or technologies will result in patents being
issued, that any issued patents will afford adequate protection to the Company,
or that such patents will not be challenged, invalidated, infringed or
circumvented. Furthermore, there can be no assurance that others have not
developed, or will not develop, similar products or technologies that will
compete with those of the Company without infringing upon the Company's
intellectual property rights.

Legal standards relating to the scope of claims and the validity of patents
in the biopharmaceutical industry are uncertain and still evolving, and no
assurance can be given as to the degree of protection that will be afforded any
patents issued to, or licensed by, the Company. There can be no assurance that,
if challenged by others in litigation, any patents assigned to or licensed by
the Company, will not be found invalid. Furthermore, there can be no assurance
that the Company's activities would not infringe patents owned by others.
Defense and prosecution of patent matters can be expensive and time-consuming
and, regardless of whether the outcome is favorable to the Company, can result
in the diversion of substantial financial, management and other resources. An
adverse outcome could subject the Company to significant liability to third
parties, require the Company to obtain licenses from third parties, or require
the Company to cease any related research and development activities and product
sales. No assurance can be given that any licenses required under any such
patents or proprietary rights would be made available on terms acceptable to the
Company, if at all. Moreover, the laws of certain countries may not protect the
Company's proprietary rights to the same extent as U.S. law.

The Company also relies on trade secrets, know-how and other proprietary
information, which it seeks to protect, in part, through the use of
confidentiality agreements with employees, consultants, advisors, and others.
There can be no assurance that such agreements will provide adequate protection
for the Company's trade secrets, know-how, or other proprietary information in
the event of any unauthorized use or disclosure, that employees of the Company,
consultants, advisors or others will maintain the confidentiality of such trade
secrets or proprietary information, or that the trade secrets or proprietary
know-how of the Company will not otherwise become known, or be independently
developed by, competitors.

In January 1997, the United States Patent and Trademark Office (the
"USPTO") instituted an interference proceeding between an issued patent licensed
by the Company from Duke University and a pending patent application owned by a
third party. An interference proceeding is an action, in the USPTO, to determine
which, of several parties, is entitled to a patent. An interference proceeding
may be instituted when the USPTO believes that a pending patent application and
an issued patent claim the same patentable subject matter. The Company believes
that no interference-in-fact exists, i.e., that the parties to the interference
are not claiming the same patentable invention, and, through its licensor, the
Company is taking all reasonable action to have the interference proceeding
dismissed. However, no assurance can be given that the interference proceeding
will be dismissed. Furthermore, no assurance can be given that, should the
interference proceeding continue, as between

<PAGE>

the two parties to the interference, the Company's licensor will be found to be
the first inventor of the invention which is declared to be the subject matter
of the interference proceeding. Failure of the Company's licensor to prevail in
the interference proceeding and any loss of the involved patent rights could
have a material adverse effect on the Company's business, financial condition
and results of operations. See "Business -- Patents, Proprietary Technology and
Trade Secrets."

EXTENSIVE GOVERNMENT REGULATION; NO ASSURANCE OF REGULATORY APPROVAL. Human
pharmaceutical products are subject to lengthy and rigorous preclinical testing
and clinical trials and other extensive, costly and time-consuming procedures
mandated by the FDA and foreign regulatory authorities. The regulatory approval
process, which includes the establishment of the safety and effectiveness of
each product candidate and compound for each target indication and confirmation
by the FDA that good laboratory, clinical and manufacturing practices were
maintained during testing and manufacturing, typically takes a number of years,
varying based upon the type, complexity and novelty of the pharmaceutical
product. This process requires the expenditure of substantial resources and
gives larger companies with greater financial resources a competitive advantage
over the Company. To date, no product candidate or compound being evaluated by
the Company has been submitted for approval by the FDA or any other regulatory
authority for commercialization, and there can be no assurance that any such
product candidate or compound will ever be approved for commercialization or
that the Company will be able to obtain the labeling claims desired for its
product candidates or compounds. There can be no assurance that submission to
the FDA of a request for authorization to conduct clinical trials on an
investigational drug will be approved on a trial basis, if at all. 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 NDA will be approved by the FDA. The approval process is affected by a
number of factors, including the severity of the targeted indications, the
availability of alternative treatments and the risks and benefits demonstrated
in the clinical trials. The FDA may reject an NDA if applicable regulatory
criteria are not satisfied, or may require additional clinical trials or
information with respect to the product candidate or compound. Even if FDA
approval is obtained, further clinical trials, including post-market trials, may
be required in order to provide additional data on safety and will be required
in order to obtain approval for the use of a product as treatment for clinical
indications other than those for which the product was initially approved. The
FDA will also require post-market reporting and may require surveillance
programs to monitor the side effects of any approved products. Results of
post-market programs may limit the further marketing, manufacturing process or
labeling, and an NDA supplement may be required to be submitted to the FDA. Any
failure of the Company to successfully complete its clinical trials and obtain
approvals of corresponding NDAs would have a material adverse effect on the
Company's business, financial condition and results of operations. The Company
is and will continue to be dependent upon the laboratories conducting its
preclinical testing and clinical trials to maintain both good laboratory and
good clinical practices, and, if any of the Company's product candidates or
compounds obtain the requisite regulatory approvals, the Company will be
dependent upon any third-party manufacturers of its products to maintain
compliance with the FDA's good manufacturing practice ("GMP") requirements.
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 will require the expenditure of substantial resources by the
Company. In addition, these requirements and processes vary widely from country
to country. The time required for completing preclinical testing and clinical
trials is uncertain, and the FDA approval process is unpredictable and
uncertain, and no assurance can be given that necessary approvals will be
granted on a timely basis, or at all. The Company may decide to replace a
product candidate or compound in preclinical testing and/or clinical trials with
a modified product candidate or compound, 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 legislation, administrative action or FDA policy during
the period of product development and FDA review. Similar delays or rejections
may be encountered in other countries.

While certain of the Company's product candidates and compounds, including
T-20, have been and will continue to be designed to treat serious or
life-threatening illnesses, such product candidates and compounds may not
qualify for accelerated development and/or approval under FDA regulations and,
even if some of the Company's product candidates or compounds qualify for
accelerated development and/or approval, they may not be approved for marketing
on an accelerated basis, or at all. There can be no assurance that, even after
substantial time and expenditures, any of the Company's product candidates or
compounds under development will receive commercialization approval in any
country on a timely basis, or at all. If the Company is unable to demonstrate
the safety and effectiveness of its product candidates and compounds to the
satisfaction of the FDA or foreign regulatory authorities, the Company will be
unable to commercialize its product candidates and compounds and the Company's
business, financial condition and results of operations would be materially and
adversely affected.

<PAGE>
Furthermore, even if regulatory approval of a product candidate or compound is
obtained, the approval may entail limitations on the indicated uses for which
the product candidate or compound may be marketed. A marketed product or
compound, 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, compound, manufacturer or facility
may result in restrictions on such product, compound, manufacturer or facility,
including withdrawal of the product or compound from the market. The failure to
comply with applicable regulatory requirements can, among other things, result
in fines, injunctions, civil penalties, total or partial suspension of
regulatory approvals, refusal to approve pending applications, refusal to permit
exports from the United States, recalls or seizures of products or compounds,
operating and production 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 product candidates
or compounds.

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

In April 1997, the Company and MiniMed entered into the MiniMed Agreement
pursuant to which the parties have agreed to jointly design, develop and
implement a system for the delivery of T-20 utilizing the MiniMed continuous
infusion pump. There can be no assurance that the FDA will approve, on a timely
basis, if at all, the delivery of T-20 utilizing the MiniMed continuous infusion
pump on a timely basis, if at all. The failure of the Company and MiniMed to
collectively develop a continual T-20 delivery system which receives FDA
approval on a timely basis could have a material adverse effect on the Company's
business, financial condition and results of operations.

The Company and its existing and potential future collaborative partners
are also subject to various federal, state and local laws and regulations
relating to safe working conditions, laboratory and manufacturing practices, the
experimental use of animals and the use and disposal of hazardous or potentially
hazardous substances, including radioactive compounds and infectious disease
agents, used in connection with the Company's product development programs.
Compliance with such laws, regulations and requirements may be costly and
time-consuming and the failure to maintain such compliance by the Company or its
existing and future collaborative partners could have a material adverse effect
on the Company's business, financial condition and results of operations.

INTENSE COMPETITION. The Company is engaged in segments of the
biopharmaceutical industry, including the treatment of HIV, that are intensely
competitive and rapidly changing. If successfully developed and approved, the
product candidates and compounds that the Company is currently developing will
compete with numerous existing therapies. For example, 11 drugs are currently
approved for the treatment of HIV. In addition, a number of companies are
pursuing the development of novel pharmaceutical products that target the same
diseases that the Company is targeting, and some companies, including several
multinational pharmaceutical companies, are simultaneously marketing several
different drugs and may therefore be able to market their own combination drug
therapies. 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 for the treatment of HIV developed by the Company's competitors,
including Glaxo Wellcome plc ("Glaxo"), Merck & Co., Inc. ("Merck") and Abbott
Laboratories, Inc. ("Abbott"), will not be more effective, or more effectively
marketed and sold, than T-20, should it be successfully developed and receive
regulatory approval, or any other therapeutic for HIV that may be developed by
the Company. Competitive products or the development by others of a cure or new
treatment methods may render the Company's technologies and products and
compounds obsolete, noncompetitive or uneconomical prior to the Company's
recovery of development or

<PAGE>
commercialization expenses incurred with respect to any such technologies or
products or compounds. 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, sell, market and distribute 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.

New developments in areas in which the Company is conducting its research
and development are expected to continue at a rapid pace in both industry and
academia. If the Company's product candidates and compounds are successfully
developed and approved, the Company will face competition based on the safety
and effectiveness of its products and compounds, the timing and scope of
regulatory approvals, availability of manufacturing, sales, marketing and
distribution capabilities, reimbursement coverage, price and patent position.
There can be no assurance that the Company's competitors will not develop more
effective or more affordable technologies 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's business, financial condition and results of
operations. See "Business -- Competition."

LACK OF MANUFACTURING CAPABILITIES. The Company has no experience in
manufacturing pharmaceuticals and has no commercial manufacturing capacity. The
Company has established relationships and intends to establish additional
relationships with third-party manufacturers for the production of quantities of
its product candidates or compounds sufficient to conduct its planned
preclinical testing and clinical trials and the commercial production of any
approved products or compounds. There can be no assurance that the Company will
be able to retain or establish relationships with third-party manufacturers on
acceptable terms, if at all, or that such third-party manufacturers will be able
to manufacture products in commercial quantities under GMP requirements on a
cost-effective basis. The Company's anticipated peptide-based therapeutics are
difficult and expensive to manufacture using existing technologies. The Company,
and its third-party manufacturers, are currently using solid-phase sequential
peptide synthesis to manufacture T-20. This chemical methodology is inherently
inefficient and complex. Due to technical limitations, solid-phase sequential
peptide synthesis is the most expensive way to chemically assemble the Company's
current peptide product candidates, including T-20. There can be no assurance
that the Company or its third-party manufacturers will be able to manufacture
T-20 on a cost-effective basis or that the Company will be successful in its
efforts to develop an alternative, more efficient manufacturing method for T-20
or any of its other peptide product candidates. The Company's dependence upon
third parties for the manufacture of its products, product candidates and
compounds may materially and adversely affect the Company's profit margins and
its ability to develop and commercialize product candidates, products and
compounds 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, product candidates or compounds or
that third-party manufacturers will maintain the necessary governmental licenses
and approvals to continue manufacturing the Company's products, product
candidates or compounds. Any failure to maintain existing or establish new
relationships with third parties for the Company's manufacturing requirements on
a timely basis and on acceptable terms would have a material adverse effect on
the Company's business, financial condition and results of operations. See
"Business -- Manufacturing."

LACK OF SALES, MARKETING AND DISTRIBUTION CAPABILITIES. The Company has no
experience in sales, marketing or distribution of pharmaceuticals and currently
has no personnel employed in any such capacities. Some therapeutics for HIV can
be marketed to a concentrated group of physicians in a relatively narrow
geographic scope. The Company may consider developing internal sales, marketing
and distribution capabilities for T-20, should it be successfully developed and
receive regulatory approval. For the remainder of the Company's product
candidates and compounds, should they be successfully developed and receive
regulatory approval, the Company may rely on marketing partners or other
arrangements with third parties which have established distribution systems and
direct sales forces for the sales, marketing, and distribution of such products
and compounds. In the event that the Company is unable to reach agreement with
one or more marketing partners to market these other products and compounds, the
Company would be required to develop internal sales, marketing and distribution
capabilities for such products and compounds. There can be no assurance that the
Company will be able to establish sales, marketing or distribution capabilities
or make arrangements with third parties to perform such activities on acceptable
terms,

<PAGE>
if at all, or that any internal capabilities or third-party arrangements will be
cost-effective. The failure to establish such capabilities would have a material
adverse effect on the Company's business, financial condition and results of
operations.

In addition, any third parties with which the Company establishes sales,
marketing or distribution arrangements may have significant control over
important aspects of the commercialization of the Company's products and
compounds, including market identification, marketing methods, pricing,
composition of sales force and promotional activities. For example, the MiniMed
Agreement contemplates that MiniMed will participate in the sales, marketing and
distribution of any products jointly developed by the parties. There can be no
assurance that the Company will be able to control the amount and timing of
resources that MiniMed or any other third party may devote to the Company's
products or compounds 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 products. See "Business -- Sales, Marketing and Distribution."

UNCERTAINTY OF MARKET ACCEPTANCE. The Company's success will depend upon
the acceptance by the medical community, including health care providers and
third-party payors, of the Company's antifusion technology as a safe and
effective means of treating viral infection. The Company's success will
additionally be dependent upon the acceptance by the medical community,
including health care providers and third-party payors, of any products or
compounds developed by the Company. The degree of market acceptance will depend
upon a number of factors, including the establishment and demonstration in
clinical trials of the safety and effectiveness of the Company's products and
compounds, the receipt and scope of regulatory approvals, the demonstration of
the potential advantages of the Company's products and compounds over existing
treatment methods, and the reimbursement policies of government and third-party
payors with respect to antiviral therapeutics based upon blocking viral fusion.
Moreover, companies that market and sell HIV antivirals and other HIV-related
therapeutics have from time to time been subject to protests and boycotts by
patient advocacy and activist groups. These protests and boycotts have focused
on, among other things, availability of such therapeutics and pricing concerns.
Market acceptance of such therapeutics, including any products or compounds that
the Company may develop, will be dependent, in part, on the continued support by
such groups. There can be no assurance that the Company's products or compounds
will achieve significant market acceptance on a timely basis, or at all. Failure
of some or all of the Company's products, if successfully developed, to achieve
significant market acceptance would have a material adverse effect on the
Company's business, financial condition and results of operations.

DEPENDENCE ON THIRD PARTIES FOR CLINICAL TRIALS. The Company has engaged,
and intends to continue to engage, third-party contract research organizations
("CROs") to perform certain functions in connection with the development of the
Company's product candidates and compounds. The Company intends to design
clinical trials, but have CROs conduct the clinical trials, and the Company will
rely on the CROs to perform many important aspects of the clinical trials. As a
result, these aspects of the Company's product development programs will be
outside the direct control of the Company. There can be no assurance that the
CROs or other third parties will perform all of their obligations under their
arrangements with the Company. In addition, there can be no assurance that any
such arrangements will be renewed or any new arrangements will be available on
acceptable terms, if at all, or that any such arrangements, if entered into,
will be successful. In the event that the CROs do not perform clinical trials in
a satisfactory manner or breach their obligations to the Company, the
commercialization of any product candidate or compound may be delayed or
precluded, which could have a material adverse effect on the Company's business,
financial condition and results of operations.

UNCERTAINTY OF THIRD-PARTY REIMBURSEMENT AND HEALTH CARE REFORM MEASURES.
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 agencies and private insurance plans.
Third-party payors are increasingly challenging the prices charged for medical
products and services in an effort to promote cost containment measures and
alternative health care delivery systems and they may mandate predetermined
discounts from list prices. If the Company succeeds in bringing one or more
products or compounds to the market, there can be no assurance that these
products or compounds will be considered cost-effective or that reimbursement to
the consumer will be available or will be sufficient to allow the Company or its
potential collaborative partners to sell the Company's products or compounds on
a competitive basis. The business and financial condition of pharmaceutical
companies will continue to be affected by economic, political and regulatory
influences, including 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. Because of the high cost of the treatment of
AIDS or HIV using combination therapy, many state legislatures are reassessing
reimbursement policies for such therapy. In addition, an increasing emphasis on
managed care in the United States to reduce the overall costs of health care 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

<PAGE>
managed care efforts may have, the announcement and/or adoption of such
proposals or efforts could have a material adverse effect on the Company's
business, financial condition and results of operations. See "Business -- Third
Party Reimbursement and Health Care Reform Measures."

HAZARDOUS MATERIALS. The Company's product development programs involve the
controlled use of hazardous materials, chemicals, viruses and various
radioactive compounds, including Class IV type hazardous materials. 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. The Company may incur substantial additional costs to
comply with environmental regulations if the Company develops manufacturing
capacity.

ABSENCE OF PRODUCT LIABILITY INSURANCE; INSURANCE RISKS. The Company's
business will expose it to potential product liability risks that are inherent
in the testing, manufacturing and marketing of pharmaceutical products. There
can be no assurance that product liability claims will not be asserted against
the Company. In addition, the use of pharmaceutical products that may be
developed by the Company's potential collaborators in clinical trials and the
subsequent sale of products by the Company or its potential collaborators may
cause the Company to bear a portion of those risks. A successful product
liability claim or series of claims brought against the Company could have a
material adverse effect on the Company's business, financial condition and
results of operations. The Company does not currently have any product liability
insurance relating to clinical trials or any products or compounds it may
develop and there can be no assurance that the Company will be able to obtain or
maintain adequate product liability insurance on acceptable terms, if at all, or
that such insurance will provide adequate coverage against potential
liabilities. Furthermore, there can be no assurance that any collaborators or
licensees of the Company will agree to indemnify the Company, be sufficiently
insured, or have a net worth sufficient to satisfy any product liability claims.
Claims or losses in excess of any product liability insurance coverage that may
be obtained by the Company could have a material adverse effect on the Company's
business, financial condition and results of operations.

NEED TO ATTRACT AND RETAIN KEY OFFICERS, EMPLOYEES AND CONSULTANTS. The
Company is highly dependent upon the efforts of the principal members of its
scientific and management staff. The loss of the services of one or more members
of the Company's scientific or management staff could significantly delay or
prevent the achievement of the Company's research, development or business
objectives and could have a material adverse effect on the Company's business,
financial condition and results of operations. At present, the Company only has
individual employment agreements with Dr. Johnson, the Company's President,
Chief Executive Officer and Chief Scientific Officer, and Mr. Megaro, the
Company's Chief Operating Officer, Chief Financial Officer, Executive Vice
President and Secretary. In addition, the Company relies on consultants and
advisors, including the members of its Scientific Advisory Board, to assist the
Company in formulating its research and development strategy. The loss of the
services of certain members of the Company's Scientific Advisory Board or
certain consultants could materially and adversely affect the Company to the
extent that the Company is pursuing research or development in areas of such
scientific advisor's or consultant's expertise. Due to the specialized
scientific nature of the Company's business, the Company is also highly
dependent upon its ability to attract and retain qualified scientific, technical
and key management personnel. There is intense competition for qualified
personnel in the areas of the Company's activities by academic institutions,
biotechnology companies and pharmaceutical companies and there can be no
assurance that the Company will be able to continue to attract and retain the
qualified personnel necessary for the development of its existing business and
its expansion into areas and activities requiring additional expertise. The loss
of, or failure to recruit, scientific, technical, and managerial personnel could
have a material adverse effect on the Company's business, financial condition
and results of operations.

The Company's scientific advisors and consultants may be employed by or
have consulting agreements with entities other than the Company, some of which
may compete with the Company. To the extent that members of the Company's
Scientific Advisory Board or the consultants have consulting arrangements with
or become employed by any competitor of the Company, the Company's business,
financial condition or results of operations could be materially and adversely
affected. Under certain circumstances, inventions or processes independently
discovered by the scientific advisors or the consultants will remain the
property of such persons or their employers. In addition, the institutions with
which the scientific advisors and the consultants are affiliated may make
available the research services of their scientific and other skilled personnel,
including the scientific advisors and the consultants, to competitors of the
Company pursuant to sponsored research agreements. Under such sponsored research
agreements, such institutions may be obligated to assign or license to a
competitor of the Company patents and other proprietary information that may
result from research sponsored by an entity other than the Company, including
research performed by a scientific advisor or a consultant for a competitor of
the Company.

<PAGE>
The Company requires all employees, consultants and certain of its
contractors to enter into confidentiality agreements that prohibit the
disclosure of confidential information to anyone outside the Company and require
disclosure and assignment to the Company of their ideas, developments,
discoveries or inventions developed during the course of their service to the
Company. However, no assurance can be given that competitors of the Company will
not gain access to trade secrets and other proprietary information developed by
the Company and disclosed to the scientific advisors and the consultants. See
"Business -- Human Resources" " -- Scientific Advisory Board" and "Management."

SHARES ELIGIBLE FOR FUTURE SALE. Sales of substantial amounts of Common
Stock (including shares issued upon the exercise of outstanding options and
warrants) in the public market after this Offering or the prospect of such sales
could materially and adversely affect the market price of the Common Stock and
may have a material adverse effect on the Company's ability to raise any
necessary capital to fund its future operations. Upon completion of this
Offering, the Company will have 9,880,325 shares of Common Stock outstanding
(assuming no exercise of options and warrants outstanding as of August 27,
1997). Of these shares, the 2,500,000 shares offered hereby will be freely
tradeable without restrictions or further registration under the Securities Act
of 1933, as amended (the "Securities Act"), except that any shares held by
"affiliates" of the Company within the meaning of the Securities Act will be
subject to the resale limitations of Rule 144 promulgated under the Securities
Act ("Rule 144"). The remaining 7,380,325 outstanding shares are "restricted"
securities that may be sold only if registered under the Securities Act, or sold
in accordance with an applicable exemption from registration, such as Rule 144.
Rule 144 imposes a holding period with respect to securities purchased directly
from an issuer or an "affiliate" of an issuer.

The officers and directors of the Company and other holders of Common Stock
who together hold 7,368,950 shares of Common Stock have agreed not to sell,
offer, make any short sale or otherwise dispose of or enter into any contract,
arrangement or commitment to sell or otherwise dispose of any Common Stock
without the prior written consent of UBS Securities LLC for a period of 180 days
from the date of this Prospectus (the "Lock-up Agreements"). Approximately
231,117 shares of Common Stock will be eligible for resale in the public market
without restriction in reliance on Rule 144(k) immediately following the
completion of this Offering, 225,944 shares of which are subject to the Lock-up
Agreements. An additional 769,238 (763,036 shares of which are subject to the
Lock-up Agreements) will be eligible for resale in the public market pursuant to
Rule 701 under the Securities Act beginning approximately 90 days after the
effective date of this Prospectus, except to the extent that such shares are
subject to vesting restrictions or certain contractual restrictions on sale or
transfer pursuant to agreements with the Company. After the expiration of the
180-day lock-up period, an additional 3,739,158 shares of Common Stock will be
eligible for resale in the public market pursuant to Rule 144. From time to time
thereafter, the remaining shares of Common Stock outstanding will become
eligible for resale in the public market pursuant to Rule 144.

Approximately 90 days after the completion of this Offering, the Company
intends to file a registration statement on Form S-8 under the Securities Act to
register the future issuance of shares of Common Stock reserved for issuance
under the Company's Stock Option Plan. As of August 27, 1997, 244,006 shares of
Common Stock were reserved for issuance pursuant to outstanding options and
240,476 shares of Common Stock were reserved for future issuance under the
Company's Stock Option Plan. Such registration statement will automatically
become effective upon filing. Accordingly, shares registered thereunder will,
subject to Rule 144 limitations applicable to affiliates, be available for sale
in the public market, except to the extent that such shares are subject to
vesting restrictions with the Company or certain contractual restrictions on
sale or transfer (including options covering 242,829 shares which are subject to
Lock-up Agreements). After this Offering, the holders of approximately 6,261,615
shares of Common Stock and the holders of warrants to purchase an aggregate of
56,684 shares of Common Stock will be entitled to certain demand and piggyback
rights with respect to the registration of such shares under the Securities Act.
If such holders, by exercising their demand registration rights, cause a large
number of securities to be registered and sold in the public market, such sales
could have an adverse effect on the market price of the Company's Common Stock.
If the Company, either on its own behalf or on behalf of certain stockholders,
were to initiate a registration and include shares held by such holders pursuant
to the exercise of their piggyback registration rights, such sales could have a
material adverse effect on the Company's ability to raise needed capital. See
"Certain Transactions," "Shares Eligible for Future Sale," "Description of
Capital Stock -- Registration Rights" and "Underwriting."

CONTROL BY DIRECTORS, EXECUTIVE OFFICERS AND AFFILIATED ENTITIES. The
Company's directors, executive officers and entities affiliated with them will,
in the aggregate, beneficially own approximately 35.1% of the Company's
outstanding shares of Common Stock following the completion of this Offering (or
approximately 33.8% if the Underwriters exercise their over-allotment option in
full). As a result, these stockholders, if acting together, would be able to
significantly influence all matters requiring approval by the stockholders of
the Company, including the election of directors and the approval of mergers and
consolidations, sales of all or substantially all of the assets of the Company
or other business combination transactions. This may discourage a tender offer
for the Company's Common Stock or a change in control of the Company. See
"Principal Stockholders" and "Description of Capital Stock."

<PAGE>
ANTI-TAKEOVER EFFECT OF CERTAIN CHARTER AND BYLAW PROVISIONS. The Company's
Board of Directors is authorized to issue up to 10,000,000 shares of Preferred
Stock and to determine the price, rights, preferences and limitations of those
shares without any further vote or action by the Company's stockholders. 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 Preferred Stock that may be issued
in the future. While the Company has no present intention to issue shares of
Preferred Stock, such issuance could have the effect of making it more difficult
for a third party to acquire a majority of the outstanding voting stock of the
Company. In addition, the Company is subject to the provisions of Section 203 of
the Delaware General Corporation Law (the "DGCL") which, subject to certain
exceptions, prohibits the Company from engaging in certain business combinations
with certain stockholders (each, an "interested stockholder") for a period of
three years after the date of the transaction in which the stockholder became an
interested stockholder, unless the business combination is approved in a
prescribed manner. The application of Section 203 could have the effect of
delaying or preventing a change of control of the Company. The Company's Third
Amended and Restated Certificate of Incorporation provides for staggered terms
for the members of the Board of Directors. The staggered Board of Directors, the
Company's Third Amended and Certificate of Incorporation and certain provisions
of the DGCL may have the effect of delaying, deterring or preventing a change in
control of the Company, may discourage bids for the Common Stock at a premium
over the market price and may adversely affect the market price, and the voting
and other rights of the holders, of the Common Stock. See "Description of
Capital Stock -- Delaware Law and Certain Charter Provisions."

NO PRIOR MARKET FOR COMMON STOCK; POSSIBLE VOLATILITY OF STOCK PRICE. Prior
to this Offering, there has been no public market for the Company's Common Stock
and there can be no assurance that an active public market for the Common Stock
will develop or be sustained after this Offering or that the market price of the
Common Stock will not decline below the initial public offering price. The
initial public offering price will be determined by negotiations between the
Company and the representatives of the Underwriters and may not be indicative of
the market price at which the Common Stock of the Company will trade after this
Offering. Among the factors to be considered in such negotiations, in addition
to prevailing market conditions, are certain financial information of the
Company, market valuations of other companies that the Company and the
representatives of the several underwriters believe to be comparable to the
Company, estimates of the business potential of the Company, the present state
of the Company's development and other factors deemed relevant. The initial
public offering price set forth on the cover page of this Prospectus should not,
however, be considered an indication of the actual value of the Common Stock.
Such price is subject to change as a result of market conditions and other
factors. There can be no assurance that an active trading market will develop
for the Common Stock or that the Common Stock will trade in the public market
subsequent to this Offering at or above the initial offering price.

The market price of the Common Stock, like that of the securities of many
other biotechnology and pharmaceutical companies, is likely to be highly
volatile. Factors such as announcements of technological innovations or new
products by the Company or its competitors, preclinical testing or clinical
trial results relating to or regulatory approvals or disapprovals of the
Company's or competitors' product candidates, government regulation, health care
legislation, developments or disputes concerning patent or other proprietary
rights of the Company or its competitors, including litigation, fluctuations in
the Company's operating results, and market prices of the capital stock of
biotechnology and pharmaceutical companies in general could have a significant
impact on the future market price of the Common Stock. In addition, the stock
market has from time to time experienced extreme price and volume fluctuations
that may be unrelated to the operating performance of particular companies. In
addition, in the past, following periods of volatility in the market price of
the securities of companies in the biotechnology and pharmaceutical 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's business, financial
condition and results of operations. The realization of any of the risks
described in these "Risk Factors" could have a dramatic and adverse impact on
the market price of the Common Stock. See "Underwriting."

<PAGE>
BROAD DISCRETION IN USE OF PROCEEDS. The net proceeds of the Offering will
be added to the Company's working capital and will be available for research and
development, capital expenditures, working capital and general corporate
purposes. As of the date of this Prospectus, the Company cannot specify with
certainty the particular uses for the net proceeds to be received upon
completion of this Offering. Accordingly, the Company's management will have
broad discretion in the application of the net proceeds. See "Use of Proceeds"
and "Management's Discussion and Analysis of Financial Condition and Results of
Operations."

IMMEDIATE AND SUBSTANTIAL DILUTION. Purchasers of the Common Stock offered
hereby will incur an immediate and substantial dilution in the net tangible book
value of the Common Stock from the initial public offering price. The current
stockholders of the Company, including the Company's directors and officers,
acquired their shares of Common Stock for consideration substantially less than
the initial public offering price of the shares of Common Stock offered hereby.
Additionally, the Company has issued options to acquire shares of the Common
Stock at prices significantly below the initial public offering price. To the
extent outstanding options to purchase the Common Stock are exercised, there
will be further dilution. See "Dilution."

NO DIVIDENDS. The Company has not paid cash dividends on its Common Stock
since its inception and does not anticipate paying cash dividends in the
foreseeable future. See "Dividend Policy."

<PAGE>
USE OF PROCEEDS

The net proceeds to the Company from the sale of the 2,500,000 shares of
Common Stock offered hereby at an assumed initial public offering price of
$13.00 per share are estimated to be approximately $29.4 million (approximately
$34.0 million if the Underwriters' over-allotment option is exercised in full),
after deducting the underwriting discounts and commissions and estimated
offering expenses payable by the Company.

The Company intends to use the net proceeds of this Offering to fund the
continued clinical trials of T-20, increased research and development
activities, including ongoing development of the Company's technologies,
preclinical testing and clinical trials, and other costs associated with the
Company's product discovery and development programs. The Company also intends,
depending on the results of ongoing preclinical testing and clinical trials, to
use some of the net proceeds for the expansion of its facilities. The remainder
of the aggregate net proceeds will be used to provide working capital and to
fund other general corporate purposes. The amounts actually expended for each
purpose and the timing of such expenditures may vary significantly depending
upon a number of factors, including the status of the Company's research,
product candidate and compound discovery and development efforts, including
preclinical testing and clinical trials, the timing of regulatory actions, the
costs involved in preparing, filing, prosecuting, maintaining, protecting and
enforcing patent claims and other proprietary rights, the ability of the Company
to establish, internally or through relationships with third parties,
manufacturing, sales, marketing and distribution capabilities, technological and
other changes in the competitive landscape, changes in the Company's existing
research and development relationships and strategic alliances, evaluation of
the commercial viability of potential product candidates and compounds, needs
for additional facilities and other factors, many of which are outside of the
Company's control. As of the date of this Prospectus, the Company cannot specify
with certainty the particular uses for the net proceeds to be received upon
completion of this Offering. Accordingly, the Company's management will have
broad discretion in the application of the net proceeds. The Company may also
use a portion of the net proceeds to acquire or invest in businesses, products
and technologies that are complementary to those of the Company, although the
Company currently has no agreements and is not involved in any negotiations with
respect to any such transactions.

Pending such uses, the Company intends to invest the net proceeds in
investment grade, interest-bearing securities, including, without limitation,
obligations of the U.S. government or U.S. government agencies and other highly
rated liquid debt instruments.

DIVIDEND POLICY

The Company has not paid any dividends on its Common Stock since its
inception. The Company currently intends to retain any future earnings to fund
its operations and, therefore, does not anticipate paying any cash dividends in
the foreseeable future.

<PAGE>
CAPITALIZATION

The following table sets forth, as of June 30, 1997, (i) the actual
capitalization of the Company, (ii) the pro forma capitalization of the Company
after giving effect to the Preferred Stock Conversion and the filing of the
Company's Third Amended and Restated Certificate of Incorporation upon the
completion of the Offering, and (iii) the pro forma capitalization of the
Company as adjusted to give effect to the sale of the 2,500,000 shares of Common
Stock offered hereby at an assumed initial public offering price of $13.00 per
share and after deducting the underwriting discounts and commissions and
estimated offering expenses payable by the Company. The table should be read in
conjunction with the Financial Statements and the related Notes thereto included
elsewhere in this Prospectus.

<TABLE>
<CAPTION>
AS OF JUNE 30, 1997
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
<S> <C> <C> <C>
Notes payable and obligations under capital leases,
excluding current installments........................................................ $ 488 $ 488 $ 488
Stockholders' equity (deficit):
Series A, B, C and D Preferred Stock.................................................. 53 -- --
Preferred Stock, $.001 par value
per share, 10,000,000 shares authorized and no shares issued and
outstanding........................................................................ -- -- --
Common Stock, $.001 par value per share,
80,000,000 shares authorized 1,092,472 shares issued
and outstanding, actual; 7,354,087 shares issued and outstanding, pro forma and
9,854,087 shares issued and outstanding, pro forma as adjusted (1)................. 1 7 10
Additional paid-in capital............................................................ 32,435 32,482 61,904
Deficit accumulated during the development stage...................................... (21,443) (21,443 ) (21,443)
Deferred compensation................................................................. (1,935) (1,935 ) (1,935)
Notes receivable from stockholders...................................................... (264) (264 ) (264)
Total stockholders' equity......................................................... 8,847 8,847 38,272
Total capitalization............................................................... $ 9,335 $ 9,335 $ 38,760
</TABLE>

(1) Excludes (i) 10,589 shares of Common Stock issued by the Company after June
30, 1997, (ii) 260,361 shares of Common Stock reserved for issuance pursuant
to stock options outstanding as of June 30, 1997 at a weighted average
exercise price of $.36 per share, and (iii) 56,684 shares of Common Stock
issuable upon exercise of warrants outstanding as of June 30, 1997 at a
weighted average exercise price of $4.25 per share. Also excludes an
aggregate of 254,188 shares of Common Stock reserved for future issuance
under the Company's Stock Option Plan as of June 30, 1997. See
"Management -- Stock Option Plans," "Description of Capital Stock" and Note
1 of Notes to Financial Statements.

<PAGE>
DILUTION

The pro forma net tangible book value of the Company's Common Stock as of
June 30, 1997 was approximately $8.3 million, or $1.13 per share, after giving
effect to the Preferred Stock Conversion. After giving effect to the sale by the
Company of the 2,500,000 shares of Common Stock offered hereby at an assumed
initial public offering price of $13.00 per share (after deducting the
underwriting discounts and commissions and estimated offering expenses payable
by the Company), the pro forma net tangible book value of the Company as of June
30, 1997 would have been approximately $37.8 million, or $3.83 per share. This
represents an immediate increase in net tangible book value of $2.70 per share
to existing stockholders and an immediate dilution in net tangible book value of
$9.17 per share to purchasers in this Offering. "Net tangible book value"
represents the amount of tangible assets of the Company less total liabilities.
Dilution represents the difference between the amount per share paid by
purchasers in this Offering and the pro forma net tangible book value per share
upon completion of this Offering. The following table illustrates this per share
dilution:

<TABLE>
<S> <C> <C>
Assumed initial public offering price per share..................................... $13.00
Pro forma net tangible book value per share as of June 30, 1997................... $1.13
Increase in book value per share attributable to new investors.................... 2.70
Pro forma net tangible book value per share after this Offering..................... 3.83
Dilution per share to new investors (1)............................................. $ 9.17
</TABLE>

(1) If the Underwriters' over-allotment is exercised in full, the dilution to
new investors will be $8.86 per share.

The following table sets forth, on a pro forma basis as of June 30, 1997,
the difference between the number of shares of Common Stock purchased from the
Company, the total consideration paid and the average price per share paid by
the existing holders of Common Stock and by the new investors, after giving
effect to the Preferred Stock Conversion and before deducting the underwriting
discounts and commissions and estimated offering expenses payable by the
Company, at an assumed initial public offering price of $13.00 per share:

<TABLE>
<CAPTION>
AVERAGE
SHARES PURCHASED TOTAL CONSIDERATION PRICE PER
NUMBER PERCENT AMOUNT PERCENT SHARE
<S> <C> <C> <C> <C> <C>
Existing stockholders........................................... 7,354,087 75% $30,488,588 48% $ 4.15
New investors................................................... 2,500,000 25 32,500,000 52 13.00
Total.................................................... 9,854,087 100% $62,988,588 100% $ 6.39
</TABLE>

The foregoing tables assume no exercise of outstanding options or warrants.
As of June 30, 1997, (i) 260,361 shares of Common Stock were issuable upon
exercise of outstanding stock options at a weighted average exercise price of
$0.36 per share, and (ii) an aggregate of 56,684 shares of Common Stock were
issuable upon the exercise of outstanding warrants at a weighted-average
exercise price of $4.25 per share. Also excludes an aggregate of 254,188 shares
of Common Stock reserved for future issuance under the Company's Stock Option
Plan as of June 30, 1997. To the extent the outstanding options are exercised,
there will be further dilution to new investors. See "Capitalization," and
"Management -- Stock Option Plans," "Description of Capital Stock" and Note 1 of
Notes to Financial Statements.

<PAGE>
SELECTED FINANCIAL DATA

The selected financial data set forth below with respect to the Company's
Statement of Operations for the years ended December 31, 1994, 1995 and 1996 and
with respect to the Company's Balance Sheets as of December 31, 1995 and 1996
are derived from the audited Financial Statements of the Company which are
included elsewhere in this Prospectus and are qualified by reference to such
Financial Statements and the related Notes thereto. Statements of Operations
data for the period from inception (January 7, 1993) through December 31, 1993
and Balance Sheet data at December 31, 1993 and 1994 are derived from audited
Financial Statements of the Company not included herein. The selected financial
data as of June 30, 1997 and for the six months ended June 30, 1996 and 1997 are
derived from unaudited Financial Statements included elsewhere in this
Prospectus. The unaudited Financial Statements include all adjustments,
consisting only of normal recurring adjustments, that the Company considers
necessary for the fair presentation of its financial position and the results of
its operations for those periods. Operating results for the six months ended
June 30, 1997 are not necessarily indicative of the results that may be expected
for the year ending December 31, 1997. The selected financial data set forth
below is qualified in its entirety by, and should be read in conjunction with,
the Financial Statements, the related Notes thereto and "Management's Discussion
and Analysis of Financial Condition and Results of Operations" included
elsewhere in this Prospectus.

TRIMERIS, INC.
(A DEVELOPMENT STAGE COMPANY)

<TABLE>
<CAPTION>
PERIOD FROM
INCEPTION FOR THE CUMULATIVE
(JANUARY 7, 1993) FOR THE SIX MONTHS ENDED FROM INCEPTION
THROUGH DECEMBER 31, YEARS ENDED DECEMBER 31, JUNE 30, (JANUARY 7, 1993)
1993 1994 1995 1996 1996 1997 TO JUNE 30, 1997
<S> <C> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED) (UNAUDITED)
STATEMENTS OF OPERATIONS DATA:
Revenue.................................. $ -- $ -- $ 104 $ 55 $ -- $ 212 $ 371
Operating expense:
Research and development expenses........ 691 2,747 4,012 5,146 2,278 2,859 15,455
General and administrative expenses...... 631 947 1,520 1,761 802 786 5,646
Total operating expenses............ 1,322 3,694 5,532 6,907 3,080 3,645 21,101
Operating loss........................... (1,322) (3,694) (5,428) (6,852) (3,080) (3,433) (20,730)
Interest income.......................... 16 8 49 47 32 33 154
Interest expense......................... (5) (258) (360) (167) (86) (78) (867)
Total other income (expense)........ 11 (250) (311) (120) (54) (45) (713)
Net loss............................ $ (1,311) $(3,944) $(5,739) $(6,972) $(3,134) $(3,478) $ (21,443)
Pro forma net loss per share (1)(2)...... $ (1.48) $ (0.59)
Pro forma weighted average shares used in
computing pro forma net loss per share
(1)(2)................................. 4,705 5,880
</TABLE>

<TABLE>
<CAPTION>
AS OF
AS OF DECEMBER 31, JUNE 30,
1993 1994 1995 1996 1997
<S> <C> <C> <C> <C> <C>
(IN THOUSANDS) (UNAUDITED)
BALANCE SHEET DATA:
Cash and cash equivalents............................................... $ 509 $ 277 $ 1,343 $ 132 $ 8,912
Working capital (deficiency)............................................ 183 (4,067) 322 (1,305) 8,019
Total assets............................................................ 1,802 1,873 3,058 1,684 10,585
Long-term notes payable and capital lease obligations, less current
portion............................................................... 401 751 703 576 488
Accumulated deficit..................................................... (1,311) (5,254) (10,994) (17,965) (21,443)
Total stockholders' equity.............................................. 701 (3,236) 1,324 (409) 8,847
</TABLE>

(1) Computed on the basis described in Note 1 of Notes to Financial Statements.

(2) Pro forma to give effect to the Preferred Stock Conversion.

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

THE FOLLOWING DISCUSSION OF THE FINANCIAL CONDITION AND RESULTS OF
OPERATIONS OF THE COMPANY SHOULD BE READ IN CONJUNCTION WITH THE FINANCIAL
STATEMENTS AND THE RELATED NOTES THERETO INCLUDED ELSEWHERE IN THIS PROSPECTUS.
THIS PROSPECTUS CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND
UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS MAY DIFFER SIGNIFICANTLY FROM THE
RESULTS DISCUSSED IN THE FORWARD-LOOKING STATEMENTS. FACTORS THAT MIGHT CAUSE OR
CONTRIBUTE TO SUCH DIFFERENCES INCLUDE, BUT ARE NOT LIMITED TO, THOSE DISCUSSED
UNDER "RISK FACTORS," "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS," AND "BUSINESS," AS WELL AS THOSE DISCUSSED
ELSEWHERE IN THIS PROSPECTUS.

OVERVIEW

Trimeris commenced operations in January 1993, has a limited operating
history and is a development stage company. Since its inception, substantially
all of the Company's resources have been dedicated to the development,
patenting, preclinical testing and a Phase I/II clinical trial of T-20, the
development of its proprietary technology platform and research and development
and preclinical testing of other potential product candidates and compounds
discovered by the Company. The Company has incurred losses since its inception
and, as of June 30, 1997, had an accumulated deficit of approximately $21.4
million. The Company has received revenue solely from SBIR grants and an
investigative contract and has yet to generate any revenue from product sales or
royalties, and there can be no assurance that it will be able to generate any
such revenues or royalties in the future.

Product candidates and compounds discovered by the Company and developed
through the Company's product development programs will require significant
additional, time-consuming and costly research and development, preclinical
testing and extensive clinical trials prior to submission of any regulatory
application for commercial use. The Company has incurred losses since its
inception. Such losses have resulted principally from expenses incurred in the
Company's research and development activities associated with the development,
patenting, preclinical testing and a Phase I/II clinical trial of T-20, the
development of its proprietary technology platform, research and development and
preclinical testing of other potential product candidates and compounds
discovered by the Company, and from general and administrative expenses. The
Company expects to incur substantial losses for the foreseeable future and
expects losses to increase as the Company's research and development,
preclinical testing and clinical trial efforts expand. The amount and timing of
the Company's operating expenses will depend on several factors, including the
status of the Company's research and development activities, product candidate
and compound discovery and development efforts, including preclinical testing
and clinical trials, the timing of regulatory actions, the costs involved in
preparing, filing, prosecuting, maintaining, protecting and enforcing patent
claims and other proprietary rights, the ability of the Company to establish,
internally or through relationships with third parties, manufacturing, sales,
marketing and distribution capabilities, technological and other changes in the
competitive landscape, changes in the Company's existing research and
development relationships and strategic alliances, evaluation of the commercial
viability of potential product candidates and other factors, many of which are
outside of the Company's control. As a result, the Company believes that
period-to-period comparisons of financial results in the future are not
necessarily meaningful and results of operations in prior periods should not be
relied upon as an indication of future performance. Any deviations in results
from operations from levels expected by securities analysts and investors could
have a material adverse effect on the market price of the Common Stock. The
Company's ability to achieve profitability will depend, in part, upon its or its
collaborated partners' ability to successfully develop and obtain regulatory
approval for T-20 and other product candidates and compounds discovered by the
Company, and to develop the capacity, either internally or through relationships
with third parties, to manufacture, sell, market and distribute approved
products, if any. There can be no assurance that the Company will ever generate
significant revenues or achieve profitable operations. See "Risk
Factors -- Development Stage Company" and " -- History of Operating Losses;
Accumulated Deficit; Uncertainty of Future Profitability."

RESULTS OF OPERATIONS

COMPARISON OF SIX MONTHS ENDED JUNE 30, 1996 AND 1997

REVENUE. There was no revenue recognized for the six months ended June 30,
1996. Revenue recognized for the six months ended June 30, 1997 consisted of
approximately $112,000 of income from SBIR grants, and $100,000 from an
investigative contract.

RESEARCH AND DEVELOPMENT EXPENSES. Total research and development expenses
increased from approximately $2.3 million for the six months ended June 30, 1996
to approximately $2.9 million for the six months ended June 30, 1997. The
increase is primarily due to increased costs related to additional personnel and
related laboratory research supplies to support

<PAGE>
these personnel and the continuation of Phase I/II clinical trials for T-20.
Total research personnel were 24 and 28 at June 30, 1996 and 1997, respectively.
The Company expects its research and development expenses to increase
substantially in the future due to continued expansion of product development
activities, including preclinical testing and clinical trials.

GENERAL AND ADMINISTRATIVE EXPENSES. Total general and administrative
expenses decreased from approximately $802,000 for the six months ended June 30,
1996 to approximately $786,000 for the six months ended June 30, 1997. The
Company expects its administrative expenses to increase in the future to support
the expansion of its product development activities.

OTHER INCOME (EXPENSE). Other income (expense) consists of interest income
and expense. Total other expenses decreased from approximately $55,000 for the
six months ended June 30, 1996 to $45,000 for the six months ended June 30,
1997. This change was primarily due to fluctuations in cash balances and
borrowings.

COMPARISON OF YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996

REVENUE. Total revenue was approximately $0, $104,000 and $54,000 for 1994,
1995 and 1996, respectively. An SBIR grant was received in 1995, and revenue was
recognized as earned under this grant in 1995 and 1996.

RESEARCH AND DEVELOPMENT EXPENSES. Total research and development expenses
increased from $2.7 million in 1994 to approximately $4.0 million in 1995 and
increased to approximately $5.1 million in 1996. The increases are primarily due
to increased costs related to additional personnel and related laboratory
research supplies to support these personnel. During 1996, the Company began
Phase I/II clinical trials for T-20 and incurred costs associated with these
clinical trials. Total research personnel were 17, 25 and 25 at December 31,
1994, 1995 and 1996, respectively.

GENERAL AND ADMINISTRATIVE EXPENSES. Total general and administrative
expenses increased from approximately $948,000 in 1994 to approximately $1.5
million in 1995, and increased to approximately $1.8 million in 1996. These
increases are primarily due to increased costs related to additional personnel
and professional fees incurred in the patent application process.

OTHER INCOME (EXPENSE). Other income (expense) consists of interest income
and expense. Total other expense increased from approximately $250,000 in 1994
to approximately $311,000 in 1995 and decreased to approximately $120,000 in
1996. The increase from 1994 to 1995 was primarily due to an increase in
interest expense of approximately $102,000 net of an increase in interest income
of approximately $41,000. The decrease from 1995 to 1996 was primarily due to a
reduction in interest expense of approximately $193,000 as a result of the
exchange of notes payable for preferred stock during 1995.

LIQUIDITY AND CAPITAL RESOURCES

Since inception, the Company has financed its operations primarily through
the private placement of equity securities, the issuance of notes to
stockholders and equipment lease financing. Net cash used by operating
activities was approximately $3.8 million, approximately $4.8 million and
approximately $5.8 million in 1994, 1995 and 1996, respectively, and
approximately $2.9 million and approximately $3.5 million for the six months
ended June 30, 1996 and June 30, 1997, respectively. The cash used by operating
activities was used primarily to fund research and development and general and
administrative expenses. Cash provided by financing activities was approximately
$3.6 million, approximately $6.1 million, and approximately $4.8 million in
1994, 1995 and 1996, respectively, and approximately $3.3 million and
approximately $12.4 million for the six months ended June 30, 1996 and 1997,
respectively. The cash provided by financing activities was primarily from the
sale of equity securities and notes to stockholders.

As of June 30, 1997, the Company had approximately $8.9 million in cash and
cash equivalents compared to approximately $132,000 as of December 31, 1996. The
increase resulted from the receipt of approximately $12.8 million from the sale
of equity securities during 1997, partially offset by approximately $3.5 million
used by operations.

The Company has experienced negative cash flows from operations since its
inception and does not anticipate generating sufficient positive cash flows to
fund its operations in the foreseeable future. The Company has expended, and
expects to continue to expend in the future, substantial funds to pursue its
product candidate and compound discovery and development efforts, including
expenditures for continued clinical trials of T-20, research and development and
preclinical testing of other product candidates and compounds discovered by the
Company and the development of its proprietary technology platform. As of June
30, 1997, the Company had commitments to purchase approximately $2.0 million of
product candidate materials and expects to expend approximately $.9 million in
capital expenditures through the end of 1997. These expenditures may be financed
with capital or operating leases, debt or working capital. The Company expects
that its existing capital resources,

<PAGE>
together with the net proceeds of the Offering and the interest earned thereon,
will be adequate to fund its capital requirements through 1998. However, the
Company's future capital requirements and the adequacy of available funds will
depend on many factors, including the results of the clinical trials relating to
T-20, the progress and scope of the Company's product development programs, the
magnitude of these programs, the results of preclinical testing and clinical
trials, the need for additional facilities based on the results of these
clinical trials and other product development programs, changes in the focus and
direction of the Company's product development programs, the costs involved in
preparing, filing, processing, maintaining, protecting and enforcing patent
claims and other intellectual property rights, competitive factors and
technological advances, the cost, timing and outcome of regulatory reviews,
changes in the requirements of the FDA, administrative and legal expenses,
evaluation of the commercial viability of potential product candidates and
compounds, the establishment of capacity, either internally or through
relationships with third parties, for manufacturing, sales, marketing and
distribution functions and other factors, many of which are outside of the
Company's control. Thus, there can be no assurance that the net proceeds of this
Offering, together with the interest earned thereon, will be sufficient to fund
the Company's capital requirements during the period discussed above. The
Company believes that substantial additional funds will be required to continue
to fund its operations and that the Company will be required to obtain
additional funds through equity or debt financing or licenses, agreements or
other arrangements with collaborative partners and others, or from other
sources. The terms of any such equity financings may be dilutive to stockholders
and the terms of any debt financings may contain restrictive covenants which
limit the Company's ability to pursue certain courses of action. There can be no
assurance that such funds will be available to the Company on acceptable terms,
if at all, or that such financings will be adequate to meet the Company's future
capital requirements. If adequate funds are not available, the Company may be
required to delay, scale-back or eliminate certain aspects of its preclinical
testing, clinical trials and research and development programs or attempt to
obtain funds through arrangements with collaborative partners or others that may
require the Company to relinquish rights to certain of its technologies or
product candidates or compounds, which could have a material adverse effect on
the Company's business, financial condition and results of operations. See "Risk
Factors -- Future Capital Needs; Uncertainty of Additional Funding" and "Use of
Proceeds."

NET OPERATING LOSS CARRYFORWARDS

As of June 30, 1997, the Company had a net operating loss carryforward of
approximately $21 million. The Company has recognized a valuation allowance
equal to the deferred asset represented by this net operation loss carryforward
and therefore recognized no tax benefit. The Company's ability to utilize its
net operating loss carryforwards may be subject to an annual limitation in
future periods pursuant to the "change in ownership rules" under Section 382 of
the Internal Revenue Code of 1986, as amended (the "Code"). See Note 6 of Notes
to Financial Statements.

<PAGE>
BUSINESS

THE COMPANY

Trimeris is a development stage biopharmaceutical company. Since its
inception, substantially all of the Company's resources have been dedicated to
the development, patenting, preclinical testing and a Phase I/II clinical trial
of T-20, the Company's lead product candidate, the development of the Company's
proprietary technology platform, and research and development and preclinical
testing of other potential product candidates and compounds discovered by the
Company. The Company is engaged in the discovery and development of novel
therapeutic agents that block viral infection by inhibiting viral fusion with
host cells. Viral fusion is a complex process by which viruses infect host
cells. The Company's lead product candidate, T-20, inhibits fusion of HIV with
host cells. T-20 is currently being administered to HIV-infected patients in a
Phase I/II clinical trial. T-20 and the Company's other product candidates are
designed to inhibit viral fusion, unlike other currently approved therapeutic
agents that target later steps in the infection process. The Company has
developed a proprietary technology platform in the field of fusion inhibition,
which will be applied to the discovery and development of novel products for the
treatment of a variety of viral diseases.

OVERVIEW OF VIRAL DISEASE

Viruses are infectious particles which contain either RNA or DNA and rely
on host cells to maintain their life cycle. Outside a host cell, a virus
particle cannot replicate. However, after infecting a host cell, a virus
exploits the metabolic mechanisms of that host cell to reproduce and make new
infectious virus particles that can infect other cells.

The genetic material of viruses is surrounded by a protein coat, called a
nucleocapsid. The nucleocapsid of certain viruses, known as enveloped viruses
(HIV, RSV, HPIV, influenza and hepatitis B and C), is surrounded by a bilayer
membrane consisting of both lipids and proteins. Certain of these viral proteins
facilitate the binding process of the virus to the host cell. These proteins
contain peptide domains that associate with one another to form coiled coils
during the infection process. These coiled-coil protein domains come together in
very specific structural rearrangements that help the viral membrane fuse with
the host cell membrane. This coiled-coil interaction permits the viral fusion
process to take place, thereby allowing the virus to inject its genetic material
into the host cell. The following diagram illustrates the process by which
certain viruses (HIV, for example) infect a host cell.

[DEPICTION OF THE HIV LIFE CYCLE AS MORE FULLY DESCRIBED BELOW]

HIV LIFE CYCLE. STEP 1: HIV attaches to the surface of a human immune
cell when the gp120 protein binds to a particular host cell receptor.
After attachment, gp120 is stripped away from the virus and certain
peptide domains within the gp41 transmembrane protein rearrange and bind
to each other very tightly to form coiled coils which mediate the fusion
of the viral and host cell membranes. STEP 2: The virus injects its
genetic material (RNA) into the cell. An HIV viral enzyme (reverse
transcriptase) then converts this RNA into DNA. STEP 3: The viral DNA is
transported to the nucleus and is integrated into the host cell's
chromosomes. STEP 4: The infected cell begins to produce new viral RNA,
which then uses a portion of the host cell's protein synthesis machinery
to make many different viral proteins. STEP 5: The viral enzyme called
protease cuts these new proteins into smaller pieces. STEP 6: These
protein pieces assemble with the HIV RNA and lipids to make new
infectious virus particles. STEP 7: Mature HIV particles are released
from the surface of the infected cell to begin a new cycle of infection.

[DEPICTION OF MODEL FOR HIV FUSION MORE FULLY DESCRIBED BELOW]

MODEL FOR HIV FUSION. PRE-FUSION: The HIV gp41 protein contains two
peptide domains which are predicted to associate with one another to
help the virus fuse with the host cell membrane. However, these two
peptide domains are presumably kept apart by the gp120 protein in a
pre-fusion state until the virus attaches to a host cell. ATTACHMENT:
The gp120 protein is stripped away from the virus after gp120 binds to
host cell receptors. The two specific peptide domains within the gp41
protein can then rearrange and bind to each other very tightly to form a
coiled-coil structure. In doing so, the tip of the gp41 protein is now
positioned to penetrate the host cell membrane. FUSION: The virus is now
drawn closer to the host cell membrane surface and the viral and host
cell membranes fuse together. PENETRATION: Once the membranes fuse
together, the virus can inject its genetic material into the host cell
and the infection process is completed.

<PAGE>
THE COMPANY'S TECHNOLOGY

The Company's academic founders, Dr. Dani Bolognesi and Dr. Thomas
Matthews, both of the Duke University Center for AIDS Research, have discovered
a novel method to block HIV infection by inhibiting viral fusion with host
cells. This discovery was licensed to the Company and led to the Company's
development of its proprietary technology platform. The Company is using its
proprietary techonology platform to support its discovery and development
programs. Unlike therapeutic agents targeting viral replication processes inside
host cells, the Company's product candidates prevent one of the first steps in
the infection process that occurs outside of the host cell. The Company's goal
is to use its expertise in the field of fusion inhibition to discover, develop
and market novel peptides or small molecules to inhibit viral fusion for the
treatment of a variety of diseases.

T-20, the Company's lead product candidate for treating HIV infection, is
currently being tested in a Phase I/II clinical trial in the United States. T-20
is a proprietary 36 amino acid synthetic peptide that binds to a key peptide
domain of the HIV gp41 protein and blocks HIV viral fusion by interfering with
the interactions between peptide domains within viral proteins that are required
for HIV entry into a host cell. The following diagram illustrates the use of
T-20 to inhibit viral fusion.

[DEPICTION OF THE USE OF T-20 TO BLOCK VIRAL FUSION AS MORE FULLY DESCRIBED
BELOW]

MODEL FOR T-20 INHIBITION OF HIV FUSION. The gp120 protein is stripped away from
the virus after gp120 binds to a particular host cell receptor. Two specific
peptide domains in the gp41 protein are thus freed and can bind to one another
to form a coiled coil. However, if T-20 is present in the bloodstream, it binds
very tightly to one of the two peptide domains within the gp41 protein.
Therefore, T-20 blocks the ability of gp41 to form a natural, coiled-coil
structure. As a result, the tip of the gp41 protein does not effectively
penetrate the host cell membrane. Since the virus cannot penetrate and inject
its genetic material into the cell, HIV infection of the host cell is inhibited.

<PAGE>
Through its study of the HIV fusion process, the Company has developed a
proprietary technology platform aimed at discovering antiviral compounds. The
cornerstone of this platform is CAST, a proprietary computer algorithm which
identifies target sequences within certain viral proteins that have the
potential to interact during the fusion process. Once identified by the CAST
algorithm, these target sequences form the basis for designing highly selective
and potent peptide inhibitors of viral fusion. CAST has enabled the Company to
design product candidates for RSV and HPIV fusion inhibition. The Company has
identified, and has filed patent applications disclosing, numerous discrete
peptide sequences, which include potential fusion targets in other viruses such
as hepatitis B and C, influenza and herpes.

In addition to viral targets, CAST has identified protein sequences which
may have a role in bacterial pathogenesis, thus providing the Company with the
basis for future work aimed at the potential discovery of antibiotic agents.
Ultimately, the Company plans to explore CAST-identified sequences across a wide
range of targets, including those associated with cancer, immunology and
neurology.

PROGRAMS AND PRODUCT CANDIDATES UNDER DEVELOPMENT

The following table describes the various stages of development of the
Company's programs and product candidates.

<TABLE>
<CAPTION>
INDICATION PRODUCT CANDIDATE DEVELOPMENT STATUS(1)
HIV T-20 Phase I/II
<S> <C> <C>
RSV T-786 Preclinical
HIV Second generation inhibitors Preclinical
RSV Small molecules Preclinical
HPIV T-205 Research
HPIV Small molecules Research
HIV Small molecules Research
Influenza Virus Small molecules Discovery
Hepatitis B Virus Small molecules Discovery
Hepatitis C Virus Small molecules Discovery
Epstein-Barr Virus Small molecules Discovery
(1) "Phase I/II" indicates that the product candidate is being tested in clinical trials for
safety and preliminary indications of biological activity in a limited patient population.
"Preclinical" indicates that the Company is testing a product candidate in animal models.
"Research" indicates the Company is pursuing the discovery of prototype compounds and
evaluating prototype compounds in IN VITRO testing. "Discovery" indicates that the Company is
developing assay systems to screen chemical libraries of small molecules. See "Risk
Factors -- Uncertainties Related to Clinical Trials and Clinical Trial Strategy,"
" -- Extensive Government Regulation; No Assurance of Regulatory Approval" and
"Business -- Government Regulation."
</TABLE>

CLINICAL DEVELOPMENT PROGRAM

T-20

T-20 is a proprietary compound which has demonstrated significant
inhibition of HIV in preclinical testing and is currently being tested in Phase
I/II clinical trials. T-20 inhibits HIV viral fusion with host cells and thus
operates by a completely different mechanism of action than any other currently
approved HIV antiviral. HIV targets primarily the human immune cells known as
CD4+ T-cells and macrophages. HIV-infected cells ultimately lose their immune
function, leading to eventual degeneration of the immune system, which results
in opportunistic infections, neurological dysfunctions, neoplasms and death.

T-20 is a 36 amino acid synthetic peptide whose sequence is derived from
the gp41 protein of HIV. In preclinical testing, T-20 displayed potent antiviral
activity and reduced HIV viral load significantly in animal models. In those
tests, T-20 displayed notable pharmaceutical properties, including long
half-life, significant bioavailability, chemical stability and rapid
distribution into lymphatic tissue, a major reservoir of HIV. In December 1996,
the Company began a Phase I/II clinical trial administering an intravenous
formulation of T-20 to HIV-infected patients. Preliminary review of the data
from the Phase I/II clinical trial indicates that no drug-induced adverse events
have been reported and no dose-limiting toxicities have been observed. The
Company anticipates that the full results of this clinical trial will be
available in the third quarter of 1997. There can be no assurance that the
results from the Phase I/II clinical trial will support future clinical trials
or will be predictive of results that will be obtained in pivotal clinical
trials.

<PAGE>
T-20 CLINICAL DEVELOPMENT

The Company believes that delivery of a continuous therapeutic dose of T-20
using a subcutaneous infusion delivery system may suppress HIV more effectively
than other delivery mechanisms. Accordingly, the Company, together with MiniMed,
is developing a continuous, subcutaneous infusion delivery system for
administering T-20. The Company believes that the ease of use of a continuous,
subcutaneous infusion delivery system may increase patient compliance. In
addition, the Company believes that such a system may reduce the amount of T-20
necessary to maintain effective HIV suppression. The Company is preparing to
begin a Phase II clinical trial that will compare delivery of a constant
therapeutic dose of T-20 by a continuous, subcutaneous infusion pump to delivery
by subcutaneous injections. The Company anticipates that this clinical trial
will be conducted at the University of Alabama at Birmingham under the
supervision of Dr. Michael Saag and at the UCLA Medical Center under the
supervision of Dr. Ron Mitsuyasu. Each site is expected to enroll 16 to 24
HIV-infected patients and measure pharmacokinetics of T-20 drug delivery using
the continuous, subcutaneous infusion pump and the effect of this treatment
approach on primary surrogate markers. This trial will also analyze the T-20
dosing range when using the MiniMed continuous, subcutaneous infusion pump. The
Company anticipates that this Phase II clinical trial will be completed in the
first quarter of 1998.

After completion of the continuous, subcutaneous infusion Phase II trial,
the Company intends to begin a pivotal Phase II trial in a larger population of
HIV-infected patients who are either resistant to, or intolerant of, currently
approved antiviral therapies (RT and protease inhibitors). Historically, pivotal
Phase II trials of this type involving HIV antivirals have included
approximately 300-400 patients and have taken approximately 18-24 months to
complete. The Company anticipates that this pivotal Phase II trial will begin in
the first half of 1998. Concurrently with the start of the pivotal Phase II
trial, the Company intends to begin a study of T-20 in HIV-infected pediatric
patients. Historically, studies of this type involving HIV antivirals have
included approximately 40-60 pediatric patients and have taken approximately
18-30 months to complete.

Throughout the T-20 clinical trial process, the Company intends to work
with the FDA to design and implement a clinical trial strategy involving the
administration of T-20 to HIV-infected patients in combination with approved HIV
antiviral agents. The Company also believes that it will be able to conduct its
T-20 clinical trial programs pursuant to the accelerated approval procedure
authorized by the FDA for drugs intended to treat serious or life-threatening
illnesses. However, there can be no assurance that T-20 will be eligible for
accelerated development and/or approval under these regulations. Further, there
can be no assurance that T-20 (if eligible for accelerated development and/or
approval under these regulations) will be approved by the FDA for marketing on
an accelerated basis, or at all. The anticipated timing of the Company's T-20
clinical trials may be delayed or cancelled for a number of reasons, including
the receipt of unanticipated T-20 clinical trial results, changes in the focus
of the Company or its collaborators, financial requirements and resources,
manufacturing issues, technological developments and competitive factors.
Accordingly, no assurance can be given that the Company's T-20 clinical trials
will commence on their target dates, or at all. Delays in such clinical trials
could have a material adverse effect on the Company's business, financial
condition and results of operations. See "Risk Factors -- Extensive Government
Regulation; No Assurance of Regulatory Approval," " -- Uncertainties Related to
Clinical Trials and Clinical Trial Strategy" and "Business -- Government
Regulation."

HIV MARKET AND EXISTING THERAPIES

HIV infection causes AIDS, which is the leading cause of death in the
United States and Western Europe in men and women between the ages of 25 and 44.
The World Health Organization estimates that, as of late 1996, approximately
750,000 people were infected with HIV in the United States, and approximately
510,000 people were infected in Western Europe.

The first drugs approved in the United States to treat HIV infection
inhibit the synthesis of virus DNA from viral RNA in infected cells by targeting
RT, the viral enzyme essential for such synthesis. Approved RT inhibitors
include AZT, 3TC, ddI, ddC, d4T, nevirapine and delavirdine. Worldwide sales of
RT inhibitors were approximately $1.1 billion in 1996. A second class of HIV
antivirals inhibit HIV protease, a viral enzyme required to cleave newly
synthesized viral proteins into the correct size so the virus can assemble
itself into new infectious virus particles. Approved HIV protease inhibitors
include indinavir, ritonavir, saquinavir and nelfinavir mesilate. Worldwide
sales of protease inhibitors were approximately $425 million in 1996 and are
projected to grow significantly over the next several years.

HIV is prone to mutations that produce resistance to RT and protease
inhibitors. Once resistance emerges to one drug, these strains may also be
resistant to most, if not all, of the drugs in the same chemical or functional
class (a phenomenon known as cross-resistance). In an effort to overcome such
resistance, physicians have begun to use RT and protease inhibitors in various
combinations. While combination therapy with RT and protease inhibitors
represents an advance in treatment of HIV infection, combination therapy has not
yet proven to be a cure. Moreover, although these combination therapies have

<PAGE>
slowed the emergence of resistance, new mutant strains have been identified
which are resistant to several of the drugs currently used in combination
therapy.

Equally problematic is that even brief instances of non-compliance with the
strict drug dosing regimens associated with these combination therapies may
reduce the effectiveness of combination therapy and can accelerate the emergence
of resistance. For example, in order to maintain a high blood level of the drug
and to present a continuous challenge to the targeted virus, many current drugs
require complex dosing, with some medications to be taken with meals and some on
an empty stomach. A typical combination therapy regimen includes 14 to 16 pills
taken at six to eight times during the day. This type of complex dosing regimen
can easily lead to noncompliance or only partial compliance. Orally
administered, small molecule drugs such as RT and protease inhibitors generally
reach peak levels in the bloodstream within a short period of time after being
taken by the patient. Drug levels then gradually fall over time as the drug is
either absorbed into tissues or is eliminated from the body. At the point in the
day when the drug level reaches its lowest concentration in the bloodstream
(prior to the patient's taking another dose), the drug level may not be
sufficiently high to effectively inhibit the virus. If a patient misses a dose
or delays taking the drug for a short period of time, the drug level in the body
will fall even lower, thus allowing the virus to replicate and potentially
develop resistant strains. The Company believes that one solution to this
problem is drug delivery using a continuous, subcutaneous infusion system
through which a controlled, programmable amount of the drug could be delivered
throughout the day.

Toxicity is also an issue associated with the use of RT and protease
inhibitors. Accumulating data indicate that certain patients are unable to take
RT and protease inhibitors, either alone or in combination, due to toxic side
effects, including gastrointestinal disorders, peripheral neuropathy and kidney
stones. Furthermore, recent information has suggested that protease inhibitors
may cause diabetes-like symptoms in some patients. Clinical studies with some RT
and protease inhibitors indicate that a significant number of HIV positive
patients discontinue therapy soon after they begin treatment because (i) they
cannot tolerate the toxic side effects, (ii) they rapidly become resistant to
these therapies, or (iii) demands of the drug dosing regimen (the number of
pills the patients are required to take on a strict schedule) are too great. If
the side effects of the drugs prove too severe, or if a patient's virus becomes
resistant to available drug combinations, there are no other antiviral
treatments currently available.

T-20 COMMERCIALIZATION STRATEGY

The Company has entered into a strategic alliance with MiniMed under which
the parties will collaborate to deliver T-20 using MiniMed's continuous infusion
pump. MiniMed pumps, currently used for insulin therapy, are generally attached
to a belt, strapped to a leg or draped on a cord around the neck. These pumps
weigh approximately 3.5 ounces and are approximately the size of a pager. The
Company expects that MiniMed will play an active role in the marketing of its
pump for T-20 delivery and will provide patient support and product service for
the pump and related disposable products. The Company plans to work directly
with MiniMed to pursue necessary regulatory approvals for the delivery of T-20
using the MiniMed pump. See "Risk Factors -- Dependence on Collaborations and
Licenses with Others," " -- Extensive Government Regulation; No Assurance of
Regulatory Approvals," "Business -- License and Collaborative Agreements" and
" -- Government Regulation."

The manufacture of peptides requires significant expertise, facilities and
equipment. Accordingly, the Company has elected to work with several third-party
contract manufacturers to supply quantities of T-20 to be used in the Company's
currently planned clinical trials. The Company may continue to rely on
third-party manufacturers throughout the clinical and initial commercialization
phases of T-20 development. The Company has also established an in-house T-20
manufacturing process development and control team that is attempting to develop
an improved process for the synthetic manufacture of T-20, which may result in
increased production volume and lower unit costs. See
"Business -- Manufacturing" and "Risk Factors -- Lack of Manufacturing
Capabilities" for a discussion of manufacturing processes and certain risks
associated with manufacturing peptides.

The Company does not currently have sales, marketing or distribution
capabilities and is evaluating strategies for the sale, marketing and
distribution of T-20, including developing internal capabilities and entering
into collaborative arrangements. The Company believes that it may be feasible to
develop internal sales, marketing and distribution capability for T-20, since
the market for HIV therapeutics is comprised of a concentrated group of
physicians in medical practices that treat HIV patients. The Company will
continue to explore alternative opportunities to market T-20, either internally
or in conjunction with appropriate marketing partners. See "Risk Factors -- Lack
of Sales, Marketing and Distribution Capabilities" and "Business -- Sales,
Marketing and Distribution."

<PAGE>
PRECLINICAL DEVELOPMENT PROGRAMS

The Company is using its proprietary technology platform to discover and
develop fusion inhibitors for other viral diseases where there are substantial
unmet medical needs.

T-786

T-786 is the Company's lead product candidate for the treatment of RSV
infection, which is a significant cause of pediatric bronchiolitis and
pneumonia. Each year in the United States, approximately 2.4 million cases of
pediatric RSV infection are reported, 100,000 infants are hospitalized with RSV
infections, and 5,000 deaths are attributed to RSV. There is currently only one
product approved for the treatment of RSV infection, and the Company believes
that this product is used sparingly because its effectiveness is limited and its
side effects are significant.

T-786 is a proprietary 36 amino acid synthetic peptide derived from a CAST
predicted domain of the RSV fusion protein. T-786 shows potent, specific and
selective inhibition of RSV infection IN VITRO. In preclinical testing, T-786
significantly reduced the level of viral infection in an animal model. Because
RSV infects lung tissue primarily, the Company believes that aerosol delivery of
its RSV therapeutic directly to the lung may be the most effective method for
administering T-786. The Company is currently developing an aerosol formulation
of T-786 for preclinical evaluation. Preclinical testing of T-786 is currently
in progress. Upon successful completion of these tests, the Company anticipates
that it will begin clinical trials for T-786 in 1998.

SECOND-GENERATION HIV FUSION INHIBITORS

Using CAST, the Company has designed proprietary second-generation, peptide
HIV fusion inhibitors which bind to regions of the HIV fusion protein target
that are different from the region bound by T-20. In preclinical testing, these
second-generation compounds have been shown to be highly effective against a
wide range of HIV strains IN VITRO. In preclinical testing, these compounds have
demonstrated pharmaceutical characteristics distinct from T-20. The Company
believes that these second-generation compounds could provide a range of future
options for the continuing treatment of HIV infection. The Company expects to
begin testing its lead second-generation HIV fusion inhibitor in animal models
in the fourth quarter of 1997.

ANTI-RSV SMALL MOLECULES

The Company has identified a series of small-molecule inhibitors of RSV
infection using its high-throughput screening assays. These assays were designed
based upon the CAST platform. Using its proprietary knowledge of the chemical
structure of these compounds, the Company has developed a number of analogs
which have demonstrated potency against RSV in preclinical testing. Several of
these analogs have also demonstrated low toxicity. The Company is continuing to
synthesize analogs of these compounds to evaluate their pharmaceutical
properties and will continue preclinical testing to identify lead compounds.

RESEARCH AND DISCOVERY PROGRAMS

The Company is leveraging its proprietary technology platform and expertise
in viral fusion to discover and develop lead compounds and product candidates to
treat a variety of diseases caused by other viruses.

ANTI-HPIV COMPOUNDS

Using CAST, the Company has developed a series of proprietary peptides
which inhibit HPIV IN VITRO. T-205, the Company's lead anti-HPIV peptide, was
derived from a coiled-coil domain of the HPIV fusion protein. T-205 shows
specific, selective and potent inhibition of HPIV infection IN VITRO. HPIV is a
cause of respiratory disease in young infants. There are no drugs currently
approved for the treatment of HPIV. The Company is conducting a research program
to evaluate T-205 and other peptide candidates for possible advancement to
preclinical development.

The Company has also discovered several small-molecule inhibitors of HPIV
using the Company's high-throughput HPIV screening assay. This assay was
designed based on the CAST platform. These compounds show potent, dose-response
inhibition of HPIV IN VITRO. The Company is currently synthesizing analogs of
these compounds to evaluate their pharmaceutical properties.

<PAGE>
ANTI-HIV SMALL MOLECULES

The Company has indentified a series of small-molecule compounds which
inhibit HIV infection IN VITRO using the Company's high-throughput HIV screening
assays. These assays were designed based on the CAST platform. The Company plans
to continue screening its chemical libraries to discover additional anti-HIV
small-molecule compounds.

INFLUENZA VIRUS

The Company has initiated an early-stage discovery program to create a
high-throughput screening assay based on CAST to identify potential
small-molecule inhibitors of influenza viral fusion. The Company has established
a collaboration with Dr. Judith White at the University of Virginia to assist in
the discovery and development of fusion inhibitors for influenza virus.

HEPATITIS B AND C VIRUS

The Company has initiated early-stage discovery programs to create
high-throughput screening assays that can identify potential small-molecule
inhibitors of the hepatitis B and C viruses. Additionally, in collaboration with
Dr. Timothy Block of the Thomas Jefferson Medical School, the Company plans to
synthesize and test peptides derived from CAST-identified regions of the
hepatitis B virus. The Company has been awarded a Phase I Small Business
Innovative Research grant from the Department of Health and Human Services for
this program.

EPSTEIN-BARR VIRUS

The Company has initiated an early-stage discovery program in Epstein-Barr
virus ("EBV") through a collaboration with Dr. Joseph Pagano of the University
of North Carolina at Chapel Hill. EBV causes infectious mononucleosis and has
been linked to a variety of cancers. Dr. Pagano is working with the Company's
scientists to develop a strategy for inhibiting a key protein required for EBV
replication. Using CAST, the Company has identified key interactive peptide
domains within this molecular target and has synthesized peptide inhibitors for
the molecular target IN VITRO.

BUSINESS STRATEGY

The Company's goal is to become a leader in anti-fusion viral therapy. To
achieve this objective, the principal elements of the Company's strategy are to:

(Bullet) VALIDATE FUSION INHIBITION THERAPY BY OBTAINING REGULATORY
APPROVAL FOR T-20. T-20 has been shown in preclinical testing to
inhibit HIV fusion. T-20 is currently being tested in Phase I/II
clinical trials, and the Company anticipates that a Phase II
pivotal trial will begin in the first half of 1998. The Company
believes that it will be able to conduct its pivotal T-20 clinical
trials program pursuant to the accelerated approval procedure
authorized by the FDA for drugs intended to treat serious or
life-threatening illnesses. The Company believes that regulatory
approval of T-20, if obtained, will provide important evidence to
support the validity of viral fusion inhibition therapy.

(Bullet) LEVERAGE ANTI-FUSION EXPERTISE TO DEVELOP OTHER ANTIVIRAL
THERAPIES. The Company believes that its proprietary technology
platform, including CAST, is applicable to many other viral
targets that may be susceptible to fusion inhibition. For example,
using CAST, the Company designed T-786 for treatment of RSV
infection. Upon the successful completion of preclinical testing,
the Company anticipates that it will begin clinical trials of
T-786 in 1998. The Company also has research and discovery
programs to identify compounds to inhibit fusion of other viruses,
including HPIV, influenza, hepatitis B and C, and EBV.
Additionally, as the Company refines and enhances CAST, the
Company believes that it will be able to develop new,
high-throughput screening assays for multiple targets.

(Bullet) TAILOR COMMERCIALIZATION CAPABILITIES TO SPECIFIC PRODUCT MARKETS.
The Company intends to evaluate the appropriate commercializaton
strategy for each of its product candidates, depending on the size
and nature of the market. For example, the Company believes that
it may develop its own capability to sell and market T-20 in the
United States because a relatively small number of physicians
write the majority of prescriptions for HIV drugs in the United
States.

MANUFACTURING

The Company has no experience in manufacturing pharmaceuticals and has no
commercial manufacturing capacity. The Company has established relationships and
intends to establish additional relationships with third-party manufacturers for
the production of quantities of its product candidates or compounds sufficient
to conduct its planned preclinical testing and clinical trials and the
commercial production of any approved products or compounds.

<PAGE>
Three different methods are currently available for the synthetic
manufacture of peptides such as T-20, namely solid-phase sequential peptide
synthesis, peptide synthesis by fragment condensation and solution-phase peptide
synthesis. In solid-phase sequential peptide synthesis, peptides are
synthetically manufactured by sequentially linking together amino acids to form
a peptide chain. The peptide chain is attached to a solid support from which the
finished peptide is chemically released after completion of this amino acid
assembly process. Because of certain technical limitations inherent in this
process that limit its efficiency, solid-phase sequential peptide synthesis is
the most expensive way to chemically assemble the Company's current peptide
product candidates, including T-20. Peptides may also be manufactured using a
process known as peptide synthesis by fragment condensation, in which peptide
segments that match sequential regions along the parent peptide sequence are
synthesized using solid-phase peptide chemistry techniques. This process is
technically more difficult to accomplish than solid-phase sequential peptide
synthesis and may not lead to a process that is commercially feasible. However,
if successful, this process is generally more economical than solid-phase
sequential peptide synthesis for peptides that are longer than approximately 15
amino acids in length. In the third peptide manufacturing method, solution-phase
peptide synthesis, peptides are synthetically manufactured by linking all amino
acids together in the peptide chain entirely in solution. This chemical assembly
process is technically the most difficult to design and implement and may be
technically infeasible on a commercial scale for peptides longer than
approximately 15 amino acids. However, the Company believes that cost savings
may be achieved beyond those possible using fragment condensation peptide
synthesis if technical difficulties with the technology are overcome.

The Company and its third-party manufacturers have manufactured sufficient
quantities of T-20 using solid-phase sequential peptide synthesis to complete
preclinical testing and initiate the Phase I/II clinical trial. The Company has
entered into agreements with two contract manufacturers for the solid-phase
sequential peptide synthetic manufacture of T-20 for use in the clinical trial.
The Company has also established a manufacturing process development and control
team consisting of four individuals with significant pharmaceutical experience
in peptide and small organic molecule process development and manufacturing.
This team is currently working to implement a strategy to manufacture T-20 using
peptide synthesis by fragment condensation. The Company anticipates that such a
process may be available to support later-stage T-20 clinical trial needs. This
team will also coordinate process implementation with third-party manufacturers
and help to ensure regulatory compliance in the manufacturing process. Although
the Company has no plans at present to evaluate solution-phase peptide synthesis
for T-20, the Company may chose to evaluate the use of this process for T-20 in
the future. There can be no assurance that the Company or its third-party
manufacturers will be able to manufacture T-20 on a cost-effective basis or that
the Company will be successful in its efforts to develop an alternative, more
efficient manufacturing method for T-20 or any of its other peptide product
candidates.

There can be no assurance that the Company will be able to retain or
establish relationships with any third-party manufacturers on acceptable terms,
if at all, or that such third-party manufacturers will be able to manufacture
products in commercial quantities under GMP requirements on a cost-effective
basis. The Company's dependence upon third parties for the manufacture of its
products, product candidates and compounds may adversely affect the Company's
profit margins and its ability to develop and commercialize product candidates,
products and compounds 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, product candidates or
compounds or that third-party manufacturers will maintain the necessary
governmental licenses and approvals to continue manufacturing the Company's
products, product candidates or compounds. Any failure to maintain existing or
establish new relationships with third parties for the Company's manufacturing
requirements on a timely basis and on acceptable terms would have a material
adverse effect on the Company's business, financial condition and results of
operations. See "Risk Factors -- Lack of Manufacturing Capabilities" and
" -- Extensive Government Regulation; No Assurance of Regulatory Approval."

LICENSING AND COLLABORATIVE AGREEMENTS

The Company intends to consider entering into collaborative and licensing
arrangements with collaborative partners, licensees and third parties to seek
regulatory approval of and to manufacture and commercialize certain of its
existing and potential product candidates and compounds. These collaborations
could provide the Company with funding, research and development resources,
access to libraries of diverse compounds and clinical development,
manufacturing, sales, marketing and distribution capabilities. Accordingly, the
Company's success will depend, in part, upon the subsequent success of such
third parties in performing preclinical testing and clinical trials, obtaining
the requisite regulatory approvals, scaling up manufacturing, successfully
commercializing the licensed product candidates or compounds and otherwise
performing their obligations. There can be no assurance that the Company will be
able to maintain its existing arrangements or enter into acceptable
collaborative and license arrangements in the future on acceptable terms, if at
all, that such arrangements will be

<PAGE>

successful, that the parties with which the Company has or may establish
arrangements will perform their obligations under the arrangements, or that
potential collaborators will not compete with the Company by seeking alternative
means of developing therapeutics for the diseases targeted by the Company. There
can also be no assurance that the Company's existing or any future arrangements
will lead to the development of product candidates or compounds with commercial
potential, that the Company will be able to obtain proprietary rights or
licenses for proprietary rights with respect to any technology developed in
connection with these arrangements, or that the Company will be able to ensure
the confidentiality of any proprietary rights and information developed in such
arrangements or prevent the public disclosure thereof. The Company currently has
a license from Duke University (as described below), and in the future may
require additional licenses from these or other parties, to effectively develop
potential product candidates and compounds.

The Company has received approximately $.3 million from SBIR grants. The
first grant, "Screens for Identifying HIV Fusion Inhibitors -- Phase I," was
completed during 1995. Phase II of that grant, in the amount of $365,000, is
currently in progress with a projected completion date in March 1998. Another
grant, "Peptide Therapeutics for the Liver Cancer Pathogen HBV," was begun
during 1996 and completed in 1997. There can be no assurance that the funding
provided by such grants will be sufficient to complete the studies contemplated
by such programs or that the Company will receive any additional future grants
under any of these programs.

The Company also received approximately $100,000 from a third party under
an investigative contract. The purpose of this contract was to identify
pharmaceutical compounds in late stage clinical development that may be licensed
for sale in the United States and other foreign countries. There can be no
assurance that the Company will receive any additional funding under this or any
other similar contract.

In April 1997, the Company and MiniMed entered into the MiniMed Agreement.
Under the agreement, the Company and MiniMed will collaborate in the development
and delivery of therapies for the treatment of targeted indications by combining
the continuous infusion delivery pump of MiniMed and the antiviral product
candidates and compounds being developed by the Company. The first collaborative
project under the terms of the agreement will involve the continuous delivery of
T-20. The parties intend to initiate clinical trials for the delivery of T-20
with MiniMed's continuous infusion delivery pump in the third quarter of 1997.
While MiniMed's continuous infusion pump has been approved for the continuous,
subcutaneous infusion of other therapies, there can be no assurance that the FDA
will approve on a timely basis, if at all, the use of the delivery of T-20
utilizing the MiniMed continuous infusion pump. The parties are evaluating other
product candidates and compounds for inclusion under the agreement. Under the
terms of the agreement, a joint management committee will determine an
implementation strategy for each collaborative project. The agreement contains
certain exclusivity and noncompetition provisions, subject to the Company's
right, under certain circumstances, to terminate such obligations with respect
to T-20 in exchange for certain royalty payments. The failure of the Company and
MiniMed to achieve their collective objectives could have a material adverse
effect on the Company's business, financial condiiton and results of operations.

Pursuant to the Duke License, the Company has obtained from Duke University
an exclusive, worldwide, royalty-free license to all discoveries and inventions
in the field of antiviral therapeutics emanating from the laboratories of Drs.
Dani Bolognesi, Thomas J. Matthews, Michael Greenberg and Kent Weinhold of the
Duke University Center for AIDS Research for the period from February 3, 1993
until February 2, 2000. The Company's rights to each of these discoveries and
inventions expire upon the expiration of the life of the particular patent.
Multiple discoveries and inventions have flowed to the Company under the Duke
License and include those upon which United States patents have been issued.
None of the technologies licensed by the Company from Duke University is the
subject of a separate license agreement. Rather, the Company's rights to such
technologies are licensed solely pursuant to the Duke License. While the Company
believes it will be able to successfully negotiate an extension or renewal of
the Duke License, there can be no assurance that the Company will be able to
obtain such an extension or renewal or that such an extension or renewal will be
on acceptable terms. The early termination of the Duke License or the failure of
the Company to renew the Duke License on acceptable terms, if at all, could have
a material adverse effect on the Company's business, financial condition and
results of operations. See "Risk Factors -- License and Collaborative
Agreements" and " -- Extensive Government Regulation; No Assurance of Regulatory
Approval."

SALES, MARKETING AND DISTRIBUTION

The Company has no experience in sales, marketing or distribution of
pharmaceuticals and currently has no personnel employed in any such capacities.
However, the Company intends to develop such capability in certain areas. For
example, because a relatively small number of physicians write the majority of
prescriptions for HIV drugs in the United States, the

<PAGE>
Company intends to consider developing in-house sales, marketing and
distribution capabilities to address the market. In other areas, however, the
Company may rely on marketing partners or other arrangements with third parties
which have established distribution systems and direct sales forces for the
sales, marketing and distribution of such products and compounds. In the event
that the Company is unable to reach agreement with one or more marketing
partners to market these other products and compounds, it may be required to
develop internal sales, marketing and distribution capabilities for such
products and compounds. There can be no assurance that the Company will be able
to establish sales, marketing or distribution capabilities or make arrangements
with third parties to perform such activities on acceptable terms, if at all, or
that any internal capabilities or third-party arrangements will be
cost-effective. The failure to establish such capabilities would have a material
adverse effect on the Company's business, financial condition and results of
operations.

In addition, any third parties with which the Company establishes sales,
marketing or distribution arrangements may have significant control over
important aspects of the commercialization of the Company's products, and
compounds including market identification, marketing methods, pricing,
composition of sales force and promotional activities. For example, the MiniMed
Agreement contemplates that MiniMed will participate in the sales, marketing and
distribution of any products jointly developed by the parties. There can be no
assurance that the Company will be able to control the amount and timing of
resources that MiniMed or any other third party may devote to the Company's
products or compounds 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 compounds and the withdrawal of support
for the Company's products and compounds. See "Risk Factors -- Lack of Sales,
Marketing and Distribution Capabilities."

PATENTS, PROPRIETARY TECHNOLOGY AND TRADE SECRETS

The Company's success will depend, in part, on its ability, and the ability
of its collaborators or licensors, to obtain protection for its products and
technologies under United States and foreign patent laws, to preserve its trade
secrets and to operate without infringing the proprietary rights of third
parties. Because of the substantial length of time and expense associated with
bringing new products through development to the marketplace, the pharmaceutical
and biotechnology industries place considerable importance on obtaining, and
maintaining, patent and trade secret protection for new technologies, products
and processes.

As of August 15, 1997, the Company was the sole assignee of one pending
United States patent application and one pending patent application under the
Patent Cooperation Treaty designating the United States, directed to
combinatorial therapy employing its proprietary antifusion peptides and other
therapeutic agents, and the owner of one pending provisional application,
directed to certain antifusion chemical compounds discovered by the Company's
proprietary screening method. In addition, as of August 15, 1997, the Company
was the assignee or owner, along with Duke University, of 14 pending United
States applications, along with certain corresponding foreign patent
applications, directed to numerous antifusion peptides and their therapeutic
uses. Under the Duke License, the Company is the exclusive licensee under Duke
University's rights in these jointly-owned patent applications, as well as the
exclusive licensee under three issued United States patents, six pending United
States patent applications, and certain corresponding foreign patent
applications directed to antifusion peptides.

Legal standards relating to the scope of claims and the validity of patents
in the biotechnology industry are uncertain and still evolving, and no assurance
can be given as to the degree of protection that will be afforded any patents
issued to, or licensed by, the Company. There can be no assurance that, if
challenged by others in litigation, any patents assigned to, or licensed by, the
Company, will not be found invalid. Furthermore, there can be no assurance that
the Company's activities will not infringe patents owned by others. Defense and
prosecution of patent matters can be expensive and time-consuming, and
regardless of whether the outcome is favorable to the Company, can result in the
diversion of substantial financial, management and other resources. An adverse
outcome could subject the Company to significant liability to third parties,
require the Company to obtain licenses from third parties, or require the
Company to cease any related product sales. No assurance can be given that any
licenses required under any such patents or proprietary rights would be made
available on terms acceptable to the Company, if at all. Moreover, the laws of
certain countries may not protect the Company's proprietary rights to the same
extent as U.S. law.

<PAGE>
maintain the confidentiality of such trade secrets or proprietary information,
or that the trade secrets or proprietary know-how of the Company will not
otherwise become known, or be independently developed by, competitors.

In January 1997, the USPTO instituted an interference proceeding between an
issued patent licensed by the Company from Duke University and a pending patent
application owned by a third party. An interference proceeding is an action, in
the USPTO, to determine which, of several parties, is entitled to a patent. An
interference proceeding may be instituted when the USPTO believes that a pending
patent application and an issued patent claim the same patentable subject
matter. The Company believes that no interference-in-fact exists, i.e., that the
parties to the interference are not claiming the same patentable invention, and,
through its licensor, the Company is taking all reasonable action to have the
interference proceeding dismissed. However, no assurance can be given that the
interference proceeding will be dismissed. Furthermore, no assurance can be
given that, should the interference proceeding continue, as between the two
parties to the interference, the Company's licensor will be found to be the
first inventor of the invention which is declared to be the subject matter of
the interference proceeding. Failure of the Company's licensor to prevail in the
interference proceeding and any loss of the involved patent rights could have a
material adverse effect on the Company's business, financial results and results
of operations. See "Risk Factors -- Patents, Proprietary, Technology and Trade
Secrets."

COMPETITION

The Company is engaged in segments of the biopharmaceutical industry,
including the treatment of HIV, that are intensely competitive and rapidly
changing. If successfully developed and approved, the product candidates and
compounds that the Company is currently developing will compete with numerous
existing therapies. For example, 11 drugs are currently approved for the
treatment of HIV. In addition, a number of companies are pursuing the
development of novel pharmaceutical products that target the same diseases that
the Company is targeting, and some companies, including several multinational
pharmaceutical companies, are simultaneously marketing several different drugs
and may therefore be able to market their own combination drug therapies. 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.

Although the Company believes that there is a significant future market for
therapeutics that treat HIV and other viral diseases, 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 for the treatment of HIV
developed by the Company's competitors, including Glaxo, Merck and Abbott, will
not be more effective, or more effectively marketed and sold, than T-20, should
it be successfully developed and receive regulatory approval, or any other
therapeutic for HIV that may be developed by the Company. Competitive products
or the development by others of a cure or new treatment methods may render the
Company's technologies and products and compounds obsolete, noncompetitive or
uneconomical prior to the Company's recovery of development or commercialization
expenses incurred with respect to any such technologies or products or
compounds. 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, sell, market and distribute 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. For use individually or in
combination therapy, 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.

New developments in areas in which the Company is conducting its research
and development are expected to continue at a rapid pace in both industry and
academia. If the Company's product candidates and compounds are successfully
developed and approved, the Company will face competition based on the safety
and effectiveness of its products and compounds, the timing and scope of
regulatory approvals, availability of manufacturing, sales, marketing and
distribution capabilities, 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's business, financial condition and results of
operations. See "Risk Factors -- Intense Competition."

<PAGE>
GOVERNMENT REGULATION

Human pharmaceutical products are subject to lengthy and rigorous
preclinical testing and clinical trials and other extensive, costly and
time-consuming procedures mandated by the FDA and foreign regulatory
authorities. The regulatory approval process, which includes the establishment
of the safety and effectiveness of each product candidate and compound for each
target indication and confirmation by the FDA that good laboratory, clinical and
manufacturing practices were maintained during testing and manufacturing,
typically takes a number of years, varying based upon the type, complexity and
novelty of the pharmaceutical product. This process requires the expenditure of
substantial resources and gives larger companies with greater financial
resources a competitive advantage over the Company. To date, no product
candidate or compound being evaluated by the Company has been submitted for
approval by the FDA or any other regulatory authority for commercialization, and
there can be no assurance that any such product candidate or compound will ever
be approved for commercialization or that the Company will be able to obtain the
labeling claims desired for its product candidates or compounds.

The steps required by the FDA before new drugs may be marketed in the
United States include: (i) preclinical studies; (ii) the submission to the FDA
of a request for authorization to conduct clinical trials on an investigational
drug (an "IND"); (iii) adequate and well-controlled clinical trials to establish
the safety and efficacy of the drug for its intended use; (iv) submission to the
FDA of an NDA; and (v) review and approval of the NDA by the FDA before the drug
may be shipped or sold commercially.

In the United States, preclinical testing includes both IN VITRO and IN
VIVO laboratory evaluation and characterization of the safety and efficacy of a
drug and its formulation. Laboratories involved in preclinical testing must
comply with FDA regulations regarding good laboratory practices. Preclinical
testing results are submitted to the FDA as part of the IND and, unless there is
objection by the FDA, the IND will become effective 30 days following its
receipt by the FDA. There can be no assurance that submission of an IND will
result in the commencement of human clinical trials.

Clinical trials, which involve the administration of the investigational
drug to healthy volunteers or to patients under the supervision of a qualified
principal investigator, are typically conducted in three sequential phases,
although the phases may overlap with one another. Clinical trials must be
conducted in accordance with good clinical procedures under protocols that
detail the objectives of the clinical trial, the parameters to be used to
monitor safety and the effectiveness criteria to be evaluated. Each protocol
must be submitted to the FDA as part of the IND. Further, each clinical trial
must be conducted under the auspices of an independent Institutional Review
Board (an "IRB") at the institution where the clinical trial will be conducted.
The IRB will consider, among other things, ethical factors, the safety of human
subjects and the possible liability of the institution. Compounds must be
formulated according to GMP requirements.

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

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

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

The approval process is affected by a number of factors, including the
severity of the targeted indications, the availability of alternative treatments
and the risks and benefits demonstrated in the clinical trials. The FDA may
reject an NDA if applicable regulatory criteria are not satisfied, or may
require additional testing or information with respect to the product candidate
or compound. Even if FDA approval is obtained, further clinical trials,
including post-market trials, may be required in order to provide additional
data on safety and will be required in order to obtain approval for the use of a
product as treatment for clinical indications other than those for which the
product was initially approved. The FDA will also require post-market reporting
and may require surveillance programs to monitor the side effects of any
approved products. Results of post-market programs may limit the further
marketing, manufacturing process or labeling, and an NDA supplement may be
required to be submitted to the FDA. Any failure of the Company to successfully
complete its clinical trials and obtain

<PAGE>
approvals of corresponding NDAs would have a material adverse effect on the
Company's business, financial condition and results of operations. The Company
is and will continue to be dependent upon the laboratories conducting its
preclinical testing and clinical trials to maintain both good laboratory and
good clinical practices, and, if any of the Company's product candidates or
compounds obtain the requisite regulatory approvals, the Company will be
dependent upon the manufacturers of its products to maintain compliance with GMP
requirements. Various federal and foreign statutes and regulations also govern
or influence the manufacturing, safety, labeling, storage, record-keeping and
marketing of pharmaceutical products.

In 1988, the FDA issued regulations to expedite the development, evaluation
and marketing of drugs for life-threatening and severely debilitating illnesses,
especially where no alternative therapy exists. These procedures encourage early
consultation between the IND sponsors and the FDA in the preclinical testing and
clinical trial phases to determine what evidence will be necessary for marketing
approval and to assist the sponsors in designing clinical trials. Under this
program, the FDA works closely with the IND sponsors to accelerate and condense
Phase II clinical trials, which may, in some cases, eliminate the need to
conduct Phase III trials or limit the scope of Phase III trials. Under these
regulations, the FDA may require postmarketing clinical trials ("Phase IV
trials") to obtain additional information on the drug's risks, benefits and
optimal use. In 1992, the FDA issued regulations establishing an accelerated NDA
approval procedure for certain drugs under Subpart H of the agency's NDA
approval regulations ("Subpart H Regulations"). The Subpart H Regulations
provide for accelerated NDA approval for new drugs intended to treat serious or
life-threatening diseases where the drugs provide a meaningful therapeutic
advantage over existing treatment. Under this accelerated approval procedure,
the FDA may approve a drug based on evidence from adequate and well-controlled
studies of the drug's effect on a surrogate endpoint that reasonably suggest
clinical benefits, or on evidence of the drug's effect on a clinical endpoint
other than survival or irreversible morbidity. This approval is conditional on
the favorable completion of trials to establish and define the degree of
clinical benefits to the patient. Such post-market clinical trials would usually
be underway when the product obtains this accelerated approval. If, after
approval, a post-market clinical trial establishes that the drug does not
perform as expected, or if post-market restrictions are not adhered to or are
not adequate to ensure the safe use of the drug, or other evidence demonstrates
that the product is not safe and/or effective under its conditions of use, the
FDA may withdraw approval. These two accelerated approval procedures for
expediting the clinical evaluation and approval of certain drugs may shorten the
drug development process by as much as two to three years.

While certain of the Company's product candidates and compounds, including
T-20, have been designed to treat serious or life-threatening illnesses, such
product candidates and compounds may not qualify for accelerated development
and/or approval under FDA regulations and, even if some of the Company's product
candidates qualify for accelerated development and/or approval, they may not be
approved for marketing on an accelerated basis, or at all. There can be no
assurance that, even after substantial time and expenditures, any of the
Company's product candidates or compounds under development will receive
commercialization approval in any country on a timely basis, or at all. If the
Company is unable to demonstrate the safety and effectiveness of its product
candidates and compounds to the satisfaction of the FDA or foreign regulatory
authorities, the Company will be unable to commercialize its product candidates
and compounds; and the Company's business, financial condition and results of
operations would be materially and adversely affected. Furthermore, even if
regulatory approval of a product candidate or compound is obtained, the approval
may entail limitations on the indicated uses for which the product candidate or
compound may be marketed. A marketed product or compound, 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, compound, manufacturer or facility may result in restrictions on such
product, compound, manufacturer or facility, including withdrawal of the product
or compound from the market. The failure to comply with applicable regulatory
requirements can, among other things, result in fines, injunctions, civil
penalties, total or partial suspension of regulatory approvals, refusal to
approve pending applications, refusal to permit exports from the United States,
recalls or seizures of products, operating and production restrictions and
criminal prosecutions. Further, FDA policy may change and

<PAGE>
additional government regulations may be established that could prevent or delay
regulatory approval of the Company's product candidates or compounds.

In April 1997, the Company and MiniMed entered into the MiniMed Agreement
pursuant to which the parties have agreed to jointly design, develop and
implement a system for the continual delivery of T-20 utilizing the MiniMed
continuous infusion pump. There can be no assurance that the FDA will approve
the delivery of T-20 utilizing the MiniMed continuous infusion pump on a timely
basis, if at all. The failure of the Company and MiniMed to collectively develop
a continual T-20 delivery system which receives FDA approval on a timely basis
could have a material adverse effect on the Company's business, financial
condition and results of operations.

In addition, this Prospectus reflects the Company's estimates regarding
future regulatory submission dates. Regulatory submissions can be delayed, or
plans to submit proposed products can be cancelled, for a number of reasons,
including the receipt of unanticipated, adverse or ambiguous results from
preclinical testing or clinical trials, the demonstration of undesirable or
unintended side effects, the inability to locate, recruit and qualify sufficient
numbers of patients, lack of funding, the inability to locate or recruit
scientists to undertake or complete planned preclinical testing or clinical
trials, the redesign of the Company's preclinical testing or clinical trial
programs, the inability to manufacture or acquire sufficient quantities of the
particular product candidate or any other components required for preclinical
testing or clinical trials, regulatory delays or other regulatory actions,
changes in focus of the Company's or its collaborators' development efforts, and
the disclosure of clinical trial results by competitors. Accordingly, no
assurances can be given that the Company's anticipated submissions will be made
on their target dates, or at all. Delays in such submissions could delay
regulatory approval for the Company's product candidates, delay
commercialization of the Company's product candidates, increase operating
expenses, result in the expenditure of additional capital, cause the diversion
of management time and attention, or create adverse market perception about the
Company and its product candidates, any of which could have a material adverse
effect on the Company's business, financial condition and results of operations.
See "Business -- Government Regulation."

THIRD PARTY REIMBURSEMENT AND HEALTH CARE REFORM MEASURES

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 agencies and private insurance
plans. Third-party payors are increasingly challenging the prices charged for
medical products and services in an effort to promote cost containment measures
and alternative health care delivery systems and they may mandate predetermined
discounts from list prices. If the Company succeeds in bringing one or more
products or compounds to the market, there can be no assurance that these
products or compounds will be considered cost-effective or that reimbursement to
the consumer will be available or will be sufficient to allow the Company to
sell its products or compounds on a competitive basis. The business and
financial condition of pharmaceutical companies will continue to be affected by
economic, political and regulatory influences, including 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. Because of
the high cost of the treatment of AIDS or HIV using combination therapy, many
state legislatures are reassessing reimbursement policies for such therapy. In
addition, an increasing emphasis on managed care in the United States to reduce
the overall costs of health care has and will continue to increase the pressure
on pharmaceutical pricing. While the Company cannot predict whether legislative
or regulatory proposals will be adopted or the effect such proposals or managed
care efforts may have on its business, the announcement and/or adoption of such
proposals or efforts could have a material adverse effect

<PAGE>
on the Company's business, financial condition and results of operations. See
"Risk Factors -- Uncertainty of Third Party Reimbursement and Health Care Reform
Measures."

FACILITIES

The Company currently leases approximately 21,000 square feet of laboratory
and office space at 4727 University Drive, Suite 100, Durham, North Carolina.
The Company leases this space under a sublease agreement which expires on
September 30, 1999. Depending on the results of clinical trials and the progress
of the Company's product development programs, the Company may require
facilities in addition to those currently under lease. The Company believes that
there will be suitable facilities available as needed.

LEGAL PROCEEDINGS

The Company is not a party to any material legal proceedings.

HUMAN RESOURCES

As of June 30, 1997, the Company had 37 full-time employees, including a
technical scientific staff of 29. None of the Company's employees are covered by
collective bargaining arrangements, and management considers relations with its
employees to be good. See "Risk Factors -- Need to Attract and Retain Key
Officers, Employees and Consultants."

SCIENTIFIC ADVISORY BOARD

The Company has assembled a Scientific Advisory Board (the "SAB") comprised
of eight individuals (the "Scientific Advisors") who are leaders in the fields
of viral disease research and treatment.

Members of the SAB review the Company's research, development and operating
activities and are available for consultation with the Company's management and
staff relating to their respective areas of expertise. The SAB holds regular
meetings. Several of the individual Scientific Advisors have separate consulting
relationships with the Company and meet more frequently, on an individual basis,
with the Company's management and staff to discuss the Company's ongoing
research and development projects. Certain of the Scientific Advisors own Common
Stock and/or hold options to purchase Common Stock. The Scientific Advisors are
expected to devote only a small portion of their time to the business of the
Company.

The Scientific Advisors are all employed by entities other than the
Company. Each Scientific Advisor has entered into a letter agreement with the
Company that contains confidentiality and non-disclosure provisions that
prohibit the disclosure of confidential information to anyone outside the
Company. Such letter agreements also provide that all inventions, discoveries or
other intellectual property that come to the attention of or are discovered by
the Scientific Advisor while performing services under the letter agreement with
the Company will be assigned to the Company. The current members of the SAB are
as follows:

DANI P. BOLOGNESI, PH.D. James B. Duke Professor of Surgery, Professor of
Microbiology/Immunology, Vice Chairman of the Department of Surgery for Research
and Development, Director of the Duke University Center for AIDS Research --
Duke University.

ROBERT C. GALLO, M.D. Professor and Director, Institute of Human
Virology -- University of Maryland Biotechnology Institute.

ERIC HUNTER, PH.D. Professor of Microbiology, Director, Center for AIDS
Research -- The University of Alabama at Birmingham.

THOMAS J. MATTHEWS, PH.D. Associate Professor of Experimental
Surgery -- Duke University.

JOSEPH S. PAGANO, M.D. Professor of Medicine and Microbiology and
Immunology, Director of The Lineberger Comprehensive Cancer Center -- The
University of North Carolina at Chapel Hill.

JEROME J. SCHENTAG, PHARM.D. Professor of Pharmacy and Pharmaceutics,
Director, The Clinical Pharmacokinetics Laboratory, Millard Fillmore Hospital,
Director, Center for Clinical Pharmacy Research -- The State University of New
York at Buffalo School of Pharmacy.

JUDITH M. WHITE, PH.D. Professor of Cell Biology and
Microbiology -- University of Virginia.

RICHARD J. WHITLEY, M.D. Loeb Eminent Scholar Chair in Pediatrics,
Professor of Pediatrics, Microbiology and Medicine -- The University of Alabama
at Birmingham.

<PAGE>
MANAGEMENT

EXECUTIVE OFFICERS, DIRECTORS AND KEY EMPLOYEES

The following table sets forth certain information with respect to
executive officers, directors and certain key employees of the Company:

<TABLE>
<CAPTION>
NAME AGE POSITION

<S> <C> <C>
M. Ross Johnson, Ph.D.................................... 52 President, Chief Executive Officer, Chief Scientific
Officer and Director

Matthew A. Megaro........................................ 39 Chief Operating Officer, Chief Financial Officer,
Executive Vice President and Secretary

Samuel Hopkins, Ph.D..................................... 38 Vice President of Medical Affairs

Dennis M. Lambert, Ph.D.................................. 50 Vice President of Biological and Molecular Sciences

M.C. Kang, Ph.D.......................................... 45 Director of Chemistry

Michael A. Recny, Ph.D................................... 41 Director of Business Development

Timothy J. Creech........................................ 36 Director of Finance

Jesse I. Treu, Ph.D.(1).................................. 50 Chairman of the Board of Directors

Dani P. Bolognesi, Ph.D.(2).............................. 56 Director

Brian H. Dovey(2)........................................ 55 Director

Andrew S. McCreath(1).................................... 41 Director

Charles A. Sanders, M.D.(1)(2)........................... 65 Director
</TABLE>

(1) Member of the Audit Committee.
(2) Member of the Compensation Committee.

M. ROSS JOHNSON, PH.D. joined the Company as Chief Scientific Officer and a
Director in January 1995 and was named President and Chief Executive Officer in
March 1996. Prior to joining the Company, Dr. Johnson was President and Chief
Executive Officer of Parnassus Pharmaceuticals, Inc. ("Parnassus"), a
biopharmaceutical company, from March 1994 to October 1994. In October 1994,
Parnassus filed for protection under the United States Bankruptcy Code. From
1987 to March 1994, Dr. Johnson served as Vice President of the Chemical
Development Division and Division of Chemistry, respectively, at Glaxo, a
multinational pharmaceutical company. Prior to joining Glaxo, Dr. Johnson held a
number of scientific management positions at Pfizer Inc., a multinational
pharmaceutical company. Dr. Johnson received his Ph.D. degree in Organic
Chemistry from the University of California at Santa Barbara.

MATTHEW A. MEGARO joined the Company as Chief Financial Officer and Vice
President of Business Development in March 1995 and was named Chief Operating
Officer, Executive Vice President and Secretary of the Company in June 1997.
Prior to joining the Company, Mr. Megaro was Chief Operating Officer of
Parnassus from January 1994 to October 1994. In October 1994, Parnassus filed
for protection under the United States Bankruptcy Code. Prior to joining
Parnassus, Mr. Megaro was Chief Financial Officer, Vice President of Finance and
Administration of Athena Neurosciences, Inc., a biopharmaceutical company, from
1988 to January 1994.

SAMUEL HOPKINS, PH.D. joined the Company as Director of Drug Development in
April 1995 and was named Vice President of Medical Affairs in June 1997. Prior
to joining the Company, Dr. Hopkins was Director of Oncology and Antiviral Drug
Product Development and Senior Clinical Research Scientist, respectively, at
Cato Research, Ltd., a contract research organization from 1991 to April 1995.
From 1987 to 1991, Dr. Hopkins was a Senior Research Scientist in the Division
of Virology at Burroughs Wellcome Co., a multinational pharmaceutical company.
Dr. Hopkins received his Ph.D. degree in Biochemisty and Biophysics from the
Medical College of Virginia.

DENNIS M. LAMBERT, PH.D. joined the Company as Director of Virology in March
1993, was named Senior Director of Virology and Molecular Biology in September
1995, and was named Vice President of Biological Molecular Sciences in June
1997. Prior to joining the Company, Dr. Lambert was Assistant Director,
Department of Molecular Virology and Host Defense, at SmithKline Beecham Corp.,
a pharmaceutical company, from 1988 to July 1993. Dr. Lambert received his Ph.D.
degree in Microbiology/Virology from Indiana State University at Terre Haute.

<PAGE>
M.C. KANG, PH.D. joined the Company as a consultant in October 1995 and was
named Director of Chemistry in August 1996. Prior to joining the Company, Dr.
Kang held various positions at Glaxo from 1990 to October 1995, most recently
serving as Director of Chemical Development. Prior to joining Glaxo, Dr. Kang
was a Development Chemist in the Medical Products Division at E.I. DuPont de
Nemours and Company, a chemical company from 1986 to 1990. Dr. Kang received his
Ph.D. degree in Synthetic Organic Chemistry from Oregon State University.

MICHAEL A. RECNY, PH.D. joined the Company as Director of Biochemical Sciences
in March 1995, and was named Director of Business Development in November 1996.
Prior to joining the Company, Dr. Recny was Senior Director of Biological
Sciences at Parnassus from November 1993 to October 1994. From 1988 to November
1993, Dr. Recny was Director of Protein Biochemistry at Procept, Inc., a
biopharmaceutical company. Prior to joining Procept, Inc., Dr. Recny was a Staff
Scientist/Laboratory Head at Genetics Institute Inc., a biopharmaceutical
company. Dr. Recny received his Ph.D. degree in Biochemistry from the University
of Illinois at Urbana-Champaign.

TIMOTHY J. CREECH, C.P.A. joined the Company as Director of Finance in July
1997. Prior to joining the Company, Mr. Creech was Corporate Controller at
Performance Awareness Corporation, a software company, from July 1996 to June
1997. From December 1993 to July 1996, Mr. Creech was Director of Finance at
Avant! Corporation, a software company. From 1990 to December 1993, Mr. Creech
was a senior manager at KPMG Peat Marwick LLP, independent auditors for the
Company.

JESSE I. TREU, PH.D. has been Chairman of the Board of Directors of the Company
since its inception. Dr. Treu has been a general partner of Domain Associates, a
venture capital firm specializing in investments in life sciences, since 1986.
Dr. Treu serves on the Boards of Directors of Biosite Diagnostics, Inc. and
GelTex Pharmaceuticals, Inc. Dr. Treu received his Ph.D. in Physics from
Princeton University.

DANI P. BOLOGNESI, PH.D. was a founder of the Company and has been a Director
since its inception. Dr. Bolognesi has held a number of positions at Duke
University since 1971, and now serves as James B. Duke Professor of Surgery,
Professor of Microbiology/Immunology, Vice Chairman of the Department of Surgery
for Research and Development and Director of the Duke University Center for AIDS
Research. Dr. Bolognesi is the Co-Chair of the National Institute of Allergy and
Infectious Diseases Vaccine Working Group ("NIAID"), Chair of the Office of AIDS
Research Coordinating Committee for Vaccines, Chair of the Office of AIDS
Research Task Force Vaccine Reasearch and Development Area Review Panel, Chair
of the panel to recommend strategies for the long-term care of the United States
biomedical chimpanzee population, and is a member of the NIAID Vaccine Selection
Committee. Dr. Bolognesi received his Ph.D. in Virology from Duke University.

BRIAN H. DOVEY has been a Director of the Company since its inception. Mr. Dovey
has been a general partner of Domain Associates, a venture capital firm
specializing in investments in life sciences, since 1988. Mr. Dovey is President
of the National Venture Capital Association and is a member of the Boards of
Trustees of the Coriell Institute and the University of Pennsylvania School of
Nursing. Mr. Dovey is Chairman of the Board of Directors of Creative
BioMolecules and also serves on the Boards of Directors of Connetics
Corporation, Geron Corporation, NABI and Vivus, Inc.

ANDREW S. MCCREATH, C.F.A. has been a Director of the Company since October
1996. In January 1996, Mr. McCreath became a founding partner of Lawrence &
Company Inc., a private investment firm in Toronto, Canada which specializes in
the technology, health care, and leisure industries. From 1991 to December 1995,
Mr. McCreath served as a partner and director of Gordon Capital Corporation, a
Canadian investment bank. Mr. McCreath serves on the Board of Directors of
Galaxy Brands International.

CHARLES A. SANDERS, M.D. has been a Director of the Company since October 1996.
From 1989 to May 1995, Dr. Sanders was Chairman of the Board of Directors and
Chief Executive Officer of Glaxo and a member of the Board of Directors of Glaxo
plc. Prior to joining Glaxo, Dr. Sanders held a number of positions at Squibb
Corporation, a multinational pharmaceutical corporation, including Vice
Chairman, Chief Executive Officer of the Science and Technology Group and
Chairman of the Science and Technology Committee of the Board. Dr. Sanders
serves on the Boards of Directors of Magainin Pharmaceuticals, Vertex
Pharmaceuticals and Staff Mark, Inc. Dr. Sanders received an M.D. degree from
Southwestern Medical College of the University of Texas.

BOARD OF DIRECTORS

In accordance with the terms of the Company's Third Amended and Restated
Certificate of Incorporation to be filed upon the completion of this Offering,
the Board of Directors of the Company will be divided into three classes,
denominated Class I, Class II and Class III, with members of each class holding
office for staggered three-year terms. At each annual stockholder meeting
commencing with the 1998 annual meeting, the successors to the Directors whose
terms expire will be

<PAGE>
elected to serve from the time of their election and qualification until the
third annual meeting of stockholders following their election or until a
successor has been duly elected and qualified. Officers serve at the discretion
of the Board.

The Compensation Committee of the Board was established in April 1997 to
determine the salaries and incentive compensation of the executive officers of
the Company and to provide recommendations for the salaries and incentive
compensation of the other employees and consultants of the Company. The
Compensation Committee also administers the Company's benefit plans, including
the Stock Option Plan. Mr. Dovey serves as the Chairman of the Compensation
Committee and the other members of the committee are Drs. Bolognesi and Sanders.

The Audit Committee of the Board was established in July 1997 to review,
act on and report to the Board with respect to various auditing and accounting
matters, including the selection of the Company's independent auditors, the
scope of the annual audits, the fees to be paid to the independent auditors, the
performance of the Company's independent auditors and the accounting practices
of the Company. Dr. Treu serves as the Chairman of the Audit Committee and the
other members of the committee are Mr. McCreath and Dr. Sanders.

EXECUTIVE COMPENSATION

The following table sets forth certain information with respect to the
annual and long-term compensation paid by the Company during the fiscal year
ended December 31, 1996 to the Company's President and Chief Executive Officer
and to the Company's two other most highly compensated executive officers who
were serving as executive officers and whose 1996 compensation exceeded $100,000
(collectively, the "Named Executive Officers").

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
SECURITIES
ANNUAL COMPENSATION UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS(#)
<S> <C> <C> <C> <C>
M. Ross Johnson (1) 1996 $ 238,800 $50,000 117,648(2)
President, Chief Executive Officer and Chief
Scientific Officer
Richard A. Franco (3) 1996 60,000 -- 94,118(2)
Former President and Chief Executive Officer
Matthew A. Megaro 1996 160,300 34,000 51,765(2)
Chief Operating Officer, Chief Financial Officer,
Executive Vice President and Secretary
Max N. Wallace (5) 1996 144,900 26,000 52,765(2)
Former Executive Vice President, General Counsel and
Secretary

<CAPTION>
ALL OTHER
NAME AND PRINCIPAL POSITION COMPENSATION
<S> <C>
M. Ross Johnson (1) $ --
President, Chief Executive Officer and Chief
Scientific Officer
Richard A. Franco (3) 244,897(4)
Former President and Chief Executive Officer
Matthew A. Megaro --
Chief Operating Officer, Chief Financial Officer,
Executive Vice President and Secretary
Max N. Wallace (5) --
Former Executive Vice President, General Counsel and
Secretary
</TABLE>

(1) Dr. Johnson was named President and Chief Executive Officer of the Company
in April 1996.

(2) For information regarding the vesting and subsequent exercise of these
options, see the table entitled Option Grants in the Year Ended December 31,
1996 and the notes thereto and "Certain Transactions."

(3) Mr. Franco resigned as President and Chief Executive Officer of the Company
in March 1996.

(4) Consists of amounts paid to Mr. Franco following the termination of his
employment with the Company pursuant to a severance arrangement with the
Company.

(5) Mr. Wallace resigned as Executive Vice President, General Counsel and
Secretary in July 1997.

<PAGE>
STOCK OPTION INFORMATION

The following table sets forth certain information concerning stock options
granted to the Named Executive Officers of the Company during the year ended
December 31, 1996. No stock appreciation rights were granted to any of the Named
Executive Officers during 1996 and no stock appreciation rights were outstanding
as of December 31, 1996.

OPTIONS GRANTED IN THE YEAR ENDED DECEMBER 31, 1996

<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT
INDIVIDUAL GRANTS ASSUMED ANNUAL RATES
NUMBER OF PERCENT OF OF
SECURITIES TOTAL STOCK PRICE
UNDERLYING OPTIONS GRANTED EXERCISE APPRECIATION
OPTIONS TO EMPLOYEES IN PRICE PER EXPIRATION FOR OPTION TERM(3)
NAME GRANTED(#)(1) 1996 SHARE(2) DATE 5% 10%
<S> <C> <C> <C> <C> <C> <C>
M. Ross Johnson 117,648(4) 24% $0.34 05/01/06 $25,156 $63,750
Richard A. Franco 94,118 19 0.34 03/25/06 20,125 51,000
Matthew A. Megaro 51,765(5) 11 0.34 05/01/06 11,069 28,050
Max N. Wallace 52,765(6) 11 0.34 05/01/06 11,282 28,592
</TABLE>

(1) These options were granted under the Company's Stock Option Plan.

(2) The exercise price per share of the options was equal to the fair market
value of the Common Stock on the date of grant as determined by the Board of
Directors.

(3) The potential realizable value of the options reported above was calculated
by assuming that the market price of the Common Stock of the Company
appreciates 5% and 10% compounded annually over the term of the options (10
years). These assumed annual rates of appreciation were used in compliance
with the rules of the Securities and Exchange Commission and are not
intended to forecast future prices appreciation of the Common Stock of the
Company. These amounts do not represent the Company's estimate of future
stock price performance. The actual value realized from the options could be
substantially higher or lower than the values reported above, depending upon
the future appreciation or depreciation of the Common Stock during the
option period and the timing of exercise of the options.

(4) In October 1996, the Board of Directors granted options to purchase 35,295
shares, 35,295 shares and 47,058 shares which were scheduled to vest ratably
over a 48-month period which commenced in January 1995, July 1995 and March
1996, respectively. In May 1997, the Board of Directors accelerated the
vesting of these options subject to certain restrictions on the underlying
shares of Common Stock which lapse over the same period of time over which
the options were to vest. See "Certain Transactions."

(5) In October 1996, the Board of Directors granted options to purchase 23,530
shares, 23,530 shares and 4,705 shares which were scheduled to vest ratably
over a 48-month period which commenced in March 1995, July 1995 and March
1996, respectively. In May 1997, the Board of Directors accelerated the
vesting of these options subject to certain restrictions on the underlying
shares of Common Stock which lapse over the same period of time over which
the options were to vest. See "Certain Transactions."

(6) In October 1996, the Board of Directors granted options to purchase 17,648
shares, 27,648 shares and 7,469 shares which were scheduled to vest ratably
over a 48-month period which commenced in March 1993, July 1995 and March
1996, respectively. In May 1997, the Board of Directors accelerated the
vesting of these options subject to certain restrictions on the underlying
shares of Common Stock which lapse over the same period of time over which
the options were to vest. On July 10, 1997, Mr. Wallace resigned as an
officer and Director of the Company and entered into an agreement with the
Company pursuant to which the vesting of 3,971 of such underlying shares was
accelerated and the other restrictions applicable to such 3,971 shares
terminated. See "Certain Transactions."

YEAR-END OPTION TABLE

The following table sets forth certain information concerning stock options
exercised by the Named Executive Officers during 1996, the number of options
held by the Named Executive Officers as of December 31, 1996, and the value of
any in-the-money options as of December 31, 1996.

AGGREGATED OPTION EXERCISES IN THE YEAR ENDED DECEMBER 31, 1996 AND YEAR-END
OPTION VALUES
<TABLE>
<CAPTION>
VALUE OF
UNEXERCISED
IN-THE-MONEY
NUMBER OF SECURITIES OPTIONS AS
UNDERLYING OF DECEMBER
UNEXERCISED OPTIONS AS OF 31, 1996
SHARES ACQUIRED DECEMBER 31, 1996 (1)(#) (2)
NAME ON EXERCISE (#) EXERCISABLE UNEXERCISABLE EXERCISABLE
<S> <C> <C> <C> <C>
M. Ross Johnson -- 39,718 77,930 $ 502,830
Richard A. Franco 27,452 -- -- --
Matthew A. Megaro -- 22,676 29,089 287,078
Max N. Wallace -- 28,232 24,533 357,419

NAME UNEXERCISABLE
<S> <C>
M. Ross Johnson $ 986,594
Richard A. Franco --
Matthew A. Megaro 368,267
Max N. Wallace 310,588
</TABLE>

(1) In May 1997, the Board of Directors accelerated all options set forth below
subject to certain restrictions on the underlying shares of Common Stock
which lapse over time. See the table entitled Options Granted in the Year
Ended December 31, 1996 and the notes thereto and "Certain Transactions."

(2) There was no public trading market for the Common Stock as of December 31,
1996. Accordingly, these values have been calculated on the basis of an
assumed initial public offering price of $13.00 per share, less the
applicable exercise price per share, multiplied by the number of shares
underlying such options.

<PAGE>
STOCK OPTION PLANS

The Company's Stock Option Plan was adopted by the Board of Directors in
May 1996 and approved by the stockholders in July 1996. In April 1997, the Stock
Option Plan was amended by the Board of Directors to increase the number of
shares of Common Stock authorized for issuance thereunder. This amendment to the
Stock Option Plan was approved by the stockholders of the Company in June 1997.
A total of 852,941 shares of Common Stock have been authorized for issuance
under the Stock Option Plan. As of June 30, 1997, options to purchase a total of
348,042 shares of Common Stock had been exercised, options to purchase a total
of 260,361 shares at a weighted average exercise price of $.36 per share were
outstanding, and 254,188 shares remained available for future option grants.

The Stock Option Plan provides for the grant to employees of the Company
(including officers and employee directors) of "incentive stock options" within
the meaning of Section 422 of the Code and for the grant of nonstatutory stock
options to employees, Directors, consultants, advisors or other independent
contractors of the Company. To the extent an optionee would have the right in
any calendar year to exercise for the first time one or more incentive stock
options for shares having an aggregate fair market value (under all plans of the
Company and determined for each share as of the date the option to purchase the
share was granted) in excess of $100,000, any such options will be treated as
nonstatutory stock options.

The Stock Option Plan is administered by the Board of Directors or a
committee of the Board of Directors. Subject to the provisions of the Stock
Option Plan, the Board determines the terms of options granted under the Stock
Option Plan, including the number of shares subject to the option, exercise
price, term and exercisability. The exercise price of all incentive stock
options granted under the Stock Option Plan must be at least equal to the fair
market value of the Common Stock of the Company on the date of grant. The
exercise price of any incentive stock option granted to an optionee who owns
stock representing more than 10% of the voting power of the Company's
outstanding capital stock (a "10% Stockholder") must equal at least 110% of the
fair market value of the Common Stock on the date of grant. The Board determines
the term of options. The term of a stock option granted under the Stock Option
Plan may not exceed ten years; provided, however, that the term of an incentive
stock option may not exceed five years for 10% Stockholders. No option may be
transferred or assigned by the optionee other than by will or the laws of
descent or distribution.

In the event an optionee ceases to be employed by the Company for any
reason other than death or disability, each outstanding option held by such
optionee will terminate and cease to be exercisable no later than three months
after the date of such cessation of employment. Should the optionee's employment
terminate by reason of death or disability (within the meaning of Section
22(e)(3) of the Code), each outstanding option held by such optionee will
terminate and cease to be exercisable no later than twelve months after the date
of held by such optionee such cessation of employment. An optionee's employment
shall be deemed to have terminated on account of death if the optionee dies
within three months following such cessation of employment.

In the event of certain transactions involving changes in control of the
Company, the Stock Option Plan provides that the Board may elect, in its sole
discretion, to provide that any unexercisable portion of all options will
accelerate so that each option will be fully exercisable for all of the shares
subject to such option as of a date prior to the effective date of the
transaction as the Board so determines, conditioned upon the consummation of
such transfer of control. The Board may further elect, in its sole discretion,
to provide that any options which become exercisable solely by reason of
transfer of control and which are not exercised as of the date such transfer of
control will terminate effective as of the date of a transfer of control. The
Board may terminate or amend the Stock Option Plan at any time; provided
however, that without the approval of the Company's stockholders, there shall be
(a) no increase in the total number of shares of stock covered by the Stock
Option Plan (except in the case of a stock dividend, stock split, reverse stock
split, combination, reclassification or similar change in the Common Stock), (b)
no change in the class of persons eligible to receive incentive stock options,
and (c) no extension of the period during which incentive stock options may be
granted beyond the date which is 10 years following the date the Stock Option
Plan is adopted by the Company or the date the Stock Option Plan is approved by
the stockholders of the Company. In any event, no amendment may adversely affect
any then outstanding option or any unexercised portion thereof, without the
consent of the optionee, unless such amendment is required to enable an option
designated as an incentive stock option to qualify as an incentive stock option.
If not previously terminated, the Stock Option Plan will terminate in 2006.

As of June 30, 1997, the Company had outstanding 9,412 nonqualifed stock
options under its previous stock option plan at a weighted average exercise
price of $.43 per share. The Board of Directors has determined not to grant
additional options under such plan.

<PAGE>

EMPLOYEE STOCK PURCHASE PLAN

In August 1997, the Board of Directors adopted, and the stockholders of the
Company approved, the Company's 1997 Employee Stock Purchase Plan (the "ESPP"),
contingent upon and subject to the consummation of the Offering. The ESPP is
intended to encourage ownership of the Company's Common Stock by employees of
the Company. A maximum of 250,000 shares of Common Stock have been reserved for
purchase under the ESPP (subject to certain adjustments under the ESPP). No
options to purchase shares of Common Stock have been granted and no shares of
Common Stock have been purchased under the ESPP. The ESPP is administered by the
Compensation Committee of the Board of Directors, or such other committee as the
Board designates (the "Committee").

For eligible employees who have become participants in the ESPP, the ESPP
provides for the automatic grant of options to purchase shares of Common Stock
("Options"). The Options are granted on the first day of an offering period
("Offering Period"). Offering Periods are successive and overlapping 24 month
periods beginning on the first trading day on or after December 1 and June 1 of
each year, and each Offering Period contains four exercise periods ("Purchase
Period"), each of which is approximately six months. The first Offering Period,
however, will run from completion of the Offering through May 31, 1999, and the
first Purchase Period will run from completion of the Offering through May 31,
1998. Employees of the Company who have been employed by the Company before the
beginning of an Offering Period may participate in the ESPP for that Offering
Period.

Payroll deductions are accumulated in an account for each participant,
based on the amounts the participant requests be withheld. The accumulated
amounts are used at the end of each Purchase Period to purchase shares of Common
Stock pursuant to the Option. The purchase price of a share of Common Stock
under an Option will equal 85% of the lower of the fair market value of a share
(a) on the first day of the Offering Period or (b) on the last day of the
relevant Exercise Period. Options may not be assigned or transferred. No
participant may purchase shares having a fair market value (determined as of the
beginning of the Offering Period) exceeding $25,000 in any calendar year, nor
may a participant purchase shares if the participant would own shares or hold
outstanding options to purchase shares, or both, possessing 5% or more of the
total combined voting power or value of all classes of shares of the Company. A
participant may withdraw from an Offering Period at any time without affecting
his or her eligibility to participate in future Offering Periods.

There are no tax consequences to either the participant or the Company when
the Option is issued. When shares are issued upon the exercise of the Option,
there are no tax consequences to the participant (except to the extent that any
excess in the fair market value of the Common Stock over the exercise price
constitutes a tax preference item which requires payment of the alternative
minimum tax) or to the Company. A participant's Option will terminate and his or
her accumulated account balance will be returned if such participant ceases to
be employed by the Company.

If a participant disposes of shares purchased under the ESPP at least two
years after the first day of the applicable Offering Period and at least one
year after the date of purchase, the participant will recognize ordinary income
in the year of disposition equal to the amount of the discount. The amount of
ordinary income recognized by a participant will be added to the participant's
basis in the shares. Any additional gain recognized upon the disposition will be
long-term capital gain. The Company will not generally be entitled to a
deduction if the participant complies with these holding periods.

If a participant disposes of shares purchased under the ESPP within two
years from the first day of the applicable Offering Period or within one year
from the date of purchase (a "disqualifying disposition"), the participant will
recognize ordinary income in the year of such disposition equal to the lesser of
(i) the amount by which the fair market value of the shares on the date the
shares were purchased exceeded the purchase price and (ii) the amount by which
the fair market value of the shares on the date of disposition exceeded the
purchase price. The amount of ordinary income will be added to the participant's
basis in the shares, and any additional gain or resulting loss recognized on the
disposition of the shares will be a capital gain or loss. The Company will
generally be entitled to a deduction in the year of the disqualifying
disposition equal to the amount of ordinary income recognized by the participant
as a result of the disposition.

The ESPP provides that in the event of a "Substantial Corporate Change" the
offering will terminate unless provision is made in writing for (i) the
assumption or continuation of outstanding elections or (ii) the substitution for
Options or grants of Options covering securities of a successor corporation. For
purposes of the ESPP, events constituting a "Substantial Corporate Change" are
(i) dissolution or liquidation of the Company, (ii) a merger, consolidation or
reorganization of the Company in which the Company is not the surviving
corporation, (iii) the sale of substantially all of the Company's assets or (iv)
any transaction approved by the Board of Directors that results in any person or
entity owning 100% of the combined voting power of all classes of stock of the
Company. The Board of Directors may terminate or amend the ESPP at any time. Any
amendment to the ESPP that (i) materially increases the benefits to
participants, (ii) materially increases the number of

<PAGE>

securities that may be issued under the ESPP, or (iii) materially modifies the
eligibility requirements for participation in the ESPP must be approved by the
stockholders of the Company.

If any change is made to the stock issuable under the ESPP by reason of any
recapitalization, reclassification, stock split, reverse stock split,
combination of shares, exchange of shares, stock dividend or other distribution
payable in capital stock, or some other increase or decrease in such Common
Stock occurs without the Company's receiving consideration, appropriate
adjustment will be made to the shares subject to the ESPP and the number of
shares that a participant may purchase with respect to an Option.

EMPLOYMENT AGREEMENTS

In December 1994, the Company entered into an employment arrangement with
Dr. Johnson, its President, Chief Executive Officer and Chief Scientific
Officer. Pursuant to this arrangement, Dr. Johnson is entitled to receive
minimum annual compensation of $225,000, an annual bonus based upon the
achievement of certain milestones and all health insurance and other benefits
generally made available to the Company's employees. In the event that Dr.
Johnson's employment is terminated for any reason other than for cause, Dr.
Johnson's employment arrangement provides that Dr. Johnson is entitled to his
base salary and benefits for one year from the date of such termination.

In February 1995, the Company entered into an employment arrangement with
Mr. Megaro, its Chief Operating Officer, Chief Financial Officer, Executive Vice
President and Secretary. Pursuant to this arrangement, Mr. Megaro is entitled to
receive minimum annual compensation of $130,000, an annual bonus based upon the
achievement of certain milestones and all health insurance and other benefits
generally made available to the Company's employees. In the event that Mr.
Megaro's employment is terminated for any reason other than for cause, Mr.
Megaro's employment arrangement provides that Mr. Megaro is entitled to his base
salary and benefits for up to six months from the date of such termination,
subject to certain limitations.

On July 10, 1997, Mr. Wallace resigned as an officer and Director of the
Company and entered into an agreement with the Company pursuant to which he will
serve as a consultant to the Company until December 31, 1997. Thereafter, Mr.
Wallace will receive severance payments until June 30, 1998 based on his annual
salary at the time of his resignation. In addition, the Company has agreed to
terminate its right of repurchase and other restrictions with respect to
approximately 24,015 shares of Common Stock held by Mr. Wallace for which such
restrictions would not otherwise have lapsed at the time of his resignation.

COMPENSATION OF DIRECTORS

The Company does not currently compensate its Directors for attending Board
or committee meetings, but reimburses Directors for their reasonable travel
expenses incurred in connection with attending meetings of the Board or
committees of the Board. Also, non-employee Directors are entitled to be granted
options under the Company's Stock Option Plan. The Company intends to reevaluate
its policy with respect to compensation of non-employee Directors after
completion of this Offering. On October 21, 1996, the Company granted Dr.
Sanders options to purchase 5,883 shares of Common Stock at an exercise price of
$.34 per share.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

Effective April 10, 1997, the Board of Directors established a Compensation
Committee which is responsible for determining the salaries and incentive
compensation of the executive officers of the Company and to provide
recommendations for the salaries and incentive compensation of the other
employees and consultants of the Company. The Compensation Committe also
administers the Company's benefit plans, including the Stock Option Plan. Mr.
Dovey serves as the Chairman of the Compensation Committee and the other members
of the committee are Drs. Bolognesi and Sanders. None of Mr. Dovey, Dr.
Bolognesi, nor Dr. Sanders was an officer or employee of the Company during 1996
or any prior year. During 1996 and prior to the formation of the Compensation
Committee, the Board of Directors as a whole made decisions relating to
compensation of the Company's executive officers. Dr. Johnson, the Company's
President, Chief Executive Officer and Chief Scientific Officer, Mr. Wallace,
the Company's former Executive Vice President, General Counsel and Secretary and
Mr. Franco, the Company's former President and Chief Executive Officer,
participated in all such discussions and decisions concerning the compensation
of executive officers of the Company, except that Dr. Johnson and Messrs.
Wallace and Franco were excluded from discussions regarding their own
compensation.

<PAGE>
CERTAIN TRANSACTIONS

Since February 1995, the Company has issued an aggregate of 274,511 shares
of Common Stock to Dr. Johnson, the Company's President, Chief Executive Officer
and Chief Scientific Officer at an aggregate purchase price of $123,300, or a
weighted average purchase price of $.45 per share. In June 1997, the Company
issued to Dr. Johnson an aggregate of 127,060 shares of Common Stock at an
aggregate purchase price of $54,636, or $.43 per share, in consideration for a
full recourse secured promissory note payable to the Company, which bears
interest at eight percent per annum and is due in June 1999. In May 1997, the
Company issued to Dr. Johnson an aggregate of 117,648 shares of Common Stock
upon the exercise of certain options granted to Dr. Johnson at an aggregate
exercise price of $40,000, or $.34 per share, in consideration for a full
recourse secured promissory note payable to the Company, which bears interest at
eight percent per annum and is due in May 1999. In April 1997, the Company
issued to Dr. Johnson an aggregate of 33,333 shares of Series C Preferred Stock
(convertible into 3,922 shares of Common Stock upon the completion of the
Offering) at an aggregate purchase price of $20,000, or $.60 per share. Certain
shares of Common Stock purchased from the Company by Dr. Johnson are subject to
the Company's right of repurchase and certain other restrictions which lapse
over a period of time.

Since March 1995, the Company has issued an aggregate of 146,079 shares of
Common Stock to Mr. Megaro, the Company's Chief Operating Officer, Chief
Financial Officer, Executive Vice President and Secretary at an aggregate
purchase price of $80,000, or a weighted average purchase price of $.55 per
share. In June 1997, the Company issued Mr. Megaro an aggregate of 76,471 shares
of Common Stock at an aggregate purchase price of $32,883, or $.43 per share, in
consideration for a full recourse secured promissory note payable to the Company
which bears interest at eight percent per annum and is due in June 1999. In May
1997, the Company issued Mr. Megaro an aggregate of 51,765 shares of Common
Stock upon the exercise of certain options granted to Mr. Megaro at an aggregate
exercise price of $17,600, or $.34 per share, in consideration for a full
recourse secured promissory note payable to the Company which bears interest at
eight percent per annum and is due in May 1999. In April 1997, the Company
issued Mr. Megaro an aggregate of 41,667 shares of Series C Preferred Stock
(convertible into 4,902 shares of Common Stock upon the completion of the
Offering) at an aggregate purchase price of $25,000, or $.60 per share. Certain
shares of Common Stock purchased from the Company by Mr. Megaro are subject to
the Company's right of repurchase and certain other restrictions which lapse
over a period of time.

Since March 1995, the Company has issued an aggregate of 129,705 shares of
Common Stock to Mr. Wallace, the Company's former Executive Vice President,
General Counsel and Secretary at an aggregate purchase price of $37,790, or a
weighted average purchase price of $.29 per share. In June 1997, the Company
issued Mr. Wallace an aggregate of 34,589 shares of Common Stock at an aggregate
purchase price of $14,874, or $.43 per share, in consideration for a full
recourse secured promissory note payable to the Company which bears interest at
eight percent per annum and is due in June 1999. In May 1997, the Company issued
Mr. Wallace an aggregate of 52,765 shares of Common Stock upon the exercise of
certain options granted to Mr. Wallace at an aggregate exercise price of
$17,941, or $.34 per share, in consideration for a full recourse secured
promissory note payable to the Company which bears interest at eight percent per
annum and is due in May 1999.

The following table summarizes the shares of Preferred Stock purchased by
affiliates of the Directors and the holders of more than five percent (5%) of
the Common Stock. See the table entitled "Principal Stockholders" and the notes
thereto for further information relating to the beneficial ownership of such
shares.

<TABLE>
<CAPTION>
SERIES A SERIES B SERIES C
PREFERRED STOCK PREFERRED STOCK PREFERRED STOCK
<S> <C> <C> <C>
Domain Partners II, L.P. (1)........................ 2,000,000 11,095,920
Domain Partners III, L.P. (2)....................... 5,932,528 2,061,997
DP III Associates, L.P. (2)......................... 206,466 71,336
Biotechnology Investments Limited (3)............... 1,000,000 6,900,650 2,866,668
Lawrence & Company Inc. (4)......................... 2,283,334
Sentron Medical, Inc................................ 2,000,000 1,333,334
</TABLE>

(1) Dr. Treu and Mr. Dovey are general partners of One Palmer Square Associates,
II, L.P., the general partner of Domain Partners II, L.P.
(2) Dr. Treu and Mr. Dovey are general partners of One Palmer Square Associates,
III, L.P., the general partner of Domain Partners III, L.P. and DP III
Associates, L.P.
(3) Pursuant to a contractual agreement, Domain Associates is the U.S. venture
capital advisor to Biotechnology Investments Limited. Dr. Treu and Mr. Dovey
are general partners of Domain Associates.
(4) Mr. McCreath is a founding partner of Lawrence & Company Inc.

For information regarding employment agreements with Named Executive
Officers, see "Management -- Employment Agreements." For information regarding
compensation of Directors, see "Management -- Compensation of Directors."

<PAGE>
PRINCIPAL STOCKHOLDERS

The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock as of August 27, 1997 (after giving
effect to the Preferred Stock Conversion) and as adjusted to give effect to the
sale of the shares of Common Stock offered hereby, by (i) each person (or group
of affiliated persons) who is known by the Company to own beneficially 5% or
more of the outstanding shares of Common Stock, (ii) each Named Executive
Officer, (iii) each of the Company's Directors, and (iv) all Directors and
executive officers of the Company as a group.

<TABLE>
<CAPTION>
NUMBER OF PERCENTAGE
SHARES OWNERSHIP(1)
BENEFICIALLY BEFORE AFTER
BENEFICIAL OWNER OWNED(1) OFFERING OFFERING
<S> <C> <C> <C>
Domain Partners II, L.P. (2)............................................................ 2,570,559 34.8% 26.0%
Domain Partners III, L.P. (2)........................................................... 2,570,559 34.8 26.0
DP III Associates, L.P. (2)............................................................. 2,570,559 34.8 26.0
Biotechnology Investments Limited (3)................................................... 1,295,068 17.5 13.1
Sentron Medical, Inc. (4)............................................................... 392,158 5.3 4.0
M. Ross Johnson (5)..................................................................... 188,994 2.6 1.9
Matthew A. Megaro (6)................................................................... 146,079 2.0 1.5
Max N. Wallace (7)...................................................................... 132,149 1.8 1.3
Richard A. Franco....................................................................... 53,334 * *
Jesse I. Treu (2)....................................................................... 2,570,559 34.8 26.0
Dani P. Bolognesi (8)................................................................... 98,813 1.3 1.0
Brian H. Dovey (2)...................................................................... 2,570,559 34.8 26.0
Charles A. Sanders (9).................................................................. 11,765 * *
Andrew A. McCreath (10)................................................................. 268,628 3.7 2.7
All executive officers and directors as a
group (eight persons) (11).............................................................. 3,464,603 46.9 35.1
</TABLE>

* Less than one percent.

(1) Applicable percentage ownership is based on 7,380,325 shares of Common
Stock outstanding as of August 27, 1997 after giving effect to the
Preferred Stock Conversion. Beneficial ownership is determined in
accordance with the rules of the Securities and Exchange Commission based
on factors including voting or investment power with respect to securities.
Shares of Common Stock subject to options, warrants and convertible notes
currently exercisable or convertible, or exercisable or convertible within
60 days after August 27, 1997, are deemed outstanding for computing the
percentage ownership of the person or entity holding such securities, but
are not deemed outstanding for computing the percentage ownership of any
other person or entity. Except as indicated, and subject to community
property laws where applicable, the persons named in the table above have
sole voting and investment power with respect to all shares of Common Stock
as beneficially owned by them, and there are no other affiliations among
the stockholders listed in the table.

(2) Consists of shares held by affiliated entities as follows: (i) 1,597,342
shares beneficially owned by Domain Partners II, L.P., whose general
partner is One Palmer Square Associates II, L.P.; (ii) 940,533 shares
beneficially owned by Domain Partners III, L.P., whose general partner is
One Palmer Square Associates III, L.P.; and (iii) 32,684 shares
beneficially owned by DP III Associates, L.P., whose general partner is One
Palmer Square Associates III, L.P. Dr. Treu and Mr. Dovey are general
partners of One Palmer Square Associates II, L.P. and One Palmer Square
Associates III, L.P. In such capacities, Dr. Treu and Mr. Dovey each may be
deemed to be the beneficial owner of such shares, although each disclaims
such beneficial ownership except to the extent of his pecuniary interest,
if any. The address for Domain Partners II, L.P., Domain Partners III,
L.P., DP III Associates, L.P., Dr. Treu and Mr. Dovey is One Palmer Square,
Princeton, New Jersey 08542.
(3) Biotechnology Investments Limited ("BIL") has entered into a contractual
arrangement with Domain Associates whereby Domain Associates serves as the
United States venture capital advisor to BIL. Domain Associates has neither
voting nor investment power over BIL's shares. Dr. Treu and Mr. Dovey are
general partners of Domain Associates. The address for BIL is St. Peter
Port House, Sausmarez Street, St. Peter Port, Guernsey, GY13PH, Channel
Islands.
(4) The address for Sentron Medical, Inc. is 4445 Lake Forest Drive, Suite 600,
Cincinnati, Ohio 45242.

(5) Includes 179,645 shares subject to certain contractual restrictions, which
restrictions lapse with respect to 8,037 shares within 60 days after August
27, 1997. Does not include an aggregate of 85,518 shares beneficially owned
by Michael Johnson and Greg Johnson, Mr. Johnson's sons, who have sole
voting and investment power of such shares and as to which shares Mr.
Johnson disclaims beneficial ownership.

(6) Includes (i) 91,756 shares subject to certain contractual restrictions,
which restrictions lapse with respect to 3,955 shares within 60 days after
August 27, 1997; and (ii) an aggregate of shares beneficially owned
by Matthew A. Megaro as custodian for Anthony Megaro and Arianna Megaro,
Mr. Megaro's son and daughter.

(7) Includes (i) 29,543 shares subject to certain contractual restrictions,
which restrictions lapse with respect to 1,442 shares within 60 days after
August 27, 1997 and (ii) 2,443 shares beneficially owned by Diana Parrish,
Mr. Wallace's wife. For information concerning the subsequent lapsing of
these restrictions, see "Certain Transactions."

(8) Includes 13,652 shares that Dr. Bolognesi may acquire pursuant to stock
options exercisable within 60 days after August 27, 1997 and the following
shares as to which Dr. Bolognesi disclaims beneficial ownership: (i) 11,765
shares beneficially owned by James C.

<PAGE>

Bolognesi Irrevocable Trust, for which James C. Bolognesi, Dr. Bolognesi's
son, is the sole beneficiary and Sarah Bolognesi, Dr. Bolognesi's wife, is
the sole trustee; (ii) 11,765 shares beneficially owned by Michael P.
Bolognesi Irrevocable Trust, for which Michael P. Bolognesi, Dr.
Bolognesi's son, is the sole beneficiary and Sarah Bolognesi is the sole
trustee; and (iii) 5,748 shares that Sarah Bolognesi may acquire pursuant
to certain stock options exercisable within 60 days after August 27, 1997.

(9) Includes 1,961 shares that Dr. Sanders may acquire pursuant to stock
options exercisable within 60 days after August 27, 1997.

(10) Includes 268,628 shares beneficially owned by Lawrence & Company Inc., of
which Mr. McCreath is a partner. In such capacity, Mr. McCreath may be
deemed to be the beneficial owner of such shares, although he disclaims
such beneficial ownership except to the extent of his pecuniary interest,
if any.
(11) See notes (2)-(10).

<PAGE>
DESCRIPTION OF CAPITAL STOCK

The authorized capital stock of the Company consists of 30,000,000 shares
of Common Stock and 10,000,000 shares of Preferred Stock (after giving effect to
the Preferred Stock Conversion and the filing of the Third Amended and Restated
Certificate of Incorporation upon the completion of this Offering). The
following description of the capital stock of the Company is a summary, does not
purport to be complete, is subject to, and qualified in its entirety by, the
provisions of the Third Amended and Restated Certificate of Incorporation, which
is filed as an exhibit to the Registration Statement of which this Prospectus is
a part, and by applicable law.

COMMON STOCK

As of June 30, 1997, there were 7,354,087 shares of Common Stock
outstanding, as adjusted to reflect the Preferred Stock Conversion upon the
completion of this Offering, held of record by 70 stockholders.

The holders of Common Stock are entitled to one vote for each share held on
all matters submitted to a vote of stockholders and do not have cumulative
voting rights. Holders of Common Stock are entitled to receive ratably such
dividends, if any, as may be declared from time to time by the Board of
Directors out of funds legally available therefor, subject to any preferential
dividend rights applicable to any outstanding Preferred Stock that may be issued
in the future. The Company has not declared or paid cash dividends on its
capital stock. The Company currently intends to retain any future earnings to
fund its operations and, therefore, does not anticipate paying any cash
dividends in the foreseeable future. See "Dividend Policy."

In the event of liquidation, dissolution or winding up of the Company, the
holders of Common Stock are entitled to share ratably in all assets of the
Company remaining after the payment of all debts and other liabilities, subject
to the prior distribution rights of shares of Preferred Stock if any, then
outstanding. There are no preemptive, subscription or conversion rights
applicable to the Common Stock. The outstanding shares of Common Stock are, and
the shares offered by the Company in this Offering will be, when issued and paid
for, validly issued, fully paid and nonassessable. The rights, preferences and
privileges of holders of Common Stock are subject to the rights of the holders
of shares of any class or series of Preferred Stock that the Company may
designate and issue in the future.

PREFERRED STOCK

The Board of Directors has the authority, without action by the
stockholders, to designate and issue 10,000,000 shares of Preferred Stock in one
or more series and to designate the rights, preferences and limitations of all
series, any or all of which may be superior to the rights of the Common Stock.
It is not possible to state the actual effect of the issuance of any shares of
Preferred Stock upon the rights of the holders of Common Stock until the Board
of Directors determines the specific rights of the holders of Preferred Stock.
However, the effects might include, among others, restricting dividends on
Common Stock, diluting the voting power of the Common Stock, impairing the
liquidation rights of the Common Stock, and making it more difficult for a third
party to acquire the Company, which could have the effect of discouraging a
third party from acquiring, or deterring a third party from paying a premium to
acquire, a majority of the outstanding voting stock of the Company. The Company
has no present plans to issue any shares of Preferred Stock. See "Risk
Factors -- Anti-Takeover Effect of Certain Charter and Bylaw Provisions."

WARRANTS

As of June 30, 1997, the Company had outstanding warrants entitling the
purchasers thereof to purchase a total of 56,684 shares of Common Stock at a
weighted-average exercise price of $4.25 per share (the "Warrants"). The
Warrants have expiration dates ranging from 2003 to 2005.

REGISTRATION RIGHTS

The holders, or their permitted transferees, of approximately 6,261,615
shares of Common Stock and 56,684 shares of Common Stock issuable upon exercise
of the Warrants (the "Registrable Securities") are entitled to certain rights
with respect to the registration of such shares under the Securities Act. These
rights are provided under the terms of certain agreements between the Company
and holders of Registrable Securities. Subject to certain limitations set forth
in the agreements, certain of the holders may require the Company, at its
expense, on not more than two occasions, to file a registration statement under
the Securities Act with respect to the public resale of Registrable Securities.
If the Company proposes to register any of its securities under the Securities
Act, either for its own account or for the account of other security holders,
the holders of Registrable Securities are entitled to notice of the registration
and are entitled to include, at the Company's expense, such shares therein,
subject to certain conditions and limitations. Further, the holders of
Registrable Securities may require the

<PAGE>
Company at its expense to register their shares on Form S-3 when the use of such
form becomes available to the Company, subject to certain conditions and
limitations. All registration expenses must be borne by the Company and all
selling expenses relating to Registrable Securities must be borne by the holder
of the securities being registered.

DELAWARE LAW AND CERTAIN CHARTER PROVISIONS

The Company is subject to the provisions of DGCL Section 203 which, subject
to certain exceptions, prohibits the Company from engaging in certain business
combinations with interested stockholders for a period of three years after the
date of the transaction in which the stockholder became an interested
stockholder, unless the business combination is approved in a prescribed manner.
A "business combination" includes a merger, asset sale or other transaction
resulting in a financial benefit to the stockholder. For purposes of Section
203, an "interested stockholder" is a person who, together with affiliates and
associates, owns (or within three years prior, did own) 15% or more of the
corporation's voting stock. The application of Section 203 could have the effect
of delaying or preventing a change of control of the Company.

The Company's Third Amended and Restated Certificate of Incorporation
provides that effective upon this Offering, each director will serve for a
three-year term and that approximately one-third of the directors are to be
elected annually. Candidates for directors shall be nominated only by the Board
of Directors or by a stockholder who gives written notice to the Company in the
manner prescribed by the Bylaws. The number of directors may be fixed by
resolution of the Board of Directors. The Board currently consists of six
members and the Board may appoint new directors to fill vacancies or newly
created directorships between stockholder meetings. The Third Amended and
Restated Certificate of Incorporation does not provide for cumulative voting at
stockholder meetings for election of directors. A director may be removed from
office only for cause by the affirmative vote of a majority of the combined
voting power of the then outstanding shares of stock entitled to vote generally
in the election of directors or without cause by the affirmative vote of at
least two-thirds of the voting power of the outstanding shares of stock entitled
to vote in the election of directors. Any action required or permitted to be
taken by stockholders of the Company must be effected at a duly called annual or
special meeting of stockholders and may not be effected by written consent. The
staggered Board of Directors, the Company's Third Amended and Restated
Certificate of Incorporation and certain other provisions of the DGCL may have
the effect of delaying, deterring or preventing a change in control of the
Company, may discourage bids for the Common Stock at a premium over the market
price and may adversely affect the market price, and the voting and other rights
of the holders, of the Common Stock.

TRANSFER AGENT AND REGISTRAR

The transfer agent and registrar for the Company's Common Stock is Wachovia
Bank of North Carolina, N.A.

SHARES ELIGIBLE FOR FUTURE SALE

Prior to this Offering, there has been no market for the Common Stock of
the Company. Future sales of substantial amounts of Common Stock (including
shares issued upon the exercise of outstanding options and warrants) in the
public market after this Offering or the prospect of such sales could materially
and adversely affect the market price of the Common Stock prevailing from time
to time. Sales of substantial amounts of Common Stock of the Company in the
public market after the restrictions described below lapse could also materially
and adversely affect the prevailing market price of the Common Stock and the
ability of the Company to raise equity capital in the future.

Upon the completion of this Offering, the Company will have 9,880,325
shares of Common Stock outstanding (assuming no exercise of options and warrants
outstanding as of August 27, 1997). Of these shares, the 2,500,000 shares sold
in this Offering will be freely tradeable without restrictions unless held by
"affiliates" of the Company as that term is defined in Rule 144 under the
Securities Act. The remaining 7,380,325 shares were issued and sold in reliance
upon certain exemptions from the registration requirements of the Securities
Act. These shares may be sold in the public market only if registered, or
pursuant to an exemption from such registration, such as Rule 144 or Rule 144(k)
under the Securities Act.

Approximately 231,117 shares of Common Stock will be eligible for resale in
the public market without restriction in reliance on Rule 144(k) immediately
following the completion of this Offering, 225,944 shares of which are subject
to the Lock-up Agreements described below. An additional 769,238 shares (763,036
shares of which are subject to the Lock-up Agreements) will be eligible for
resale in the public market pursuant to Rule 701 under the Securities Act
beginning approximately 90 days after the effective date of this Prospectus,
except to the extent that such shares are subject to vesting restrictions or
certain contractual restrictions on sale or transfer pursuant to agreements with
the Company. After the expiration of the 180-day lock-up period described below,
an additional 3,739,158 shares of Common Stock will be eligible for resale in

<PAGE>
the public market pursuant to Rule 144. From time to time thereafter, the
remaining shares of Common Stock outstanding will become eligible for resale in
the public market pursuant to Rule 144.

In general, under Rule 144 as currently in effect, any person (or persons
whose shares are aggregated), who has beneficially owned restricted securities
(as that term is defined in Rule 144) for at least one year is entitled to sell,
within any three month period, a number of such securities that does not exceed
the greater of one percent of the then outstanding class of securities (in the
case of the Common Stock, approximately 98,803 shares, based on the number of
shares to be outstanding after this Offering) or the average weekly trading
volume in such securities in the public market during the four calendar weeks
preceding the filing of the seller's Form 144, provided certain requirements
concerning availability of public information concerning the issuer of the
restricted securities, manner of sale and notice of sale are satisfied. A person
who is not an affiliate of the issuer, has not been an affiliate within three
months prior to the sale and has beneficially owned the restricted securities
for at least two years is entitled to sell such shares under Rule 144(k) without
regard to any of the limitations described above. Rule 144 also provides that
affiliates who are selling shares that are not restricted securities must
nonetheless comply with the same restrictions applicable to restricted
securities with the exception of the holding period requirement The one-year and
two-year holding periods described above do not begin to run until the full
purchase price or other consideration is paid by the person acquiring the
restricted securities from the issuer or an affiliate of the issuer and may
include the holding period of a prior owner who is not an affiliate of the
issuer.

Securities issued in reliance on Rule 701 (such as shares of Common Stock
issued before the completion of this Offering upon the exercise of options) are
also restricted securities and, beginning approximately 90 days after the
effective date of this Prospectus, may be resold by persons other than
affiliates of the Company subject only to the manner of sale provisions of Rule
144 and may be resold by affiliates under Rule 144 without compliance with the
one-year holding period.

The executive officers, directors, employees and certain other stockholders
of the Company, who together beneficially own or have dispositive power over
7,368,950 shares of Common Stock outstanding prior to this Offering, have agreed
that they will not sell, offer, make any short sale or otherwise dispose of or
enter into any contract, arrangement or commitment to sell or otherwise dispose
of any shares of Common Stock or securities exerciseable into or convertible
into shares of Common Stock owned by them for a period of 180 days after the
date of this Prospectus without the prior written consent of UBS Securities LLC.

Approximately 90 days after the completion of this Offering, the Company
intends to file a registration statement on Form S-8 under the Securities Act to
register the future issuance of shares of Common Stock reserved for issuance
under the Company's stock option plan. As of August 27, 1997, 244,006 shares of
Common Stock were reserved for issuance pursuant to outstanding options and
240,476 shares of Common Stock were reserved for future issuance under the
Company's stock option plan. Such registration statement will automatically
become effective upon filing. Accordingly, shares registered thereunder will,
subject to Rule 144 limitations applicable to affiliates, be available for sale
in the public market, except to the extent that such shares are subject to
vesting restrictions with the Company or certain contractual restrictions on
sale or transfer (including options covering 242,829 shares which are subject to
Lock-up Agreements). After this Offering, the holders of approximately 6,261,215
shares of Common Stock and the holders of warrants to purchase an aggregate of
56,684 shares of Common Stock will be entitled to certain demand and piggyback
rights with respect to the registration of such shares under the Securities Act.
If such holders, by exercising their demand registration rights, cause a large
number of securities to be registered and sold in the public market, such sales
could have an adverse effect on the market price of the Company's Common Stock.
If the Company, either on its own behalf or on behalf of certain stockholders,
were to initiate a registration and include shares held by such holders pursuant
to the exercise of their piggyback registration rights, such sales could have a
material adverse effect on the Company's ability to raise needed capital. See
"Certain Transactions," "Shares Eligible for Future Sale," "Description of
Capital Stock -- Registration Rights" and "Underwriting."

<PAGE>
UNDERWRITING

Subject to the terms and conditions of the Underwriting Agreement, the
underwriters named below (the "Underwriters"), for whom UBS Securities LLC and
Montgomery Securities are acting as representatives (the "Representatives"),
have agreed to purchase from the Company the following respective number of
shares of Common Stock:

<TABLE>
<CAPTION>
UNDERWRITERS SHARES
<S> <C>
UBS Securities LLC...........................................................
Montgomery Securities........................................................

Total................................................................. 2,500,000
</TABLE>

The Underwriting Agreement provides that the obligations of the
Underwriters are subject to certain conditions precedent, including the absence
of any material adverse change in the Company's business and the receipt of
certain certificates, opinions and letters from the Company and its counsel. The
nature of the Underwriters' obligation is such that they are committed to
purchase all shares of Common Stock offered hereby if any such shares are
purchased. The Underwriting Agreement contains certain provisions whereby if any
Underwriter defaults in its obligations to purchase shares, and the aggregate
obligations of the Underwriters so defaulting do not exceed ten percent of the
shares offered hereby, the remaining Underwriters, or some of them, must assume
such obligations.

The Underwriters have advised the Company that the Underwriters propose to
offer the shares of the Common Stock directly to the public at the offering
price set forth on the cover of this Prospectus, and to certain dealers at such
price less a concession not in excess of $ per share. The Underwriters may
allow and such dealers may reallow a concession not in excess of $ per share
to certain other dealers. After the public offering of the shares of Common
Stock, the offering price and other selling terms may be changed by the
Underwriters.

The Company has granted to the Underwriters an option, exercisable no later
than 30 days after the date of this Prospectus, to purchase up to additional
375,000 shares of Common Stock to cover over-allotments, if any, at the public
offering price set forth on the cover page of this Prospectus, less the
underwriting discounts and commissions. To the extent that the Underwriters
exercise this option, each of the Underwriters will have a firm commitment to
purchase approximately the same percentage thereof which the number of shares of
Common Stock to be purchased by it shown in the above table bears to the total
number of shares of Common Stock offered hereby. The Company will be obligated,
pursuant to the option, to sell such shares to the Underwriters.

In connection with the Offering, the Underwriters may engage in
transactions that stabilize, maintain or otherwise affect the price of the
Common Stock. Specifically, the Underwriters may overallot the Offering,
creating a syndicate short position. In addition, the Underwriters may bid for
and purchase shares of Common Stock in the open market to cover syndicate short
positions or to stabilize the price of the Common Stock. Finally, the
Underwriters may reclaim selling concessions from syndicate members in the
Offering if the syndicate repurchases previously distributed Common Stock in
syndicate covering transactions, in stabilizing transactions or otherwise. Any
of these activities may stabilize or maintain the market price of the Common
Stock above independent market levels. The Underwriters are not required to
engage in these activities, and may end any of these activities at any time.

The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act.

The executive officers, directors, employees and certain other stockholders
of the Company who beneficially own or have dispositive power over 7,368,950
shares of Common Stock outstanding prior to this Offering, including Common
Stock to be issued upon the completion of this Offering pursuant to the
Preferred Stock Conversion, have agreed that they will not,

<PAGE>
without the prior written consent of UBS Securities LLC, offer, sell or
otherwise dispose of any shares of Common Stock or securities exchangeable for
or convertible into shares of Common Stock owned by them for a period of 180
days after the date of this Prospectus. The Company has agreed that it will not,
without the prior written consent of UBS Securities LLC, offer, sell or
otherwise dispose of any shares of Common Stock for a period of 180 days after
the date of this Prospectus, except that the Company may grant options under the
Stock Option Plan and may issue shares pursuant to other currently outstanding
options.

The Representatives have advised the Company that the Underwriters do not
intend to confirm sales to any account over which they exercise discretionary
authority in excess of five percent of the number of shares of Common Stock
offered hereby.

In June 1997, an entity affiliated with UBS Securities LLC purchased in
connection with the Company's Series D Preferred Stock financing an aggregate of
2,000,000 shares of Series D Preferred Stock at a price of $.75 per share. Such
Preferred Stock will convert into 235,295 shares of Common Stock upon the
completion of this Offering.

Prior to this Offering, there has been no public market for the Common
Stock of the Company. The initial public offering price will be determined by
negotiations between the Company and the Representatives and may not be
indicative of the market price at which the Common Stock of the Company will
trade after this Offering. Among the factors to be considered in such
negotiations, in addition to prevailing market conditions, are certain financial
information of the Company, market valuations of other companies that the
Company and the Representatives believe to be comparable to the Company,
estimates of the business potential of the Company, the present state of the
Company's development and other factors deemed relevant. The initial public
offering price set forth on the cover page of this Prospectus should not,
however, be considered an indication of the actual value of the Common Stock.
Such price is subject to change as a result of market conditions and other
factors. There can be no assurance that an active trading market will develop
for the Common Stock or that the Common Stock will trade in the public market
subsequent to this Offering at or above the initial offering price.

<PAGE>
LEGAL MATTERS

The validity of the shares of Common Stock offered hereby will be passed
upon for the Company by Hutchison & Mason PLLC, Raleigh, North Carolina, counsel
to the Company. Certain legal matters will be passed upon for the Company by
Wilmer, Cutler & Pickering, Washington D.C., special counsel to the Company. As
of the date of this Prospectus, a member of Hutchison & Mason PLLC beneficially
owns 3,530 shares of the Company's Common Stock and a partner of Wilmer, Cutler
& Pickering beneficially owns 9,804 shares of the Company's Common Stock. A
principal of AspenTree Capital, financial advisor to the Company and beneficial
owner of 26,864 shares of the Company's Common Stock, serves as a consultant to
Wilmer, Cutler & Pickering on certain matters other than those relating to the
Company. Certain legal matters will be passed upon for the Underwriters by
Brobeck, Phleger & Harrison LLP, New York, New York.

EXPERTS

The financial statements of the Company, as of December 31, 1995 and 1996
and for each of the years in the three-year period ended December 31, 1996, and
the period from inception (January 7, 1993) to December 31, 1996 have been
included herein and in the Registration Statement in reliance upon the report of
KPMG Peat Marwick LLP, independent certified public accountants, appearing
elsewhere herein, and upon the authority of said firm as experts in accounting
and auditing.

The statements in this Prospectus under the captions "Risk
Factors -- Uncertainty Regarding Patents and Proprietary Rights" and
"Business -- Patents, Proprietary Technology and Trade Secrets", relating to
U.S. patent matters, have been reviewed and approved by Pennie & Edmonds LLP,
New York, New York, patent counsel to the Company, and are included herein in
reliance upon such review and approval by the firm as experts in U.S. patent
law.

ADDITIONAL INFORMATION

The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-l under the Securities Act with
respect to the Common Stock offered hereby. This Prospectus, which is a part of
the Registration Statement, does not contain all of the information set forth in
the Registration Statement and the exhibits and schedules hereto. For further
information with respect to the Company and the Common Stock offered hereby,
reference is hereby made to such Registration Statement and to the exhibits and
schedules filed as a part thereof. Statements made in this Prospectus concerning
the contents of any contracts or documents are not necessarily complete, and, in
each such instance, if such contract or document is filed as an exhibit to the
Registration Statement, reference is made to such exhibit for a more complete
description, and each such statement is qualified in its entirety by reference
to such exhibit. Any interested party may inspect the Registration Statement,
without charge, at the public reference facilities of the Commission at Room
1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 and copies
of all or any portion of the Registration Statement, including exhibits and
schedules thereto, may be obtained at prescribed rates from the Public Reference
Section of the Commission at its principal office at Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549 and at the Commission's public reference
facilities in Chicago, Illinois and New York, New York. The Commission maintains
a World Wide Web site that will contain reports, proxy and information
statements and other information regarding the Company. The address of such site
is http://www.sec.gov.

As a result of the filing of this Registration Statement and the completion
of the Offering contemplated hereby, the Company will become subject to the
periodic reporting requirements of the Securities Exchange Act of 1934, as
amended, and in accordance therewith will be required to file reports and other
information with the Commission. Such reports and other information can be
inspected and copied at the public reference facilities maintained by the
Commission at its principal offices.

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

<PAGE>
TRIMERIS, INC.
(A DEVELOPMENT STAGE COMPANY)

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
<S> <C>
Independent Auditors' Report........................................................................................... F-2
Balance Sheets at December 31, 1995 and 1996 and June 30, 1997 (unaudited)............................................. F-3
Statements of Operations for the Years Ended December 31, 1994, 1995,
and 1996 and for the Six Months Ended June 30, 1996 (unaudited) and 1997
(unaudited) and for the period from Inception to December 31, 1996................................................... F-4
Statements of Stockholders' Equity (Deficit) for the Years Ended December 31, 1993, 1994,
1995, and 1996 and for the Six Months Ended June 30, 1997 (unaudited)................................................ F-5
Statements of Cash Flows for the Years Ended December 31, 1994, 1995,
and 1996 and for the Six Months Ended June 30, 1996 (unaudited) and 1997
(unaudited) and for the period from Inception to December 31, 1996................................................... F-6
Notes to Financial Statements.......................................................................................... F-7
</TABLE>

F-1

<PAGE>
INDEPENDENT AUDITORS' REPORT

The Board of Directors and Stockholders
Trimeris, Inc.:

We have audited the accompanying balance sheets of Trimeris, Inc. (A
Development Stage Company) (the "Company") as of December 31, 1995 and 1996, and
the related statements of operations, stockholders' equity (deficit), and cash
flows for each of the years in the three-year period ended December 31, 1996 and
for the cumulative period from the date of inception to December 31, 1996. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

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

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of the Company as of December
31, 1995 and 1996, and the results of its operations and its cash flows for each
of the years in the three-year period ended December 31, 1996, and for the
cumulative period from the date of inception to December 31, 1996, in conformity
with generally accepted accounting principles.

March 17, 1997 except for
Note 11(a) as to which the
date is June 30, 1997

Raleigh, North Carolina KPMG PEAT MARWICK
LLP

F-2

<PAGE>
TRIMERIS, INC.
(A DEVELOPMENT STAGE COMPANY)

BALANCE SHEETS

<TABLE>
<CAPTION>
PRO FORMA
AS OF JUNE STOCKHOLDERS'
AS OF DECEMBER 31, 30, EQUITY AS OF
1995 1996 1997 JUNE 30, 1997
<S> <C> <C> <C> <C>
(UNAUDITED) (UNAUDITED)
ASSETS
Current assets:
Cash and cash equivalents........................................... $ 1,343,346 $ 131,540 $ 8,912,343
Accounts receivable................................................. 793 32,752 44,758
Loans to employees.................................................. -- 2,985 --
Prepaid expenses.................................................... 9,564 45,470 311,753
Total current assets............................................ 1,353,703 212,747 9,268,854
Property, furniture and equipment, net of accumulated depreciation of
$921,135, $1,611,544 and $1,911,663 at December 31, 1995, 1996 and
June 30, 1997 (unaudited), respectively............................. 1,230,394 896,672 698,372
Other assets:
Equipment held for resale, less allowance of $60,972, $54,029 and
$54,029 at December 31, 1995, 1996 and June 30, 1997 (unaudited),
respectively...................................................... 60,972 54,029 54,029
Exclusive license agreement, net of accumulated amortizaton of
$6,632, $9,044 and $10,250 at December 31, 1995, 1996 and June 30,
1997 (unaudited), respectively.................................... 34,368 31,956 30,750
Patent costs........................................................ 298,154 412,619 444,949
Equipment deposits.................................................. 58,830 58,830 58,830
Other assets, net of accumulated amortization of $10,233, $14,531
and $16,518 at December 31, 1995, 1996 and June 30, 1997
(unaudited), respectively......................................... 21,427 16,876 28,967
Total other assets.............................................. 473,751 574,310 617,525
Total assets.................................................... $ 3,057,848 $ 1,683,729 $ 10,584,751
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable.................................................... $ 118,016 $ 254,845 $ 337,173
Current installments of obligations under capital leases............ 527,406 500,248 332,332
Accrued expenses.................................................... 385,797 762,548 580,012
Total current liabilities....................................... 1,031,219 1,517,641 1,249,517
Notes payable......................................................... 166,718 259,000 260,000
Obligations under capital leases, excluding current installments...... 536,184 316,537 228,111
Total liabilities............................................... 1,734,121 2,093,178 1,737,628
Stockholders' equity (deficit):
Series A Preferred Stock at $.001 par value per share. 3,000,000
shares authorized, issued and outstanding......................... 3,000 3,000 3,000 $ --
Series B Preferred Stock at $.001 par value per share. 29,000,000
shares authorized; issued and outstanding 20,635,564 and
27,135,564 shares at December 31, 1995, 1996 and June 30, 1997
(unaudited), respectively......................................... 20,636 27,136 27,136 --
Series C Preferred Stock at $.001 per share. 20,000,000 shares
authorized; issued and outstanding 3,333,335 and 13,317,740 shares
at December 31, 1996 and June 30, 1997 (unaudited),
respectively...................................................... -- 3,333 13,317 --
Series D Preferred Stock at $.001 par value per share 10,666,667
shares authorized; issued and outstanding 9,047,962 at
June 30, 1997 (unaudited)......................................... -- -- 9,048 --
Common Stock at $.001 par value per share. Authorized 80,000,000
shares; issued and outstanding 352,412, 436,688 and 1,092,472
shares at December 31, 1995, 1996 and June 30, 1997 (unaudited),
respectively...................................................... 353 437 1,092 7,354
Additional paid-in capital.......................................... 12,293,582 17,535,897 32,434,995 32,481,234
Deficit accumulated during the development stage.................... (10,993,844) (17,965,252) (21,442,925) (21,442,925)
Deferred compensation............................................... -- -- (1,935,000) (1,935,000)
Notes receivable from stockholders.................................. -- (14,000) (263,540) (263,540)
Total stockholders' equity (deficit)............................ 1,323,727 (409,449) 8,847,123 $ 8,847,123
Commitments and contingencies (notes 2, 10, and 11)
Total liabilities and stockholders' equity (deficit)............ $ 3,057,848 $ 1,683,729 $ 10,584,751
</TABLE>

See accompanying notes to financial statements.

F-3

<PAGE>
TRIMERIS, INC.
(A DEVELOPMENT STAGE COMPANY)

STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
CUMULATIVE
FROM INCEPTION
(JANUARY 7, FOR THE
1993) SIX MONTHS ENDED
FOR THE YEARS ENDED DECEMBER 31, TO DECEMBER 31, JUNE 30,
1994 1995 1996 1996 1996 1997
<S> <C> <C> <C> <C> <C> <C>
(UNAUDITED)
Revenue......................... $ -- $ 104,453 $ 54,465 $ 158,918 $ -- $ 211,875
Operating expenses:
Research and development...... 2,746,867 4,011,875 5,146,072 12,596,163 2,278,084 2,858,785
General and administrative.... 947,518 1,520,974 1,759,965 4,859,704 801,547 786,445
Total operating
expenses............... 3,694,385 5,532,849 6,906,037 17,455,867 3,079,631 3,645,230
Operating loss................ (3,694,385) (5,428,396) (6,851,572) (17,296,949) (3,079,631) (3,433,355)
Other income (expense):
Interest income............... 8,611 49,176 46,992 121,449 31,672 33,319
Interest expense.............. (258,191) (360,158) (166,828) (789,752) (85,623) (77,637)
(249,580) (310,982) (119,836) (668,303) (53,951) (44,318)
Net loss...................... $(3,943,965) $(5,739,378) $(6,971,408) $ (17,965,252) $(3,133,582) $(3,477,673)
Pro forma net loss
per share...................... $ (1.48) $ (0.59)
Pro forma weighted average
shares used in per share
computations................... 4,705,000 5,880,000

<CAPTION>
CUMULATIVE
FROM INCEPTION
(JANUARY 7, 1993)
TO JUNE 30, 1997
<S> <C>
(UNAUDITED)
Revenue......................... $ 370,793
Operating expenses:
Research and development...... 15,454,948
General and administrative.... 5,646,149
Total operating
expenses............... 21,101,097
Operating loss................ (20,730,304)
Other income (expense):
Interest income............... 154,768
Interest expense.............. (867,389)
(712,621)
Net loss...................... $ (21,442,925)
Pro forma net loss
per share......................
Pro forma weighted average
shares used in per share
computations...................
</TABLE>

See accompanying notes to financial statements.

F-4

<PAGE>
TRIMERIS, INC.
(A DEVELOPMENT STAGE COMPANY)

STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)

YEARS ENDED DECEMBER 31, 1993, 1994, 1995 AND 1996, AND THE SIX MONTHS ENDED
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
DEFICIT
ACCUMULATED
PREFERRED STOCK COMMON STOCK ADDITIONAL DURING THE
NUMBER PAR NUMBER PAR PAID-IN DEVELOPMENT DEFERRED
OF SHARES VALUE OF SHARES VALUE CAPITAL STAGE COMPENSATION
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at January
7, 1993........... -- $ -- -- $ -- $ -- $ -- -- --
Issuances of Common
Stock............. -- -- 217,647 218 1,632 -- --
Issuances of Series
A Preferred
Stock............. 3,000,000 3,000 -- -- 1,997,000 -- --
Stock issuance
costs............. -- -- -- -- (33,813) -- --
Common Stock issued
in exchange for
exclusive
license........... -- -- 96,471 96 40,904 -- --
Common Stock issued
in exchange for
consulting
services.......... -- -- 5,882 6 2,494 -- --
Loss for the
period............ -- -- -- -- -- (1,310,501) --
Balance as of
December 31,
1993.............. 3,000,000 3,000 320,000 320 2,008,217 (1,310,501) --
Issuances of Common
Stock............. -- -- 11,911 12 5,051 -- --
Common Stock issued
in exchange for
consulting
services.......... -- -- 4,706 5 1,995 -- --
Loss for the
period............ -- -- -- -- -- (3,943,965) --
Balance as of
December 31,
1994.............. 3,000,000 3,000 336,617 337 2,015,263 (5,254,466) --
Issuances of Common
Stock............. -- -- 15,795 16 7,894 -- --
Issuance of Series B
Preferred Stock... 20,635,564 20,636 -- -- 10,297,146 -- --
Stock issuance
costs............. -- -- -- -- (26,721) -- --
Loss for the
period............ -- -- -- -- -- (5,739,378) --
Balance as of
December 31,
1995.............. 23,635,564 23,636 352,412 353 12,293,582 (10,993,844) --
Issuances of Common
Stock............. -- -- 83,688 84 28,370 -- --
Common Stock issued
in exchange for
consulting
services.......... -- -- 588 -- 200 -- --
Issuances of Series
B Preferred
Stock............. 6,500,000 6,500 -- -- 3,243,500 -- --
Issuances of Series
C Preferred
Stock............. 3,333,335 3,333 -- -- 1,996,668 -- --
Stock issuance
costs............. -- -- -- -- (26,423) -- --
Loss for the
period............ -- -- -- -- -- (6,971,408) --
Notes receivable
from stockholders
for the purchase
of shares......... -- -- -- -- -- -- --
Balance as of
December 31,
1996.............. 33,468,899 33,469 436,688 437 17,535,897 (17,965,252) --
Issuances of Series
C Preferred
Stock............. 9,984,405 9,984 -- -- 5,980,658 -- --
Issuances of Series
D Preferred
Stock............. 9,047,962 9,048 -- -- 6,776,923 -- --
Issuances of Common
Stock............. -- -- 656,494 656 251,198 -- --
Repurchase of Common
Stock............. -- -- (710) (1) (301) -- --
Stock issuance
costs............. -- -- -- -- (109,380) -- --
Issuance of Common
Stock and options
at below market
value............. -- -- -- -- 2,000,000 -- (2,000,000)
Amortization of
deferred
compensation...... -- -- -- -- -- -- 65,000
Loss for the
period............ -- -- -- -- -- (3,477,673) --
Balance as of June
30, 1997
(unaudited)....... 52,501,266 $52,501 1,092,472 $1,092 $32,434,995 $ (21,442,925) $ (1,935,000)

<CAPTION>
NOTES NET
RECEIVABLE STOCKHOLDERS'
FROM EQUITY
STOCKHOLDERS (DEFICIT)
<S> <C> <C>
Balance at January
7, 1993........... $ -- $ --
Issuances of Common
Stock............. -- 1,850
Issuances of Series
A Preferred
Stock............. -- 2,000,000
Stock issuance
costs............. -- (33,813)
Common Stock issued
in exchange for
exclusive
license........... -- 41,000
Common Stock issued
in exchange for
consulting
services.......... -- 2,500
Loss for the
period............ -- (1,310,501)
Balance as of
December 31,
1993.............. -- 701,036
Issuances of Common
Stock............. -- 5,063
Common Stock issued
in exchange for
consulting
services.......... -- 2,000
Loss for the
period............ -- (3,943,965)
Balance as of
December 31,
1994.............. -- (3,235,866)
Issuances of Common
Stock............. -- 7,910
Issuance of Series B
Preferred Stock... -- 10,317,782
Stock issuance
costs............. -- (26,721)
Loss for the
period............ -- (5,739,378)
Balance as of
December 31,
1995.............. -- 1,323,727
Issuances of Common
Stock............. -- 28,454
Common Stock issued
in exchange for
consulting
services.......... -- 200
Issuances of Series
B Preferred
Stock............. -- 3,250,000
Issuances of Series
C Preferred
Stock............. -- 2,000,001
Stock issuance
costs............. -- (26,423)
Loss for the
period............ -- (6,971,408)
Notes receivable
from stockholders
for the purchase
of shares......... (14,000) (14,000)
Balance as of
December 31,
1996.............. (14,000) (409,449)
Issuances of Series
C Preferred
Stock............. -- 5,990,642
Issuances of Series
D Preferred
Stock............. -- 6,785,971
Issuances of Common
Stock............. (249,540) 2,314
Repurchase of Common
Stock............. -- (302)
Stock issuance
costs............. -- (109,380)
Issuance of Common
Stock and options
at below market
value............. -- --
Amortization of
deferred
compensation...... -- 65,000
Loss for the
period............ -- (3,477,673)
Balance as of June
30, 1997
(unaudited)....... $ (263,540) $ 8,847,123
</TABLE>

See accompanying notes to financial statements.

F-5

<PAGE>
TRIMERIS, INC.
(A DEVELOPMENT STAGE COMPANY)

STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
CUMULATIVE
FROM INCEPTION
(JANUARY 7,
1993) FOR THE SIX MONTHS ENDED
FOR THE YEARS ENDED DECEMBER 31, TO DECEMBER 31, JUNE 30,
1994 1995 1996 1996 1996 1997
<S> <C> <C> <C> <C> <C> <C>
(UNAUDITED)
Cash flows from operating activities:
Net Loss.................................. $(3,943,965) $(5,739,378) $(6,971,408) $ (17,965,252) $(3,133,582) $(3,477,673)
Adjustments to reconcile net loss to net
cash used by operating activities:
Depreciation and amortization of
property, furniture and equipment..... 356,009 543,796 690,419 1,631,486 324,270 300,109
Other amortization...................... 7,055 6,707 8,699 25,565 1,206 66,206
Provision for equipment held for
resale................................ 16,821 -- -- 60,972 -- --
Stock issued for consulting services.... 2,000 -- 200 4,700 -- --
Stock issued to repay interest on notes
to stockholders....................... -- 194,521 -- 194,521 -- --
Debt issued for research and
development........................... -- -- 193,350 193,350 -- --
Loss on disposal of property and
equipment............................. 16,686 -- -- 16,686 -- --
Decrease (increase) in assets:
Accounts receivable and loans to
employees............................. (8,223) 7,430 (34,944) (35,737) (7,449) (9,021)
Prepaid expenses........................ 2,680 (3,574) (35,906) (45,470) (112) (266,283)
Other assets............................ (719) (16,260) 253 (68,651) 2,401 (12,091)
Increase (decrease) in liabilities:
Accounts payable........................ (351,554) (20,409) 136,829 254,845 45,605 82,328
Accrued expenses........................ 137,275 270,778 183,401 673,292 (111,906) (182,536)
Net cash used by operating activities... (3,765,935) (4,756,389) (5,829,107) (15,059,693) (2,879,567) (3,498,961)
Cash flows from investing activities:
Purchase of property and equipment........ (57,608) (97,467) (26,529) (430,469) (234,032) (101,809)
Equipment held for resale................. 21,475 -- 6,943 (115,001) 6,943 --
Organizational costs...................... -- -- -- (8,217) -- --
Patent costs.............................. (20,474) (213,454) (116,454) (414,608) (76,418) (32,330)
Net cash used in investing activities... (56,607) (310,921) (136,040) (968,295) (303,507) (134,139)
Cash flows from financing activities:
Proceeds from issuance of notes payable... 3,600,000 2,716,718 92,282 6,409,000 71,782 1,000
Lease costs............................... -- -- -- (13,371) -- --
Proceeds from financing................... 265,650 -- -- -- -- --
Principal payments under capital lease
obligations............................. (281,067) (432,958) (576,973) (1,297,589) (62,659) (256,342)
Proceeds from issuance of Common Stock.... 5,063 7,910 14,454 29,277 -- 2,314
Proceeds from issuance of Preferred
Stock................................... -- 3,869,167 5,250,001 11,119,168 3,244,664 12,776,613
Repurchase of Common Stock................ -- -- -- -- -- (302)
Stock issuance costs...................... -- (26,721) (26,423) (86,957) -- (109,380)
Net cash provided by financing
activities............................ 3,589,646 6,134,116 4,753,341 16,159,528 3,253,787 12,413,903
Net increase (decrease) in cash and cash
equivalents........................... (232,896) 1,066,806 (1,211,806) 131,540 70,713 8,780,803
Cash and cash equivalents at beginning of
period.................................... 509,436 276,540 1,343,346 -- 1,343,346 131,540
Cash and cash equivalents at end of period.. $ 276,540 $ 1,343,346 $ 131,540 $ 131,540 $ 1,414,059 $ 8,912,343
Supplemental disclosure of cash flow
information:
Cash paid during the period for interest.. $ 154,097 $ 178,913 $ 154,228 $ 691,728 $ 85,623 $ 56,233
</TABLE>

Supplemental disclosures of noncash investing and financing activities are
described in Note 8.

See accompanying notes to financial statements.

F-6

<PAGE>
TRIMERIS, INC.

(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION

Trimeris, Inc. was incorporated on January 7, 1993 to discover and develop
novel therapeutic agents that block viral infection by inhibiting viral fusion
with host cells. The financial statements have been prepared in accordance with
Statement of Financial Accounting Standards No. 7, "Accounting and Reporting by
Development Stage Enterprises," to recognize the fact that the Company is
devoting substantially all of its efforts to establishing a new business and
planned principal operations have not commenced.

CASH EQUIVALENTS

The Company considers all highly liquid debt instruments with an original
maturity of three months or less to be cash equivalents.

PROPERTY, FURNITURE AND EQUIPMENT

Property, furniture and equipment are recorded at cost. Property, furniture
and equipment under capital leases are initially recorded at the present value
of minimum lease payments at the inception of the lease.

Depreciation is calculated using the straight-line method over the
estimated useful lives of the assets. Property, furniture and equipment held
under capital leases and leasehold improvements are amortized using the straight
line method over the lesser of the lease term or estimated useful life of the
asset.

ORGANIZATION COSTS

Organization costs are amortized using the straight-line method over five
years.

EXCLUSIVE LICENSE

The exclusive license is amortized using the straight-line method over
seventeen years.

PATENTS

The costs of patents are capitalized and will be amortized using the
straight-line method over the remaining lives of the patents from the date the
patents are granted.

RESEARCH AND DEVELOPMENT

Research and development costs are charged to operations as incurred.

DEFERRED FINANCING COSTS

Financing costs were incurred as part of the Company's capital lease
agreements and are amortized straight-line over the lease term.

INCOME TAXES

The Company uses the asset and liability method of accounting for income
taxes.

USE OF ESTIMATES

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

F-7

<PAGE>
TRIMERIS, INC.
(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS -- CONTINUED

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- Continued
PRO FORMA STOCKHOLDERS' EQUITY (UNAUDITED)

Upon the completion of the Company's initial public offering (the
"Offering") of Common Stock (the "Common Stock"), all of the outstanding shares
of Series A, B, C, and D Preferred Stock (the "Preferred Stock") will convert
into 6,261,615 shares of Common Stock. The unaudited pro forma presentation of
stockholders' equity has been prepared giving effect to the conversion of all
the Preferred Stock into Common Stock on June 30, 1997, assuming that the
initial public offering price per share in connection with this Offering is
$13.00.

PRO FORMA NET LOSS PER SHARE (UNAUDITED)

The pro forma net loss per share is computed based upon the weighted
average number of common shares and common equivalent shares (using the treasury
stock method) outstanding after certain adjustments described below. Common
equivalent shares are not included in the per share calculations where the
effect of their inclusion would be anti-dilutive, except that, in accordance
with Securities and Exchange Commission Staff Accounting Bulletin No. 83, all
common and common equivalent shares issued during the twelve-month period prior
to the initial filing of the registration statement relating to the Offering,
even when anti-dilutive, have been included in the calculation as if they were
outstanding for all periods, using the treasury stock method and an assumed
initial public offering price of $13.00 per share. The pro forma net loss per
common share gives effect to the mandatory conversion of all outstanding shares
of Preferred Stock into 6,261,615 shares of Common Stock upon the completion of
this Offering.

HISTORICAL NET LOSS PER COMMON SHARE

Net loss per common share on a historical basis is computed in the same
manner as pro forma net loss per common share, except that Series A, B, C and D
Preferred Stock are not assumed to be converted. Net loss per common share on a
historical basis is as follows:

<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED JUNE 30,
1994 1995 1996 1996 1997
<S> <C> <C> <C> <C> <C>
(UNAUDITED)
Net loss to common stockholders.................... $(3,943,965) $(5,739,378) $(6,971,408) $(3,133,582) $(3,477,673)
Net loss per common share.......................... $ (3.57) $ (5.06) $ (6.04) $ (2.77) $ (2.96)
Weighted average number of common and common
equivalent shares outstanding.................... 1,105,000 1,134,000 1,154,000 1,133,000 1,173,000
</TABLE>

Fully diluted net loss per common share is the same as primary net loss per
common share.

STOCK SPLIT

Effective July 11, 1997, the Company declared a one for eight and one-half
reverse stock split for common shareholders. This stock split has been
retroactively applied and all periods presented have been restated. The
conversion prices for the Preferred Stock discussed in Note 4 will be adjusted
for this reverse stock split.

F-8

<PAGE>
TRIMERIS, INC.
(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS -- CONTINUED

2. LEASES

The Company is obligated under various capital leases for furniture and
equipment that expire at various dates during the next four years. The gross
amount of furniture and equipment and related accumulated amortization recorded
under capital leases and included in property, furniture and equipment were as
follows at December 31, 1995, 1996 and June 30, 1997 (unaudited):

<TABLE>
<CAPTION>
JUNE 30,
1995 1996 1997
<S> <C> <C> <C>
(UNAUDITED)
Furniture and equipment.................................... $1,790,110 $ 1,930,423 $ 1,980,665
Less accumulated amortization.............................. (780,082) (1,084,160) (1,347,996)
$1,010,028 $ 846,263 $ 632,669
</TABLE>

The Company also has several non-cancelable operating leases, primarily for
office space and office equipment, that extend through September 1999. Rental
expense, including maintenance charges, for operating leases during 1994, 1995,
1996 and the six months ended June 30, 1996 (unaudited) and 1997 (unaudited) was
$454,307, $532,146, $552,001, $254,717 and $300,018 respectively.

Future minimum lease payments under non-cancelable operating leases (with
initial or remaining lease terms in excess of one year) and future minimum
capital lease payments as of December 31, 1996 are:

<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
<S> <C> <C>
Year ending December 31:
1997...................................................................... $552,675 $ 514,774
1998...................................................................... 274,991 520,721
1999...................................................................... 114,871 419,255
2000...................................................................... 7,117 --
Total minimum lease payments.............................................. 949,654 $1,454,750
Less amount representing interest......................................... 132,869
Present value of net minimum capital lease payments....................... 816,785
Less current installments of obligations under capital leases............... 500,248
Obligations under capital leases, excluding current installments.......... $316,537
</TABLE>

Additionally, under a warrant agreement dated August 24, 1993 with a
lessor, the Company issued warrants to acquire Series B Preferred Stock at the
initial Series B Preferred Stock per share offering price, such that the
aggregate purchase price for the shares equals $118,756. The warrants shall be
exercisable prior to the earlier of the tenth annual anniversary date of the
grant date or fifth anniversary date of Trimeris' Initial Public Offering. The
shares have not been issued as of December 31, 1996.

During the year ended December 31, 1995, the lease with the aforementioned
lessor was amended to increase the credit limit by $750,000 to $2.0 million. As
part of this amendment, Trimeris granted the lessor additional warrants to
purchase shares valued at $71,250 of Series B Preferred Stock at the initial per
share offering price.

3. NOTES PAYABLE

In March 1995, the Company entered into a Financial Assistance Agreement
with the North Carolina Biotechnology Center (the "Center"). Under this
agreement, the Center agreed to extend to the Company a line of credit up to
$250,000 for the funding of certain research performed by the Company. This note
payable is unsecured and bears interest at 8.5% on the balance of all
outstanding principal. The note matures in March 2000, at which time principal
and accrued interest is to be

F-9

<PAGE>
TRIMERIS, INC.
(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS -- CONTINUED

3. NOTES PAYABLE -- Continued
repaid. At December 31, 1995, 1996 and June 30, 1997 (unaudited), the total
principal and interest due were $162,218, $262,600 and $284,000, respectively.

In November 1995, the Company entered into a Collaborative Funding
Assistance Agreement with the Center. Under this agreement, the Center agreed to
lend the Company up to $10,000 for the funding of certain research performed by
the Company. This note payable is unsecured and bears interest at 8.75% on the
balance of all outstanding principal. The note matures in December 2000, at
which time principal and accrued interest is to be repaid. At December 31, 1995,
1996 and June 30, 1997 (unaudited), the total principal due was $4,500, $9,000
and $10,000, respectively.

4. STOCKHOLDERS' EQUITY (DEFICIT)

The Company has the authority to issue 121,750,000 shares of stock
consisting of 69,750,000 shares of Common Stock, par value $0.001 per share, and
52,000,000 shares of Preferred Stock, par value $0.001 per share, of which
3,000,000 shares shall be designated Series A Preferred Stock, 29,000,000 shares
shall be designated Series B Preferred Stock, and 20,000,000 shares shall be
designated Series C Preferred Stock.

During 1996 and the six months ended June 30, 1997 (unaudited), loans with
an interest rate of 8% totaling $14,000 and $249,540, respectively, were issued
to employees of the Company for purchase of shares of the Company's Common
Stock. This amount has been presented as contra-equity in the statement of
stockholders' equity (deficit).

PREFERRED STOCK

DIVIDENDS

Holders of the Preferred Stock are not entitled to receive dividends,
provided however, that in the event the Company shall at any time declare or pay
a dividend on the Common Stock, other than a stock dividend, each holder of
Preferred Stock shall receive a dividend equal to the dividend that would have
been payable to such holder if the Preferred Stock had been converted into
Common Stock on the date of record for holders of the Common Stock.

In the event of a merger or consolidation, holders of Preferred Stock will
have the right to redeem the shares within 15 days of receipt of such notice.
Any redeemed shares will be considered permanently retired.

LIQUIDATION

Upon any liquidation, dissolution, or winding up of the Company, holders of
the Preferred Stock shall be entitled, before any distribution is made upon the
Common Stock, to be paid for each share in cash an amount equal to (i) $0.67 per
share in the case of the Series A Preferred Stock, (ii) $0.50 per share in the
case of the Series B Preferred Stock or (iii) $0.60 per share in the case of
Series C Preferred Stock in addition to other considerations. If the assets to
be distributed are insufficient to permit full payment to the preferred
stockholders, then the assets of the Company shall be distributed on a pro rata
basis to each class of preferred stockholders. The value of any noncash
distribution shall be determined by an independent appraiser or securities
exchange if the item is an actively traded security.

CONVERSION

Holders of Preferred Stock have the right, at any time, to convert into
such number of shares of common stock as is obtained by multiplying the number
of shares to be converted by the preferred stock's "Basic Liquidation
Preference" ($0.67 for Series A Preferred Stock, $0.50 for Series B Preferred
Stock $0.60 for Series C Preferred Stock and $0.75 for Series D Preferred Stock)
and dividing such amount by the Preferred Stock's conversion price in effect at
the time of conversion.

The respective preferred stock conversion prices are as follows as of
December 31:

<TABLE>
<CAPTION>
1994 1995 1996
<S> <C> <C> <C>
Series A......................................... $0.670 $0.534 $0.524
Series B......................................... -- 0.500 0.500
Series C......................................... -- -- 0.600
</TABLE>

F-10

<PAGE>
TRIMERIS, INC.
(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS -- CONTINUED

4. STOCKHOLDERS' EQUITY (DEFICIT) -- Continued
The Preferred Stock conversion price will be reduced in the event of the
Company's issuing any shares of its Common Stock without consideration or for a
consideration per share of less than the conversion price of any series of
Preferred Stock in effect immediately prior to the time of such issue or sale,
subject to certain limitations.

The Company shall at times reserve and keep available out of its authorized
Common Stock or treasury shares, such number of common shares sufficient to
cover the conversion of all outstanding Preferred Stock.

The Company may at its option, require the conversion of all (but not less
than all) the shares at the time outstanding if the Company shall complete a
firm commitment underwritten public offering involving the sale of the Company's
Common Stock (i) at a price to the public of at least $10 per share
appropriately adjusted for stock splits and dividends and stock combinations,
and (ii) yielding gross proceeds to the Company of at least $20 million.

VOTING

Each holder of Preferred Stock shall be entitled to one vote for each share
of Common Stock which would be issuable to holder upon conversion. Each holder
of Common Stock is entitled to one vote per share. Preferred and common
stockholders shall vote together as a class.

RESTRICTIONS

The Company cannot, without the consent of the preferred stockholders: (i)
authorize any new classes of stock unless that class ranks junior to the
Preferred Stock, (ii) increase the authorized amount of Preferred Stock, or
(iii) authorize any obligation or security which is convertible into Preferred
Stock.

COMMON STOCK

DIVIDENDS

The holders of Common Stock shall be entitled to receive dividends as from
time to time may be declared by the Board of Directors taking into account the
rights of the preferred stockholders.

LIQUIDATION

After payment to the preferred stockholders as discussed above, holders of
Common Stock shall be entitled, together with the holders of Preferred Stock, to
share ratably, according to the number of shares held by them in all remaining
assets of the Company available for distribution.

5. STOCK OPTION PLAN

In 1993, the Company adopted a stock option plan which allows for the
issuance of non-qualified and incentive stock options. During 1996, the
Trimeris, Inc. New Stock Option Plan (the "Stock Option Plan") was implemented
that replaced the 1993 plan. Under this new Stock Option Plan, the Company may
grant non-qualified or incentive stock options for up to 852,941 shares of
Common Stock. The exercise price of each option shall not be less than the fair
market value of the Company's Common Stock on the date of grant and an option's
maximum term is ten years. All outstanding incentive stock options have been
issued at $.34. The vesting period occurs ratably over four years. All incentive
stock options which had been granted under the 1993 plan were cancelled at
inception of the new Stock Option Plan while the non-qualified stock options
remain outstanding at an exercise price of $.43. No more grants will be made
under the 1993 plan.

F-11

<PAGE>
TRIMERIS, INC.
(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS -- CONTINUED

5. STOCK OPTION PLAN -- Continued
Stock option transactions for the years ended December 31, 1994, 1995 and
1996 and the six months ended June 30, 1997 (unaudited) are as follows:

<TABLE>
<CAPTION>
JUNE 30,
1994 1995 1996 1997
<S> <C> <C> <C> <C>
(UNAUDITED)
Options outstanding at January 1......................................... 27,276 141,411 166,191 482,804
Granted.................................................................. 114,341 37,753 572,206 100,782
Exercised (at $.43/share)................................................ (147) (4,755) (28,394) (319,540)
Cancelled................................................................ (59) (8,218) (227,199) (3,685)
Options outstanding at end of period..................................... 141,411 166,191 482,804 260,361
</TABLE>

The Company applies APB Opinion No. 25 and related interpretations in
accounting for its plans. Accordingly, compensation cost related to stock
options issued to employees would be recorded on the date of grant only if the
current market price of the underlying stock exceeded the exercise price. For
the period ended June 30, the Company has recorded a deferred charge of $2.0
million, representing the difference between the exercise price and the deemed
fair value of the Company's Common Stock for 347,529 shares of Common Stock and
79,959 shares subject to Common Stock Options granted in the second quarter of
1997. The deferred compensation will be amortized to expense over the period the
shares and options vest, generally four years.

SFAS 123, Accounting for Stock-Based Compensation, permits entities to
recognize as expense over the vesting period the fair value of all stock-based
awards on the date of grant. Alternatively, SFAS No. 123 also allows entities to
continue to apply the provisions of APB Opinion No. 25 and provide pro forma net
income and pro forma earnings per share disclosures for employee stock option
grants as if the fair-value-based method defined in SFAS No. 123 had been
applied. The Company has elected to continue to apply the provisions of APB
Opinion No. 25. The pro forma disclosures have not been included as the fair
value of the options granted in 1996 and 1995 are immaterial. The fair value of
each option grant is estimated on the date of grant using the Black-Scholes
option pricing model with the following assumptions:

<TABLE>
<S> <C>
Estimated dividend yield................................................... 0.00%
Expected stock price volatility............................................ 0.00%
Risk-free interest rate.................................................... 5.07-6.00%
Expected life of options................................................... 5-7 years
</TABLE>

6. INCOME TAXES

At December 31, 1996, the Company has net operating loss carryforwards
(NOL's) for federal income tax purposes of approximately $17.4 million which
expire in varying amounts between 2009 and 2012. The Company has NOL's for state
tax purposes of approximately $17.4 million which expire in varying amounts
between 1999 and 2002. Additionally, the Company has research and development
credits of $261,000 which expire in varying amounts between 2008 and 2011.

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

F-12

<PAGE>
TRIMERIS, INC.
(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS -- CONTINUED

6. INCOME TAXES -- Continued
The components of deferred tax assets and deferred tax liabilities as of
December 31, 1995 and 1996 and June 30, 1997 (unaudited) are as follows:

<TABLE>
<CAPTION>
JUNE 30,
1995 1996 1997
<S> <C> <C> <C>
(UNAUDITED)
Deferred tax assets:
Tax loss carryforwards......................................................... $ 4,100,000 $ 6,823,000 $ 8,165,000
Tax credits.................................................................... 158,000 261,000 297,000
Reserves and accruals.......................................................... 76,000 211,000 56,000
Start-up costs................................................................. 114,000 109,000 57,000
4,448,000 7,404,000 8,575,000
Valuation allowance.............................................................. (4,448,000) (7,404,000) (8,575,000)
Net deferred asset............................................................. -- -- --

Deferred tax liabilities:
Deferred tax liability......................................................... -- -- --
Net deferred tax assets and (liability)..................................... $ -- $ -- $ --
</TABLE>

The Company has established a valuation allowance against its deferred tax
assets due to the uncertainty surrounding the realization of such assets.

7. PROFIT SHARING PLAN

The Company has adopted a 401(k) Profit Sharing Plan (the "Plan") covering
all qualified employees. The effective date of the Plan is January 1, 1994.

Participants may elect a salary reduction from 1% to 10% as a contribution
to the Plan. Modifications of the salary reductions may be made annually. The
Plan permits the Company to match up to 8% of a participant's salary, but to
date, the Company has elected not to match participants' contributions.

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

8. SUPPLEMENTARY CASH FLOW INFORMATION

Capital lease obligations of $345,104, $330,168 and $195,179 were incurred
in 1995 and 1996 and for the six months ended June 30, 1997 (unaudited),
respectively, for leases of new furniture and equipment.

During 1995, the Company exchanged notes payable to stockholders, including
accrued interest of $6.4 million for Series B Preferred Stock.

Shares issued under the license and consulting agreements have been valued
by the Board of Directors taking into consideration the fair value of the most
recently issued preferred stock or the value of the services, whichever is more
readily determinable.

9. EQUITY FINANCING

An initial investment of $2 million was provided by Domain Partners II,
L.P. ("Domain") and Biotechnology Investments Limited ("BIL") to fund the start
up phase of the Company.

During the year ended December 31, 1995, Domain, BIL and others invested an
additional $3.9 million to fund continued operations of the Company through the
purchase of shares of Series B Preferred Stock. In addition, the Company
exchanged notes payable, including accrued interest, of $6.4 million for shares
of Series B Preferred Stock. These notes were

F-13

<PAGE>
TRIMERIS, INC.
(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS -- CONTINUED

9. EQUITY FINANCING -- Continued
payable to Domain and BIL and were entered into during the years ended December
31, 1994 and 1995. A total of 20,635,564 shares were issued for a total
consideration of $10.3 million.

In March and October 1996, Domain, BIL, and others invested an additional
$5.3 million to fund continued operations of the Company through the purchase of
6,500,000 shares of Series B Preferred Stock and 3,333,335 shares of Series C
Preferred Stock, respectively.

Common stock was issued during 1994, 1995, and 1996 through purchase by
Company personnel and also through the exercise of stock options.

10. CONTINGENCIES

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

11. SUBSEQUENT EVENTS

(a) During the six months ended June 30, 1997 equity financing of
approximately $12.8 million has been received from current and new
investors.

(b) The Company's Certificate of Incorporation was amended on July 11,
1997, giving the Company the authority to issue 142,666,667 shares of
stock consisting of 80,000,000 shares of Common Stock, par value $.001
per share, and 62,666,667 shares of Preferred Stock, par value $0.001
per share, of which 3,000,000 shares shall be designated Series A
Preferred Stock, 29,000,000 shares shall be designated Series B
Preferred Stock, 20,000,000 shares shall be designated Series C
Preferred Stock, and 10,666,667 shares shall be designated Series D
Preferred Stock.

(c) During 1997, the Company entered into agreements for the production of
drug material which require maximum payments of approximately $2.3
million, subject to acceptance of the material under the terms of the
contracts.

(d) On August 26, 1997, the Board of Directors adopted, and the
stockholders of the Company approved, the Trimeris, Inc. 1997 Employee
Stock Purchase Plan, subject to and contingent upon the consummation of
the Offering.

F-14

<PAGE>

NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY OR THE UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER
TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED
HEREBY BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT
AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT
QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE
INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE OF THIS
PROSPECTUS OR THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE
SUCH DATE.

TABLE OF CONTENTS

<TABLE>
<CAPTION>
Page
<S> <C>
Prospectus Summary............................... 3
Risk Factors..................................... 6
Use of Proceeds.................................. 18
Dividend Policy.................................. 18
Capitalization................................... 19
Dilution......................................... 20
Selected Financial Data.......................... 21
Management's Discussion and Analysis of Financial
Condition and Results of Operations............ 22
Business......................................... 25
Management....................................... 40
Certain Transactions............................. 47
Principal Stockholders........................... 48
Description of Capital Stock..................... 50
Shares Eligible for Future Sale.................. 51
Underwriting..................................... 53
Legal Matters.................................... 55
Experts.......................................... 55
Additional Information........................... 55
Index to Financial Statements.................... F-1
</TABLE>

UNTIL , 1997 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.

2,500,000 Shares

[LOGO]

Trimeris, Inc.

Common Stock

PROSPECTUS
, 1997

UBS Securities

Montgomery Securities

<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The following table sets forth the expenses to be paid by Trimeris, Inc.
(the "Registrant" or the "Company") in connection with the issuance and
distribution of the securities being registered hereby other than underwriting
discounts and commissions.

<TABLE>
<S> <C>
Registration Fee -- Securities and Exchange Commission............................................................ $ 12,197
Filing Fee -- National Association of Securities Dealers, Inc..................................................... 4,525
Filing and Listing Fee -- Nasdaq National Market.................................................................. 42,177
Transfer Agent's Fee and Expenses*................................................................................ 5,000
Legal Fees and Expenses*.......................................................................................... 325,000
Printing and Engraving Expenses*.................................................................................. 175,000
Accounting Fees and Expenses*..................................................................................... 150,000
Blue Sky Fees and Expenses (including legal fees)*................................................................ 15,000
Miscellaneous*.................................................................................................... 71,101
Total...................................................................................................... $800,000
</TABLE>

* Estimated

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS

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

The Company's Third Amended and Restated Certificate of Incorporation to be
filed upon the completion of this Offering contains certain provisions permitted
under DGCL relating to the liability of directors. These provisions eliminate a
director's personal liability for monetary damages resulting from a breach of
fiduciary duty, except in certain circumstances involving certain wrongful acts,
such as (i) for any breach of the director's duty of loyalty to the Company or
its stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) under Section 174 of
the DGCL, (iv) for any transaction from which the director derives an improper
personal benefit or (v) acts or omissions occurring prior to the date of these
provisions. These provisions do not limit or eliminate the rights of the Company
or any stockholder to seek equitable relief, such as an injunction or
rescission, in the event of a breach of director's fiduciary duty. These
provisions will not alter a director's liability under federal securities laws.
The Company's Third Amended and Restated Certificate of Incorporation also
contains provisions indemnifying the directors and officers of the Company to
the fullest extent permitted by DGCL.

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

The Company intends to enter into indemnification agreements with each of
its directors and executive officers prior to the completion of the Offering.
Generally, the indemnification agreements will provide the maximum protection
available under the Third Amended and Restated Certificate of Incorporation, the
Amended and Restated Bylaws and the DGCL as it

II-1

<PAGE>

may be amended from time to time. Under such indemnification agreements,
however, an individual will not receive indemnification for judgments,
settlements or expenses if he or she is found liable to the Company (except to
the extent the court determines he or she is fairly and reasonably entitled to
indemnity for expenses), for settlements not approved by the Company or for
settlements and expenses if the settlement is not approved by the court. The
indemnification agreements provide for the Company to advance to the individual
any and all expenses (including attorneys' fees) incurred in investigating or
defending any such action, suit or proceeding. Also, the individual must repay
such advances upon a final judicial decision that he or she is not entitled to
indemnification.

The Underwriting Agreement (to be filed as Exhibit 1.1 to this Registration
Statement) contains provisions by which the Underwriters have agreed, severally
and not jointly, to indemnify and hold harmless the Company, each person, if
any, who controls the Company, within the meaning of Section 15 of the
Securities Act, each director of the Company, and each officer of the Company
who signs this Registration Statement, from and against any liability caused by
any information furnished in writing by the Underwriters for use in the
Registration Statement.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES

Except as hereinafter set forth, there have been no securities sold by the
Registrant within the last three years which were not registered under the
Securities Act of 1933, as amended (the "Securities Act"). Amounts in this Item
15 have been adjusted to reflect the 1-for-8.5 reverse stock split of the
Registrant effected on July 11, 1997.

(a) Issuances of Securities

On July 1, 1997, the Registrant issued 10,589 shares of Common Stock
to a key employee of the Registrant at a purchase price of $.43 per share.

On June 27, 1997, the Registrant issued 9,047,962 shares of Series D
Preferred Stock to certain existing stockholders and new investors at a
purchase price of $.75 per share.

On June 11, 1997, the Registrant issued an aggregate of 117,648 shares
of Common Stock to certain executive officers and key employees of the
Registrant at a purchase price of $.43 per share payable pursuant to the
terms of certain promissory notes.

On June 2, 1997, the Registrant issued an aggregate of 219,295 shares
of Common Stock to certain executive officers and key employees of the
Registrant at a purchase price of $.43 per share payable pursuant to the
terms of certain promissory notes.

In a series of closings held on October 7, 1996, January 16, 1997,
March 27, 1997 and April 29, 1997, the Registrant issued an aggregate of
13,317,739 shares of Series C Preferred Stock to certain existing
stockholders and new investors at a purchase price of $.60 per share.

On October 31, 1996, the Registrant issued an aggregate of 41,177
shares of Common Stock to certain executive officers and key employees of
the Registrant at a purchase price of $.34 per share payable pursuant to
the terms of certain promissory notes.

On June 25, 1996, the Registrant issued an aggregate of 14,118 shares
of Common Stock to a former executive officer of the Registrant at a
purchase price of $.34 per share.

On January 26, 1996, the Registrant issued an aggregate of 589 shares
of Common Stock to consultants of the Registrant at a purchase price of
$.43 per share.

On July 31, 1995, the Registrant issued a warrant to purchase up to an
aggregate of 100,000 shares of Series B Preferred Stock (which warrant has
been amended to provide for the purchase shares of Common Stock upon the
completion of this Offering) at an exercise price of $0.50 per share to
North Carolina Biotechnology Center.

In a series of closings held on July 17, 1995, August 16, 1995, and
March 22, 1996, the Registrant issued an aggregate of 27,135,564 shares of
Series B Preferred Stock to existing stockholders and new investors at a
purchase price of $.50 per share.

On March 1, 1995, the Registrant issued an aggregate of 17,648 shares
of Common Stock to certain executive officers and key employees of the
Registrant at a purchase price of $.43 per share.

II-2

<PAGE>
On February 21, 1995, the Registrant issued 5,883 shares of Common
Stock to an executive officer of the Registrant at a purchase price of $.43
per share.

On September 16, 1994, the Registrant sold 11,765 shares of Common
Stock to a former executive officer at a purchase price of $.43 per share.

In a series of transactions on August 24, 1993, October 26, 1994 and
February 7, 1995, the Registrant issued warrants to purchase an aggregate
of 381,808 shares of Series B Preferred Stock (which warrant has been
amended to provide for the purchase of shares of Common Stock upon the
completion of this Offering) at an exercise price of $.50 per share to its
venture leasing partner in consideration for certain leasing arrangements.

Since June 1994, the Registrant has issued options to certain
employees, directors, consultants and others to purchase an aggregate of
676,282 shares of Common Stock at a weighted average exercise price of $.35
per share. 356,634 of such options have been exercised, 241,062 of such
options remain outstanding at a weighted average exercise price of $.36 per
share and 77,586 of such options have been terminated.

(b) No underwriters were involved in connection with the sales of
securities referred to in paragraph (a) of this Item 15.

(c) The shares of Series B, Series C and Series D Preferred Stock described
in paragraph (a) of this Item 15 were issued in reliance on the exemption
provided by Rule 506 of Regulation D promulgated pursuant to the Securities Act,
as well as Section 4(2) of the Securities Act. The issuances of compensatory
stock awards, stock options and the shares of Common Stock upon the exercise
thereof as described in paragraph (a) of this Item 15 were issued in reliance
upon the exemption provided by Section 3(b) of the Securities Act and Rule 701
promulgated thereunder, as well as Section 4(2) of the Securities Act. The
warrants described in paragraph (a) of this Item 15 were issued upon reliance on
exemption provided by Section 4(2) of the Securities Act. Appropriate legends
are affixed to the stock certificates and warrant certificates issued in the
aforementioned transactions.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) Exhibits

<TABLE>
<C> <S>
1.1 * Form of Underwriting Agreement.
3.1 * Second Restated Certificate of Incorporation of the Registrant.
3.2 ** Form of Third Amended and Restated Certificate of Incorporation of the Registrant (to be filed with the
Secretary of State of Delaware upon the completion of the Offering).
3.3 ** Bylaws of the Registrant.
3.4 ** Form of Amended and Restated Bylaws of the Registrant (to be adopted upon the completion of the Offering).
4.1 * Specimen certificate for shares of Common Stock.
4.2 ** Description of Capital Stock (contained in the Third Amended and Restated Certificate of Incorporation of
the Corporation of the Registrant, filed as Exhibit 3.2).
5.1 ** Opinion of Hutchison & Mason PLLC with respect to the legality of the shares being registered.
10.1 License Agreement dated February 3, 1993, between the Registrant and Duke University.
10.2 Sublease Agreement dated November 19, 1993, by and among the Registrant, Sphinx Pharmaceuticals Corporation
and University Place Associates and as amended by the Lease Amendment dated August 15, 1994, and Second
Agreement of Sublease dated January 16, 1995.
10.3 Cooperation and Strategic Alliance Agreement dated April 21, 1997, between the Registrant and MiniMed Inc.
10.4 * Trimeris, Inc. New Stock Option Plan.
10.5 * Trimeris, Inc. Employee Stock Purchase Plan.
10.6 ** Form of Promissory Notes executed by certain executive officers in favor of the Registrant, and related
collateral documents.
10.7 ** Form of Stock Restriction Agreements between the Registrant and certain executive officers.
10.8 ** Form of Stock Pledge Agreement between the Registrant and certain executive officers.
10.9 Employment Offer Letter with M. Ross Johnson dated December 15, 1994.
10.10 Employment Offer Letter with Matthew A. Megaro dated February 23, 1995.
10.11 Sixth Amended and Restated Registration Rights Agreement dated June 27, 1997, by and among the Registrant
and certain stockholders of the Registrant.
10.12** Agreement with Max N. Wallace dated July 10, 1997.
10.13* Form of Indemnification Agreements.
11.1 Computation of Net Income (Loss) Per Share.
23.1 ** Consent of Hutchison & Mason PLLC (included in Exhibit 5.1).
23.2 ** Consent of KPMG Peat Marwick, LLP, Independent Auditors.
</TABLE>

II-3

<PAGE>

<TABLE>
<C> <S>
23.3 ** Consent of Pennie & Edmonds.
24.1 Power of Attorney (included in signature page to Registration Statement).
27 Financial Data Schedule.
</TABLE>

* To be filed by amendment

** Filed herewith.

(b) Financial Statement Schedules.

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

ITEM 17. UNDERTAKINGS

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

The undersigned Registrant hereby further undertakes that:

(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(b) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.

(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial BONA FIDE offering thereof.

Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended, may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act of 1933, as amended, and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other than
the payment by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the Registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act of 1933, as amended, and will be governed by the final
adjudication of such issue.

II-4

<PAGE>
SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Durham,
County of Durham, State of North Carolina, on this 27th day of August, 1997.

TRIMERIS, INC.

By: /s/ M. ROSS JOHNSON

M. ROSS JOHNSON,
PRESIDENT, CHIEF EXECUTIVE OFFICER
AND CHIEF SCIENTIFIC OFFICER

WITNESS our hands on this 27th day of August, 1997.

<TABLE>
<S> <C> <C>
/s/ JESSE I. TREU* /s/ ANDREW MCCREATH*
Jesse I. Treu, Ph.D. Andrew McCreath
Chairman of the Board of Directors Director

/s/ DANI P. BOLOGNESI* /s/ MATTHEW A. MEGARO
Dani P. Bolognesi, Ph.D. Matthew A. Megaro
Director Chief Operating Officer, Chief Financial
Officer, Executive Vice President and
Secretary (Principal Accounting and Financial
Officer)

/s/ BRIAN H. DOVEY* /s/ CHARLES A. SANDERS*
Brian H. Dovey Charles A. Sanders, M.D.
Director Director

/s/ M. ROSS JOHNSON
M. Ross Johnson, Ph.D.
President, Chief Executive Officer, Chief
Scientific Officer and Director (Principal
Executive Officer)

* Executed on behalf of these persons by
Matthew A. Megaro, duly appointed
Attorney-in-fact of each such person.
/s/ MATTHEW A. MEGARO
_________________________________
Matthew A. Megaro
Attorney-in-Fact
</TABLE>

THIRD AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
TRIMERIS, INC.
PURSUANT TO SECTIONS 242 AND 245
OF THE GENERAL CORPORATION LAW OF
THE STATE OF DELAWARE

TRIMERIS, INC. (the "Corporation"), a corporation duly organized and
existing under and by virtue of the General Corporation Law of the State of
Delaware, does hereby certify as follows:

1. The name of the Corporation is TRIMERIS, INC.

2. The Corporation's original Certificate of Incorporation was filed
with the Secretary of State of the State of Delaware under the name SL-1
Pharmaceuticals, Inc. on January 7, 1993.

3. This Third Restated Certificate of Incorporation restates,
integrates and further amends the Second Restated Certificate of Incorporation
of the Corporation, was duly adopted in accordance with the provisions of
Sections 242 and 245 of the General Corporation Law of the State of Delaware,
and was approved by written consent of the holders of a majority of the issued
and outstanding capital stock of the Corporation in accordance with the
provisions of Section 228 of the General Corporation Law of the State of
Delaware with prompt written notice thereof having been given to those
stockholders of the Corporation not signing such written consent pursuant to
Section 228 (d) of the General Corporation Law of the State of Delaware. The
resolution setting forth the Third Restated Certificate of Incorporation is as
follows:

"RESOLVED, that the Second Restated Certificate of
Incorporation of the Corporation, as heretofore amended, supplemented
or restated, be amended and restated in its entirety to read as
follows:

* * * * * *

FIRST. The name of the Corporation is TRIMERIS, INC.

SECOND. The address of the registered office of the
Corporation in the State of Delaware is 1013 Centre Road, Wilmington,
New Castle County, Delaware 19805 and the name of the registered agent
is Corporation Service Company.

THIRD. The purpose for which the Corporation is organized is
to engage in any lawful act or activity for which corporations may be
organized under the General Corporation Law of the State of Delaware.

1
<PAGE>

FOURTH. The Corporation shall have the authority to issue
40,000,000 shares of capital stock, of which 30,000,000 shares shall be
Common Stock having a par value of $0.001 per share ("Common Stock"),
and of which 10,000,000 shares shall be Preferred Stock having a par
value of $0.001 per share ("Preferred Stock").

The following is a statement of the designations and the
powers, privileges and rights and the qualifications, limitations or
restrictions thereof in respect to each class of capital stock of the
Corporation.

A. Common Stock.

1. General. The voting, dividend and liquidation
rights of the holders of the Common Stock are subject
to and qualified by the rights of the holders of the
Preferred Stock or any series as may be designated by
the Board of Directors upon any issuance of the
Preferred Stock or any series.

2. Voting. The holders of the Common Stock are
entitled to one vote for each share held. There shall
be no cumulative voting.

The number of authorized shares of Common Stock may
be increased or decreased (but not below the number
of shares then outstanding) by the affirmative vote
of the holders of a majority of the stock of the
Corporation entitled to vote, irrespective of the
provisions of Section 242(b)(2) of the General
Corporation Law of the State of Delaware.

3. Dividends. Dividends may be declared and paid on
the Common Stock from funds lawfully available
therefor as and when determined by the Board of
Directors and subject to any preferential dividend
rights of any then outstanding Preferred Stock.

4. Liquidation. Upon the dissolution or liquidation
of the Corporation, whether voluntary or involuntary,
holders of the Common Stock will be entitled to
receive all of the assets of the Corporation
available for distribution to its stockholders,
subject to any preferential rights of any then
outstanding Preferred Stock.

2
<PAGE>

B. Preferred Stock.

Preferred Stock may be issued from time to time in
one or more series, each of such series to have such terms as
stated or expressed herein and in the resolution or
resolutions providing for the designation of such series
adopted by the Board of Directors of the Corporation as
hereinafter provided. Any shares of Preferred Stock which may
be redeemed, purchased or acquired by the Corporation may be
reissued except as otherwise provided by law or this Third
Restated Certificate of Incorporation. Different series of
Preferred Stock shall not be construed to constitute different
classes of shares for the purposes of voting by classes unless
expressly provided.

Authority is hereby expressly granted to the Board of
Directors from time to time to designate the Preferred Stock
in one or more series, and in connection with the designation
of any such series, by resolution providing for the issue of
the shares thereof, to determine and fix such voting powers,
full or limited, or no voting powers, and such designations,
preferences and relative participating, optional or other
special rights, and qualifications, limitations or
restrictions thereof, including without limitation thereof,
dividend rights, conversion rights, redemption privileges and
liquidation preferences, as shall be stated and expressed in
such resolutions, all to the full extent now or hereafter
permitted by the General Corporation Law of the State of
Delaware. Without limiting the generality of the foregoing,
the resolutions providing for designation of any series of
Preferred Stock may provide that such series shall be superior
or rank equally or be junior to the Preferred Stock of any
other series to the extent permitted by law and this Third
Restated Certificate of Incorporation. Except as otherwise
provided in this Third Restated Certificate of Incorporation,
no vote of the holders of the Preferred Stock or Common Stock
shall be a prerequisite to the designation or issuance of any
shares of any series of the Preferred Stock authorized by and
complying with the conditions of this Third Certificate of
Incorporation, the right to have such vote being expressly
waived by all present and future holders of the capital stock
of the Corporation.

FIFTH. The Corporation shall have perpetual existence.

SIXTH. In furtherance of and not in limitation of powers
conferred by statute, it is further provided:

1. Election of directors need not be by written ballot.

2. The Board of Directors of the Corporation shall have the
power to adopt, amend or repeal the Bylaws of the Corporation.

3
<PAGE>

SEVENTH. Whenever a compromise or arrangement is proposed
between this Corporation and its creditors or any class of them and/or
between this Corporation and its stockholders or any class of them, any
court of equitable jurisdiction within the State of Delaware may, on
the application in a summary way of this Corporation or of any creditor
or stockholder thereof, or on the application of any receiver or
receivers appointed for this Corporation under the provisions of
Section 291 of Title 8 of the Delaware Code or on the application of
trustees in dissolution or of any receiver or receivers appointed for
this Corporation under the provisions of Section 279 of Title 8 of the
Delaware Code order a meeting of the creditors or class of creditors,
and/or of the stockholders or class of stockholders of this
Corporation, as the case may be, to be summoned in such manner as the
said court directs. If a majority in number representing three-fourths
in value of the creditors or class of creditors, and/or of the
stockholders or class of stockholders of this Corporation, as the case
may be, agree to any compromise or arrangement and to any
reorganization of this Corporation as a consequence of such compromise
of arrangement and the said reorganization shall, if sanctioned by the
court to which the said application has been made, be binding on all
the creditors or class of creditors, and/or on all the stockholders or
class of stockholders, of this Corporation, as the case may be, and
also on this Corporation.

EIGHTH. No Director of the Corporation shall have personal
liability arising out of an action whether by or in the right of the
Corporation or otherwise for monetary damages for breach of fiduciary
duty as a Director; provided, however, that the foregoing shall not
eliminate or limit the liability of a Director (i) for any breach of
the Director's duty of loyalty to the Corporation or its stockholders;
(ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law; (iii) under
Section 174 of the General Corporation Law of the State of Delaware or
any successor provision; (iv) for any transaction from which such
Director derived an improper personal benefit; or (v) for acts or
omissions occurring prior to the date of the effectiveness of this
provision.

Furthermore, notwithstanding the foregoing provision, in the
event that the General Corporation Law of the State of Delaware is
amended or enacted to permit further elimination or limitation of the
personal liability of a Director, the personal liability for the
Corporation's Directors shall be limited or eliminated to the fullest
extent permitted by the applicable law.

This provision shall not affect any provision permitted under
the General Corporation Law of the State of Delaware, in the
certificate of incorporation, bylaws or contract or resolution of the
Corporation indemnifying or agreeing to indemnify a Director of the
Corporation against personal liability. Any repeal or modification of
this provision shall not adversely affect any limitation hereunder

4
<PAGE>

on the personal liability of a Director of the Corporation with respect
to acts or omissions occurring prior to such repeal or modification.

NINTH. The Corporation shall, to the fullest extent permitted
by Section 145 of the General Corporation Law of the State of Delaware,
as the same may be amended and supplemented, indemnify any and all
persons whom it shall have power to indemnify under said section from
and against any and all of the expenses, liabilities or other matters
referred to in or covered by said section, and the indemnification
provided for herein shall not be deemed exclusive of any other rights
to which those indemnified may be entitled under any Bylaw, agreement,
vote of stockholders or disinterested Directors or otherwise, both as
to action in his or her official capacity and as to action in another
capacity while holding such office, and shall continue as to a person
who has ceased to be a Director, officer, employee, or agent and shall
inure to the benefit of the heirs, executors, and administrators of
such a person. The Corporation shall advance expenses for the defense
of any Director, officer, employee or agent prior to a final
disposition of a claim provided such party executes an undertaking to
repay advances from the Corporation if it is ultimately determined that
such party is not entitled to indemnification. Any repeal or
modification of this Article shall not adversely affect any right or
protection existing hereunder immediately prior to such repeal or
modification.

TENTH. The Corporation reserves the right to amend, alter,
change or repeal any provision contained in this Third Restated
Certificate of Incorporation, in the manner now or hereafter prescribed
by statute, and all rights conferred upon stockholders are herein
granted subject to this reservation.

ELEVENTH. This Article is inserted for the management of the
business and for the conduct of the affairs of the Corporation.

1. Number of Directors. The number of Directors of the
Corporation shall not be less than three. The exact number of Directors within
the limitations specified in the preceding sentence shall be fixed from time to
time by, or in the manner provided in, the Corporation's Bylaws.

2. Classes of Directors. The Board of Directors shall be and
is divided into three classes: Class I, Class II and Class III. No one class
shall have more than one Director more than any other class. If a fraction is
contained in the quotient arrived at by dividing the designated number of
directors by three, then, if such fraction is one-third, the extra Director
shall be a member of Class I, and if such fraction is two-thirds, one of the
extra Directors shall be a member of Class I and one of the extra Directors
shall be a member of Class II, unless otherwise provided from time to time by
resolution adopted by the Board of Directors.

5
<PAGE>

3. Terms of Office. Each Director shall serve for a term
ending on the date of the third annual meeting following the annual meeting at
which such Director was elected; provided, that each initial Director in Class I
shall serve for a term ending on the date of the annual meeting in 1998; each
initial Director in Class II shall serve for a term ending on the date of the
annual meeting in 1999; and each initial Director in Class III shall serve for a
term ending on the date of the annual meeting in 2000; and provided further,
that the term of each Director shall be subject to the election and
qualification of his successor and to his earlier death, resignation or removal.

4. Allocation of Directors Among Classes in the Event of
Increases or Decreases in the Number of Directors. In the event of any increases
or decreases in the authorized number of Directors, (i) each Director then
serving as such shall nevertheless continue as a Director of the class of which
he is a member, and (ii) the newly created or eliminated directorships resulting
from such increase or decrease shall be apportioned by the Board of Directors
among the three classes of Directors so as to ensure that no one class has more
than one Director more than any other class. To the extent possible, consistent
with the foregoing rule, any newly created directorships shall be added to those
classes whose terms of office are to expire at the latest dates following such
allocation, and any newly eliminated directorships shall be subtracted from
those classes whose terms of offices are to expire at the earliest dates
following such allocation, unless otherwise provided from time to time by
resolution adopted by the Board of Directors.

5. Quorum; Action at Meeting.A majority of the Directors at
any time in office shall constitute a quorum for the transaction of business. In
the event one or more of the Directors shall be disqualified to vote at any
meeting, then the required quorum shall be reduced by one for each Director so
disqualified, provided that in no case shall less than one-third of the number
of Directors fixed pursuant to Section 1 of this Article constitute a quorum. If
at any meeting of the Board of Directors there shall be less than such a quorum,
a majority of those present may adjourn the meeting from time to time. Every act
or decision done or made by a majority of the Directors present shall be
regarded as the act of the Board of Directors unless a greater number is
required by law, by the Bylaws of the Corporation or by this Certificate of
Incorporation.

6. Removal. A Director may be removed from office with cause
by the affirmative vote of at least seventy-five percent (75%) of all eligible
votes present in person or by proxy at a meeting of stockholders at which a
quorum is present. A Director may be removed from office without cause by the
affirmative vote of seventy-five percent (75%) of all eligible votes present in
person or by proxy at a meeting of stockholders at which a quorum is present,
provided that removal without cause is recommended to the stockholders by the
Board of Directors pursuant to a vote of not less than seventy-five percent
(75%) of the Directors then in office. If a Director is elected by a separate
voting group, only the members of that voting group may participate in the vote
to remove him. The entire Board of Directors may not be removed except pursuant
to the removal of individual Directors in accordance with the foregoing
provisions.

6
<PAGE>

For purposes of this Section, "cause" is defined as personal
dishonesty, incompetence, mental or physical incapacity, breach of fiduciary
duty involving personal profit, a failure to perform stated duties, or a
violation of any law, rule or regulation (other than a traffic violation or
similar routine offense) (based on a conviction for such offense or an opinion
of counsel to the Corporation that such violation has occurred).

7. Vacancies. Any vacancy in the Board of Directors, however
occurring, including a vacancy resulting from an enlargement of the Board of
Directors, shall be filled only by a vote of a majority of the Directors then in
office, although less than a quorum, or by a sole remaining Director. A Director
elected to fill a vacancy shall be elected to hold office until the next
election of the class for which such Director shall have been chosen, subject to
the election and qualifications of his successor and to his earlier death,
resignation or removal.

8. Stockholder Nominations and Introduction of Business, Etc.
Advance notice of stockholder nominations for election of Directors and other
business to be brought by stockholders before a meeting of stockholders shall be
given in the manner provided by the Bylaws of the Corporation.

9. Amendments to Article. Notwithstanding any other provisions
of law, this Third Restated Certificate of Incorporation or the Bylaws of the
Corporation , each as amended, and notwithstanding the fact that a lesser
percentage may be specified by law, the affirmative vote of the holders of at
least seventy-five percent (75%) of the shares of capital stock of the
Corporation issued and outstanding and entitled to vote shall be required to
amend or repeal, or to adopt any provision inconsistent with, this Article;
provided, however, the provisions of this section shall not apply, and the
provisions of Delaware law otherwise applicable shall apply, to an amendment or
repeal approved by the Board of Directors by resolution adopted by a two-third
vote of all disinterested Directors then in office.

TWELFTH. Stockholders of the Corporation may not take any
action by written consent in lieu of a meeting. Notwithstanding any other
provisions of law, the this Third Restated Certificate of Incorporation or the
Bylaws of the Corporation, each as amended, and notwithstanding the fact that a
lesser percentage may be specified by law, the affirmative vote of the holders
of at least seventy-five percent (75%) of the shares of capital stock of the
Corporation issued and outstanding and entitled to vote shall be required to
amend or repeal, or to adopt any provision inconsistent with, this Article;
provided, however, the provisions of this section shall not apply, and the
provisions of Delaware law otherwise applicable shall apply, to an amendment or
repeal approved by the Board of Directors by resolution adopted by a two-third
vote of all disinterested Directors then in office.

THIRTEENTH. Special meetings of the stockholders may be called
at any time by only the Chairman of the Board of Directors, the Chief Executive
Officer (or if there is no Chief Executive Officer, the President) or the Board
of Directors.

7
<PAGE>

Business transacted at any special meeting of stockholders shall be limited to
matters relating to the purpose or purposes stated in the notice of meeting.
Notwithstanding any other provision of law, this Third Restated Certificate of
Incorporation or the Bylaws of the Corporation, each as amended, and
notwithstanding the fact that a lesser percentage may be specified by law, the
affirmative vote of the holders of at least seventy-five percent (75%) of the
shares of capital stock of the Corporation issued and outstanding and entitled
to vote shall be required to amend or repeal, or to adopt any provision
inconsistent with, this Article; provided, however, the provisions of this
section shall not apply, and the provisions of Delaware law otherwise applicable
shall apply, to an amendment or repeal approved by the Board of Directors by
resolution adopted by a two-third vote of all disinterested Directors then in
office.

FOURTEENTH. The Board of Directors, when considering a tender
offer or merger or acquisition proposal, may take into account factors in
addition to potential short-term economic benefits to stockholders of the
Corporation, including without limitation (i) comparison of the proposed
consideration to be received by stockholders in relation to the then current
market price of the Corporation's capital stock, the estimated current value of
the Corporation in a freely negotiated transaction, and the estimated future
value of the Corporation as an independent entity, and (ii) the impact of such a
transaction on the employees, suppliers, and customers of the Corporation and
its effect in the communities in which the Corporation operates.

IN WITNESS WHEREOF, the Corporation has caused its corporate seal to be
hereunto affixed and this certificate to be signed by M. Ross Johnson, its
President, who hereby acknowledges under penalties of perjury that the facts
herein stated are true and that this certificate is his act and deed, and
attested by Matthew A. Megaro, its Secretary, this ____ day of ________, 1997.

TRIMERIS, INC.
[CORPORATE SEAL]
By: ______________________________
M. Ross Johnson, President
ATTEST:

By: __________________________________
Matthew A. Megaro, Secretary

BYLAWS
OF
SL-1 PHARMACEUTICALS, INC.

ARTICLE I
OFFICES

1. Principal Office. The principal office of the Corporation shall be
located in Durham, North Carolina or such other place as is designated by the
Board of Directors.

2. Registered Office. The registered office of the Corporation required by
law to be maintained in the State of Delaware may be, but need not be, identical
with the principal office.

3. Other Offices. The Corporation may have offices at such other places,
either within or without the State of Delaware, as the Board of Directors may
from time to time determine or as the affairs of the Corporation may require.

Article II
MEETINGS OF SHAREHOLDERS

1. Place of Meetings. All meeting of shareholders shall be held at the
principal office of the Corporation or at such other place, either within or
without the State of Delaware, as shall be designated in the notice of the
meeting or agreed upon by the Board of Directors.

2. Annual Meeting. The annual meeting of the shareholders shall be held at
the principal office of the Corporation during the month of November of each
year on any day in that month (except a Saturday, Sunday or a legal holiday) and
at such time as is determined by the Board of Directors, for the purpose of
electing Directors of the Corporation and for the transaction of

<PAGE>

such other business as may be properly brought before the meeting.

3. Substitute Annual Meeting. If the annual meeting shall not be held on
the day designated by these Bylaws, a substitute annual meeting may be called in
accordance with the provisions of Section 4 of this Article II. A meeting so
called shall be designated and treated for all purposes as the annual meeting.
The shares represented at such substitute annual meeting, either in person or by
proxy, and entitled to vote thereat, shall constitute a quorum for the purpose
of such meeting.

4. Special Meetings. Special meetings of the shareholders may be calledat
any time by the President, the Secretary or the Board of Directors of
theCorporation, or by any shareholder pursuant to the written request of
theholders of not less than one-tenth (1/10) of all the shares entitled to
voteat the meeting.

5. Notice of Meetings.

(a) Written or printed notice stating the time and place of the
meeting shall be delivered not less than ten (10) nor more than sixty (60) days
before the date thereof, either personally or by mail, by or at the direction of
the Board of Directors, President, Secretary or other person calling the
meeting, to each shareholder of record entitled to vote at such meeting. If
mailed, such notice shall be deemed to be delivered when deposited in the United
States mail addressed to the shareholder at his address as it appears on the
record of shareholders of the Corporation, with postage thereon prepaid.

(b) In the case of an annual or substitute annual meeting, the notice
of meeting need not specifically state the business to be transacted thereat
unless it is a matter, other than election of Directors, on which the vote of
the shareholders is expressly required by the provisions of the Delaware
Corporation Law. In the case of a special meeting, the notice of meeting shall
specifically state the purpose or purposes for which the meeting is called.

(c) When a meeting is adjourned for thirty (30) days or more, or when a
new record date is fixed after the adjournment for the adjourned meeting, notice
of the adjourned meeting shall be given as in the case of an original meeting.
When a meeting is adjourned for less than thirty (30) days in any one
adjournment, it is not necessary to give any notice of the time and place of the
adjourned meeting or of the business to be transacted thereat other than by
announcement at the meeting at which the adjournment is taken.
2
<PAGE>

6. Voting Lists. At least ten (10) days before each meeting of shareholders
the Secretary of the Corporation shall prepare an alphabetical list of the
shareholders entitled to vote at such meeting or any adjournment thereof, with
the address of and number of shares held by each, which list shall be kept on
file at a location in the city where such meeting is to be held or at the place
where such meeting is to be held for a period of ten (10) days prior to such
meeting, and shall be subject to inspection by any shareholder at any time
during the usual business hours. This list shall also be produced and kept open
at the time and place of the meeting and shall be subject to inspection by any
shareholder during the whole time of the meeting.

7. Quorum.

(a) Unless otherwise provided by law, the holders of a majority of the
shares entitled to vote, represented in person or by proxy, shall constitute a
quorum at a meeting of shareholders. When a quorum is present at the original
meeting, any business which might have been transacted at the original meeting
may be transacted at an adjourned meeting, even when a quorum is not present. In
the absence of a quorum at the opening of any meeting of shareholders, such
meeting may be adjourned from time to time by the Board of Directors or the vote
of a majority of the shares voting on the motion to adjourn, but no other
business may be transacted until and unless a quorum is present. If later a
quorum is present at an adjourned meeting, then any business may be transacted
which might have been transacted at the original meeting.

(b) The shareholders at a meeting at which a quorum is present may
continue to do business until adjournment, notwithstanding the withdrawal of
sufficient shareholders to leave less than a quorum.

8. Voting of Shares.

(a) Each outstanding share having voting rights shall be entitled to one
vote on each matter submitted to a vote at a meeting of shareholders.

(b) Except in the election of Directors, the vote of a majority of the
shares voted on any matter at a meeting of shareholders, duly held and at which
a quorum is present, shall be the act of the shareholders on that matter, unless
the vote by a greater number is required by law or by the charter or Bylaws of
the Corporation.

<PAGE>

(c) Voting on all matters except the election of Directors shall be by
voice vote or by a show of hands unless the holders of one-tenth (1/10) of the
shares represented at the meeting shall, prior to the voting on any matter,
demand a ballot vote on that particular matter.

(d) Shares of its own stock owned by the Corporation, directly or
indirectly, through a subsidiary or otherwise, shall not be voted and shall not
be counted in determining the total number of shares entitled to vote; except
that shares held in a fiduciary capacity may be voted and shall be counted to
the extent provided by law.

9. Proxies. Shares may be voted either in person or by one or more agents
authorized by a written proxy executed by the shareholder or by his duly
authorized attorney-in-fact. A proxy is not valid after the expiration of
thirty-six (36) months from the date of its execution, unless the person
executing it specifies therein the length of time for which it is to continue in
force, or limits its use to a particular meeting.

10. Informal Action by Shareholders. Any action which is required or
permitted to be taken at a meeting of the shareholders may be taken without a
meeting if a consent in writing, setting forth the action so taken, shall be
signed and dated by the holders of outstanding stock having not less than the
minimum number of votes that would be necessary to authorize or take such action
at a meeting at which all shares entitled to vote thereon were present andvoted.
When corporate action is taken without a meeting by less than unanimouswritten
consent, prompt notice shall be given to those shareholders who have not
consented in writing. Such signed and dated action must be filed with the
Secretary of the Corporation to be kept in the Corporate minute book, whether
done before or after the action so taken, but in no event later than sixty (60)
days after the first signature date.

ARTICLE III
DIRECTORS

1. General Powers. The business and affairs of the Corporation shall be
managed by the Board of Directors or by such committees as the Board may
establish pursuant to these Bylaws.

2. Number, Term and Qualification. The number of Directors of the
Corporation shall be not less than three (3) nor more than seven (7) as may be
fixed or changed from time to time, within

<PAGE>

the minimum and maximum, by the shareholders or by the Board of Directors. Each
Director shall hold office until his death, resignation, retirement, removal,
disqualification, or his successor is elected and qualifies. Directors need not
be residents of the State of Delaware or shareholders of the Corporation.

3. Election of Directors. Except as provided in Section 5 of this Article
III, the Directors shall be elected at the annual meeting of shareholders; and
those persons who receive the highest number of votes shall be deemed to have
been elected. Election of Directors shall be by written ballot.

4. Removal. Directors may be removed from office with or without cause by a
vote of shareholders holding a majority of the outstanding shares entitled to
vote at an election of Directors. If a director is elected by a voting group of
shareholders, only the shareholders of that voting group may participate in the
vote to remove him. If any Directors are so removed, new Directors may be
elected at the same meeting.

5. Vacancies. A vacancy occurring in the Board of Directors, including,
without limitation, a vacancy created by an increase in the authorized number of
Directors or resulting from the shareholders' failure to elect the full
authorized number or Directors, may be filled by the Board of Directors or if
the Directors remaining in office constitute less than a quorum of the
Directors, they may fill the vacancy by the affirmative vote of a majority of
all remaining Directors or by the sole remaining Director. If the vacant office
was held by a Director elected by a voting group, only the remaining Director or
Directors elected by that voting group or the holders of shares of that voting
group are entitled to fill the vacancy. A Director elected to fill a vacancy
shall be elected for the unexpired term of his predecessor in office. The
shareholders may elect a Director at any time to fill any vacancy not filled by
the Directors.

6. Chairman. There may be a Chairman of the Board of Directors elected by
the Directors from their number at any meeting of the Board of Directors. The
Chairman shall preside at all meetings of the Board of Directors and of
shareholders and perform such other duties as may be directed by the Board of
Directors. Until a Chairman of the Board of Directors is elected, the President
of the Corporation shall preside at the meetings of the Board of Directors and
shareholders.

7. Compensation. The Board of Directors may provide for the compensation of
Directors for their services as such and may

<PAGE>

provide for the payment of any and all expenses incurred by the Directors in
connection with such services.

8. Executive and Other Committees.

(a) The Board of Directors, by resolution adopted by a majority of the
number of Directors then in office, may designate from among its members in
Executive Committee and one or more other committees, each consisting of one or
more Directors, and each of which, to the extent authorized by law or provided
in the resolution, shall have and may exercise all of the authority of the Board
of Directors and may authorize the corporate seal to be affixed to all papers
which may require it, except no such committee shall have authority as to the
following matters: (i) the dissolution, merger or consolidation of the
Corporation, or the sale, lease or exchange of all or substantially all of the
property of the Corporation; (ii) the amendment of the Certificate of
Incorporation; (iii) the amendment or repeal of the Bylaws or adoption of new
Bylaws; (iv) the declaration of a dividend; (v) the issuance of stock; (vi) the
adoption of a certificate of ownership and merger pursuant to Section 253 of the
Delaware Corporation Law.

(b) Any resolutions adopted or other action taken by any such committee
within the scope of the authority delegated to it by the Board of Directors
shall be deemed for all purposes to be adopted or taken by the Board of
Directors. The designation of any committee and the delegation thereto of
authority shall not operate to relieve the Board of Directors, or any member
thereof, of any responsibility or liability imposed upon it or him by law.

(c) If a committee member is absent or disqualified, the qualified
members present at a meeting, even if not a quorum, may unanimously appoint
another Board of Directors member to act in the absent or disqualified member's
place.

(d) Regular meetings of any such committee may be held without notice
at such time and place as such committee may fix from time to time by
resolution. Special meetings of any such committee may be called by any member
thereof upon not less than one day's notice stating the place, date and hour of
such meeting, which notice may be written or oral, and if mailed, shall be
deemed to be delivered when deposited in the United States mail addressed to any
member of the Executive Committee at his business address. Any member of the
Executive Committee may waive notice of any meeting and no notice of any meeting
need be given to any member thereof who attends in person. The notice of

<PAGE>
a meeting of the Executive Committee need not state the business proposed
to be transacted at the meeting.

(e) A majority of the members of any such committee shall constitute
a quorum for the transaction of business at any meeting thereof, and actions
of such committee must be authorized by the affirmative vote of a majority
of the members of such committee.

(f) Any member of any such committee may be removed at any time with
or without cause by resolution adopted by a majority of the Board of Directors.

(g) Any such committee shall elect a presiding officer from among
its members and may fix its own rules of procedure which shall not be
inconsistent with these Bylaws. It shall keep regular minutes of its
proceedings and report the same to the Board of Directors for its information
at the meeting thereof held next after the proceedings shall have been taken.

ARTICLE IV
MEETINGS OF DIRECTORS

1. Regular Meetings. A regular meeting of the Board of Directors shall be
held immediately after, and at the same place as, the annual meeting of
shareholders. In addition, the Board of Directors may provide, by resolution,
the time and place for the holding of additional regular meetings.

2. Special Meetings. Special meetings of the Board or Directors may be
called by or at the request of the Chairman of the Board (if one has been duly
elected), the President or any two Directors.

3. Notice of Meetings.

(a) The Secretary shall give notice, at least two days before the
meeting, by any usual means of communication of any regular meeting of the Board
of Directors.

(b) The person or persons calling a special meeting of the Board of
Directors shall, at least two days before the meeting, give notice thereof by
any usual means of communication. Such notice or waiver of notice need not
specify the business to be transacted at, or the purpose of, the meeting that is
called. Notice of an adjourned meeting need not be given if the time and

<PAGE>

place are fixed at the meeting adjourning and if the period of adjournment does
not exceed ten (10) days in any one adjournment.

(c) A Director may waive notice of any meeting. Attendance by a
Director at a meeting shall constitute a waiver of notice of such meeting,
except where a Director attends a meeting for the express purpose of objecting
to the transaction of any business because the meeting is not lawfully called or
convened.

5. Manner of Acting.

(a) Except as otherwise provided in this Section, the act of majority
of the Directors then in office shall be the act of the Board of Directors,
unless a greater number is required by law, the charter of the Corporation, or a
Bylaw adopted by the shareholders.

(b) A Director of the Corporation, who is present at a meeting of the
Board of Directors at which action on any corporate matter is taken, shall be
presumed to have assented to the action taken unless his contrary vote is
recorded or his dissent is otherwise entered in the minutes of the meeting or
unless he shall file his written dissent to such action with the person acting
as the secretary of the meeting before the adjournment thereof or shall forward
such dissent by registered mail to the Secretary of the Corporation immediately
after the adjournment of the meeting. Such right of dissent shall not apply to a
Director who voted in favor of such action.

(c) The vote of a majority of the number of Directors then in office
shall be required to adopt a resolution constituting an Executive Committee or
other committee of the Board. The vote of a majority of the Directors then
holding office shall be required to adopt, amend or repeal a Bylaw, or to adopt
a resolution dissolving the Corporation without action by the shareholders, in
circumstances authorized by law. Vacancies in the Board of Directors may be
filled as provided in Section 5 of Article III of these Bylaws.

6. Informal Action by Directors. Action taken by the Directors or
members of a committee or the Board of Directors without a meeting is
nevertheless Board or committee action if written consent to the action in
question is signed by all of the Directors or members of the committee, as the
case may be, and

<PAGE>

filed with the minutes of the precedings of the Board or committee, whether
done before or after the action so taken.

7. Attendance by Telephone. Any one or more Directors or members of a
committee may participate in a meeting of the Board or committee by means of a
conference telephone or similar communications device which allow all persons
participating in the meeting to hear each other, and such participation in the
meeting shall be deemed presence in person at such meeting.

ARTICLE V
OFFICERS

1. Number. The officers of the Corporation shall consist of a
President, a Secretary, a Treasurer, and such Vice Presidents, Assistant
Secretaries, Assistant Treasurers and other officers as the Board of Directors
may from time to time elect. Any two or more offices, other than that of
President and Secretary, may be held by the same person. In no event, however,
may an officer act in more than one capacity where action of two or more
officers is required.

2. Election and Term. The officers of the Corporation shall be elected
by the Board of Directors. Such election may be held at any regular or special
meeting of the Board. Each officer shall hold office until his death,
resignation, retirement, removal, disqualification, or his successor is elected
and qualifies.

3. Removal. Any officer or agent elected or appointed by the Board of
Directors may be removed by the Board with or without cause; but such removal
shall be without prejudice to the contract rights, if any, of the person so
removed.

4. Compensation. The compensation of all officers of the Corporation
shall be fixed by the Board of Directors.

5. President. The President shall be the chief executive officer of the
Corporation and, subject to the control of the Board of Directors shall
supervise and control the management of the Corporation in accordance with these
Bylaws. He shall, in the absence of the Chairman of the Board of Directors,
preside at all meetings of the Board of Directors and shareholders. He shall
sign with any other proper officer, certificates for shares of the Corporation
and any deeds, mortgages, bonds, contracts, or other instruments which may be
lawfully executed on

<PAGE>

behalf of the Corporation, except where required or permitted by law to be
otherwise signed and executed and except where the signing and execution
thereof shall be delegated by the Board of Directors to some other officer
or agent; and, in general, he shall perform all duties incident to the office
of President and such other duties as may be prescribed by the Board of
Directors from time to time.

6. Vice Presidents. The Vice Presidents, in the order of their
appointment, unless otherwise determined by the Board of Directors, shall, in
the absence or disability of the President, perform the duties and exercise the
powers of that office. In addition, they shall perform such other duties and
have such other powers as the President or the Board of Directors shall
prescribe. The Board of Directors may designate one or more Vice Presidents to
be responsible for certain functions, including, without limitation, Marketing,
Finance, Manufacturing and Personnel.

7. Secretary. The Secretary shall keep accurate records of the acts and
proceedings of all meetings of shareholders, Directors and committees. He shall
give all notices required by law and these Bylaws. He shall have general charge
of the corporate books and records and of the corporate seal, and he shall affix
the corporate seal to any lawfully executed instrument requiring it. He shall
have general charge of the stock transfer books of the Corporation and shall
keep, at the registered or principal office of the Corporation, a record of
shareholders showing the name and address of each shareholder and the number and
class of the shares held by each. He shall sign such instruments as may require
his signature, and, in general, attest the signature or certify the incumbency
or signature of any other officer of the Corporation and shall perform all
duties incident to the office of Secretary and such other duties as may be
assigned him from time to time by the President or by the Board of Directors.

8. Treasurer. The Treasurer shall have custody of all funds and
securities belonging to the Corporation and shall receive, deposit or disburse
the same under the direction of the Board of Directors. He shall keep full and
accurate accounts of the finances of the Corporation in books especially
provided for that purpose, which may be consolidated or combined statements of
the Corporation and one or more of its subsidiaries as appropriate, that include
a balance sheet as of the end of the fiscal year, an income statement for that
year, and a statement of cash flows for the year unless that information appears
elsewhere in the financial statements. If financial statements are prepared for
the Corporation on the basis of generally

<PAGE>

accepted accounting principles, the annual financial statements must also be
prepared on that basis. The Corporation shall mail the annual financial
statements, or a written notice of their availability, to each shareholder
within one hundred twenty 120 days of the close of each fiscal year. The
Treasurer shall, in general, perform all duties incident to his office and such
other duties as may be assigned to him from time to time by the President or by
the Board of Directors.

9. Assistant Secretaries and Treasurers. The Assistant Secretaries and
Assistant Treasurer shall, in the absence or disability of the Secretary or the
Treasurer, perform the respective duties and exercise the respective powers of
those offices, and they shall, in general, perform such other duties as shall be
assigned to them by the Secretary or the Treasurer, respectively, or by the
President or by the Board of Directors.

10. Controller and Assistant Controllers. The Controller, if one has
been appointed, shall have charge of the accounting affairs of the Corporation
and shall have such other powers and perform such other duties as the Board of
Directors shall designate. Each Assistant Controller shall have such powers and
perform such duties as may be assigned by the Board of Directors, and the
Assistant Controllers shall exercise the powers of the controller during that
officer's absence or inability to act.

11. Bonds. The Board of Directors, by resolution, may require any or
all officers, agents and employees of the Corporation to give bond to the
Corporation, with sufficient sureties, conditioned on the faithful performance
of the duties of their respective offices or positions, and to comply with such
other conditions as may from time to time be required by the Board of Directors.

ARTICLE VI
CONTRACTS, LOANS AND DEPOSITS

1. Contracts. The Board of Directors may authorize any officer or
officers, or agent or agents, to enter into any contract or execute and deliver
any instrument on behalf of the Corporation, and such authority may be general
or combined to specific instances.

2. Loans. No loans shall be contracted on behalf of the Corporation and
no evidence of indebtedness shall be issued in its name unless authorized by a
resolution of the Board of

<PAGE>

Directors. Such authority may be general or confined to specific instances.

3. Checks and Drafts. All checks, drafts or other orders for the
payment of monkey issued in the same of the Corporation shall be signed by such
officer of officers, or agent or agents, of the Corporation and in such manner
as shall from time to time be determined by resolution of the Board of
Directors.

4. Deposits. All funds of the Corporation not otherwise employed shall
be deposited from time to time to the credit of the Corporation in such
depository or depositories as the Board of Directors shall direct.

ARTICLE VII
CERTIFICATES FOR SHARES AND OTHER TRANSFER

1. Certificates for Shares. Certificates representing shares of the
Corporation shall be issued, in such form as the Board of Directors shall
determine, to every shareholder for the fully paid shares owned by him. These
certificates shall be signed by the President or any Vice President or person
who has been designated as the chief executive officer of the Corporation and by
the Secretary, Assistant Secretary, Treasurer or Assistant Treasurer and sealed
with the seal of the Corporation or a facsimile thereof. The signatures of any
such officers upon a certificate may be a facsimiles or may be engraved or
printed or omitted if the certificate is countersigned by a transfer agent, or
registered by a registrar, other than the Corporation itself or an employee of
the Corporation. In case any officer who has signed or whose facsimile or other
signature has been placed upon such certificate shall have ceased to be such
officer before such certificate is issued, it may be issued by the Corporation
with the same effect as if he were such officer at the date of its issue. The
certificates shall be consecutively numbered or otherwise identified; and the
name and address of the persons to whom they are issued, with the number of
shares and date of issue, shall be entered on the stock transfer books of the
Corporation.
2. Transfer of Shares. Transfer of shares shall be made on the
stocktransfer books of the Corporation only upon surrender of the certificates
forthe shares sought to be transferred by the record holder thereof or by
hisduly authorized agent, transferee or legal representative. All
certificatessurrendered for transfer shall be cancelled before new certificates
for thetransferred shares shall be issued.

<PAGE>

3. Transfer Agent and Registrar. The Board of Directors may appoint one
or more transfer agents and one or more registrars of transfer and may require
all stock certificates to be signed or countersigned by the transfer agent
and registered by the registrar of transfers.

4. Restrictions on Transfer.

(a) If the Corporation has elected Subchapter S status under Section
1362 of the Internal Revenue Code of 1986, as amended, no shareholder or
involuntary transferee shall dispose of or transfer any shares of the
Corporation which he now owns or may hereafter acquire if such disposition or
transfer would result in the termination of such Subchapter S status, unless
such disposition or transfer is consented to by all shareholders of the
Corporation. Any such disposition or transfer that does not comply with the
terms of this paragraph shall be void and have no legal force or effect and
shall not be recognized on the share transfer books of the Corporation as
effective.

(b) No shareholder or involuntary transferee shall dispose of or
transfer any shares of the Corporation which he now owns or may hereafter
acquire except as set forth in this Section 4. Any purported transfer or
disposition of shares in violation of the terms of this paragraph shall be void
and the Corporation shall be void and the Corporation shall not recognize or
give any effect to such transaction.

(c) A shareholder shall be free to transfer, during his lifetime or
by testamentary transfer, any or all of his shares of the Corporation to his
spouse, any of his children, grandchildren or direct lineal descendants, whether
by blood or by adoption, spouses of such issue or a trust for the sole benefit
of those persons or any of them; but, in case of any such transfer, the
transferee shall be bound by all the provisions of these Bylaws and no further
transfer of such shares shall be made by such transferee except back to the
shareholder who originally owned them or except in accordance with the
provisions of this paragraph.

(d) Any shareholder, or transferee of such shareholder, who wishes
to transfer all or any part of his shares of the Corporation (hereinafter
"offeror"), other than is permitted in subparagraph (c) above, first shall
submit a written offer to sell such shares to the Corporation at the same price
per share and upon the same terms and conditions offered by a bona fide
prospective purchaser of such shares. Such written offer to the Corporation
shall continue to be a binding offer to sell until: (1) expressly rejected by an
officer or Director of

<PAGE>

the Corporation acting pursuant to resolution formally adopted by a majority
of the outstanding shares (excluding shares held by the offeror); or (2) the
expiration of a period of thirty (30) days after delivery of such written offer
to the Corporation, whichever shall first occur.

(e) Upon termination of the offer referred to in subparagraph (d) above,
the offeror shall than submit to each of the other holders of shares written
offers to sell (hereinafter "offeree"), at the same price per share and upon the
same terms and conditions previously offered to the Corporation, any of the
shares not previously purchased by the Corporation under the aforesaid offer to
it, such shares to be allocated among the offerees on the basis of the
percentage of shares then held by them. Each such offer shall continue to be a
binding offer to sell until expressly accepted or rejected by the offeree or
until the expiration or twenty (20) days after its delivery to the offeree,
whichever shall first occur. If any such offeree does not elect to purchase all
of the shares offered to him, any other offeree may purchase all or any part of
the unpurchased shares by giving to the offeror written notice of his election
so to purchase not later than five (5) days after the termination of the
original offer to the offeree who died not elect to purchase all such shares. If
more than one offeree exercises this election to purchase unpurchased shares,
such shares shall be divided between or among such offerees in proportion to
their the respective holdings of shares. Unless all of the shares offered are
purchased by the Corporation and the other shareholders, then all acceptances to
purchase less than all such shares shall be deemed null and void.

(f) Every written offer submitted in accordance with the provisions
of this paragraph shall specifically name the person to whom the offeror
intends to transfer the shares, the number of shares which he intends so to
transfer to each person and the price per share and other terms upon which each
intended transfer is to be made. Upon the termination of all such written offers
and the five-day period provided for in subparagraph (e) above, the offeror
shall be free to transfer, for a period of three (3) months thereafter, any
unpurchased shares to the persons so named at the price per share and upon
the other terms and conditions so named, provided that any such transferee of
those shares shall thereafter be bound by all the provisions of these Bylaws.

(g) Every written offer submitted to the Corporation shall be deemed to
have been delivered when delivered in person to each member of the Board of
Directors or if and when sent by prepaid registered or certified mail, to all
of the Directors at

<PAGE>

their last known business addresses. Every written offer submitted to an
offeree shall be deemed to have been delivered if and when delivered in
person to such offeree or if and when sent by prepaid registered or certified
mail, to such offeree at his address as it then appears on the stock books of
the Corporation or, if no address appears on said stock books, to his last
known residence address.

(h) If any consideration to be received by the offeror for the shares
offered is property other than cash, then the price per share shall be measured
to the extent of the fair market value of such noncash consideration.

(i) The provisions contained herein shall not apply to the pledge of
any shares of the Corporation as collateral for a loan but shall apply to the
sale or other disposition of shares under any such pledge.

(j) Every certificate representing shares of the Corporation shall bear
the following legend prominently displayed:

"The shares represented by this certificate, and the transfer thereof,
are subject to the provisions of the Bylaws of the Corporation, a copy of which
is on file in, and may be examined at, the principal office of the
Corporation."

(k) The restrictions set forth in this Section 4 shall terminate upon
the closing of a public offering of securities registered under the Securities
Act of 1933, as amended.

5. Closing Transfer Books and Fixing Record Date.

(a) For the purpose of determining the shareholders entitled to notice
of or to vote at any meeting of shareholders or any adjournment thereof, the
Board of Directors may fix a record date, which record date shall not precede
the date upon which the resolution fixing the record date is adopted by the
Board of Directors, and which record date shall not be more than sixty (60) nor
less than ten (10) days before the date of such meeting. If no record date is
fixed by the Board of Directors, such record date shall be at the close of
business on the day next preceding the day on which notice is given, or, if
notice is waived, at the close of business on the day next preceding the day on
which the meeting is held. Such determination of shareholders of record shall
apply to any adjournment of the meeting; provided, however, that the Board of
Directors may fix a new record date for the adjourned meeting.

<PAGE>

(b) For the purpose of determining the shareholders entitled to consent
to corporate action in writing without a meeting, the Board of Directors may
fix a record date, which record date shall not precede the date upon which the
resolution fixing the record date is adopted by the Board of Directors, and
which date shall not be more than ten (10) days after the date upon which the
resolution fixing the record date is adopted by the Board of Directors. If no
record date has been fixed by the Board of Directors, such record date, when no
prior action by the Board of Directors is required by this chapter, shall be
the first date on which a signed written consent setting forth the action
taken or proposed to be taken is filed with the Secretary of the Corporation.
If no record date has been fixed by the Board of Directors and prior action by
the Board of Directors is required by the Delaware Corporation Law, such record
date shall be at the close of business on the day on which the Board of
Directors adopts the resolution taking such prior action.

(c) For the purpose of determining the shareholders entitled to
receive payment of any dividend or other distribution or allotment of any
rights, or the shareholders entitled to exercise any rights in respect of any
change, conversion or exchange of stock, or for the purpose of any other
lawful action, the Board of Directors may fix a record date, which record date
shall not precede the date upon which the resolution fixing the record date is
adopted, and which record date shall be not more than sixty (60) days prior to
such action. If no record date is fixed, the record date for determining
shareholders for any such purpose shall be at the close of business on the day
on which the Board of Directors adopts the resolution relating thereto.

6. Lost Certificates. The Board of Directors may authorize the issuance of
a new share certificate in place of a certificate claimed to have been lost or
destroyed, upon receipt of an affidavit of such fact from the person claiming
the loss or destruction. When authorizing such issuance of a new certificate,
the Board may require the claimant to give the Corporation a bond in such sum
as it may direct to indemnify the Corporation against loss from any claim with
respect to the certificate claimed to have been lost or destroyed; or the
Board may, by resolution reciting that the circumstances justify such action,
authorize the issuance of the new certificate without requiring such a bond.

7. Holder of Record. The Corporation may treat as absolute owner of the
shares the person in whose name the shares stand of record on its books just
as if that person had full competency, capacity, and authority to exercise all
rights of ownership irrespective of any knowledge or notice to the contrary or
any

<PAGE>

description indicating a representative, pledge or other fiduciary relation or
any reference to any other instrument or to the rights of any other person
appearing upon its record or upon the share certificate; except that any person
furnishing to the Corporation proof of his appointment as a fiduciary shall be
treated as if he were a holder of record of the Corporation's shares.

8. Treasury Shares. Treasury shares of the Corporation shall consist of
such shares as have been issued and thereafter acquired but not cancelled by
the Corporation. Treasury shares shall not carry voting or dividend rights,
except rights in share dividends.

ARCICLE VIII
INDEMNIFICATION AND REIMBURSEMENT
OF DIRECTORS AND OFFICERS

1. Indemnification for Expenses and Liabilities: Any person who at any time
serves or has served (i) as a director, officer, employee or agent of the
Corporation, (ii) at the request of the Corporation as a director, officer,
partner, trustee, employee or agent of another foreign or domestic corporation,
partnership, joint venture, trust, or other enterprise, or (iii) at the request
of the Corporation as a trustee or administrator under an employee benefit
plan, or is called as a witness at a time when he or she has not been made a
named defendant or respondent to any Proceeding, shall have a right to be
indemnified by the Corporation to the fullest extent from time to time
permitted by law against Liability and Expenses in any Proceeding (including
without limitation a Proceeding brought by or on behalf of the Corporation
itself) arising out of his or her status as such or activities in any of the
foregoing capacities.

The Board of Directors of the Corporation shall take all such action as
may be necessary and appropriate to authorize the Corporation to pay the
indemnification required by this provision, including without limitation, to
the extent needed, making a good faith evaluation of the manner in which the
claimant for indemnity acted and of the reasonable amount of indemnity due him
or her.

Any person who at any time serves or has served in any of the aforesaid
capacities for or on behalf of the Corporation shall be deemed to be doing or
to have done so in reliance upon, and as consideration for, the rights provided
for herein. Any repeal or modification of these indemnification provisions
shall

17
<PAGE>

not affect any rights or obligations existing at the time of such repeal or
modification. The rights provided for herein shall inure to the benefit of the
legal representatives of any such person and shall not be exclusive of any
other rights to which such person may be entitled apart from this provision.

The rights granted herein shall not be limited by the provisions contained
in Section 145 of the Delaware Corporation Law or any successor to such
statute.

2. Advance Payment of Expenses: The Corporation shall (upon receipt of an
undertaking by or on behalf of the director, officer, employee or agent
involved to repay the Expenses described herein unless it shall untimately be
determined that he or she is entitled to be indemnified by the Corporation
against such Expenses) pay Expenses incurred by such director, officer,
employee or agent in defending a Proceeding or appearing as a witness at a
time when he or she has not been named as a defendant or a respondent with
respect thereto in advance of the final disposition of such Proceeding.

3. Insurance: The Corporation shall have the power to purchase and maintain
insurance (on behalf of any person who is or was a director, officer, employee
or agent of the Corporation, or is or was serving at the request of the
Corporation as a director, officer, employee or agent of another domestic or
foreign corporation, partnership, joint venture, trust or other enterprise or
as a trustee or administrator under an employee benefit plan) against any
liability asserted against him or her and incurred by him or her in any such
capacity, or arising out of his or her status as such, whether or not the
Corporation would have the power to indemnify him or her against such
liability.

4. Definitions: The following terms as used in this Article shall have the
following meanings. "Proceeding" means any threatened, pending or completed
action, suit, or proceeding and any appeal therein (and any inquiry or
investigation that could lead to such action, suit, or proceeding), whether
civil, criminal, administrative, investigative or arbitrative and whether
formal or informal. "Expenses" means expenses of every kind, including counsel
fees. "Liability" means the obligation to pay a judgment, settlement,
penalty, fine (including an excise tax assessed with respect to an employee
benefit plan), reasonable expenses incurred with respect to a Proceeding, and
all reasonable expenses incurred in enforcing the indemnification rights
provided herein. "Director," "officer," "employee" and "agent" include the
estate or personal representative of a director, officer, employee or agent.
"Corporation" shall

<PAGE>

include any domestic or foreign predecessor of this Corporation in a merger or
other transaction in which the predecessor's existence ceased upon consummation
of the transaction.

ARTICLE IX
GENERAL PROVISIONS

1. Dividends. The Board of Directors may from time to time declare, and the
Corporation may pay, dividends on its outstanding shares in the manner and upon
the terms and conditions provided by law and by its charter.

2. Seal. The corporate seal shall have the name of the corporation
inscribed thereon and shall be in such form of as may be approved from time to
time by the Board of Directors. Such seal may be an impression or stamp and may
be used by the officers of the Corporation by causing it, or a facsimile
thereof, to be impressed or affixed or in any other manner reproduced. In
addition to any form of seal adopted by the Board of Directors, the officers of
the Corporation may use as the corporate seal a seal in the form of a circle
containing the name of the Corporation and the state of its incorporation (or
an abbreviation thereof) on the circumference and the word "Seal" in the
center.

3. Waiver of Notice. Whenever any notice is required to be given to any
shareholder or Director under the provisions of the Delaware Corporation Law
or under the provisions of the charter or Bylaws of the Corporation, a waiver
thereof in writing signed by the person or persons entitled to such notice,
whether before or after the time stated therein, shall be equivalent to the
giving of such notice.

4. Fiscal Year. The fiscal year of the Corporation shall be determined by
the Board of Directors.

5. Form of Records. Any records maintained by the Corporation in the
regular course of its business, including its stock ledger, books of account,
and minute books, may be kept on, or be in the form of, punch cards, magnetic
tape, photographs, microphotographs, or any other information storage device;
provided that the records so kept can be converted into clearly legible form
with a reasonable time. The Corporation shall so convert any records so kept
upon the request of any person entitled to inspect the same.

<PAGE>

6. Amendments. Except as otherwise provided herein, these Bylaws may be
amended or repealed and new Bylaws may be adopted by the affirmative vote of
shareholders entitled to exercise a majority of voting power of the
Corporation, or, if the Certificate of Incorporation of the Corporation so
permits, by the affirmative vote of a majority of the Directors then holding
office at any regular or special meeting of the Board of Directors.

The Board of Directors shall have no power to adopt a Bylaw: (i) changing
the statutory requirement for a quorum of Directors or action by Directors or
changing the statutory requirement for a quorum of shareholders or action by
shareholders; (ii) providing for the management of the Corporation otherwise
than by the Board of Directors or the committees thereof; (iii) increasing or
decreasing the number of directors; or (iv) classifying and staggering the
election of Directors.

No Bylaw adopted or amended by the shareholders may be altered or repealed
by the Board of Directors, except to the extent that such Bylaw provision
expressly authorizes its amendment or repeal by the Board of Directors.
Section 4 of Article VII may not be amended without the unanimous consent of
all shareholders of the Corporation.

THIS IS TO CERTIFY that the above Bylaws were duly adopted by the Board
of Directors of the Corporation by action taken, without a meeting, effective
this 7th day of January 1993.

/s/ Dani Bolognesi
Dani Bolognesi, Secretary

AMENDED AND RESTATED BYLAWS
OF
TRIMERIS, INC.

ARTICLE 1 - STOCKHOLDERS

1.1 Place of Meeting. All meetings of stockholders shall be held at
such place within or without the State of Delaware as may be designated from
time to time by the Board of Directors or the President or, if not so
designated, at the registered office of the corporation.

1.2 Annual Meeting. The annual meeting for the stockholders for the
election of directors and for the transaction of such other business as may
properly be brought before the meeting shall be held within six months after the
end of each fiscal year of the corporation on a date to be fixed by the Board of
Directors or the President (which date shall not be a legal holiday in the place
where the meeting is to be held) at the time and place to be fixed by the Board
of Directors or the President and stated in the notice of the meeting. If no
annual meeting is held in accordance with the foregoing provisions, the Board of
Directors shall cause the meeting to be held as soon as thereafter as
convenient. If no annual meeting is held in accordance with the foregoing
provisions, a special meeting may be held in lieu of the annual meeting, and any
action taken at that special meeting shall have the same effect as if it had
been taken at the annual meeting, and in such case all references in these
Bylaws to the annual meeting of the stockholders shall be deemed to refer to
such special meeting.

1.3 Special Meetings. Special meetings of stockholders may be called at
any time by the Chairman of the Board of Directors, the Chief Executive Officer
(or, if there is no Chief Executive Officer, the President) or the Board of
Directors. Business transacted at any special meeting of the stockholders shall
be limited to matters relating to the purpose or purposes stated in the notice
of the meeting.

NOTE: THE PROVISIONS OF THIS SECTION 1.3 OF ARTICLE I WERE APPROVED BY
THE STOCKHOLDERS OF THE CORPORATION AND MAY NOT BE AMENDED EXCEPT BY
THE STOCKHOLDERS IN ACCORDANCE WITH THE PROVISIONS OF SECTION 6.3 OF
ARTICLE 6 HEREOF.

1.4 Notice of Meetings. Except as otherwise provided by law, written
notice of each meeting of stockholders, whether annual or special, shall be
given not less then 10 nor more than 60 days before the date of the meeting to
each stockholder entitled to vote at such meetings. The notices of all meetings
shall state the place, date and hour of the meeting. The notice of a special
meeting shall state, in addition, the purpose or purposes for which the meeting
is called. If mailed, notice is given when deposited in the United States mail,
postage prepaid, directed to the stockholder at his address as it appears on the
records of the corporation.

<PAGE>

1.5 Voting List. The officer who has charge of the stock ledger of the
corporation shall prepare, at least 10 days before every meeting of
stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
10 days prior to the date on which the meeting, at a place within the city where
the meeting is to be held. The list shall also be produced and kept at the time
and place of the meeting during the whole time of the meeting, and may be
inspected by any stockholder who is present.

1.6 Quorum. Except as otherwise provided by law, the Certificate of
Incorporation or these Bylaws, the holders of the majority of the shares of the
capital stock of the corporation issued and outstanding and entitled to vote at
the meeting, present in person or represented by proxy, shall constitute a
quorum for the transaction of business.

1.7 Adjournments. Any meeting of stockholders may be adjourned to any
other time and to any other place at which a meeting of stockholders present or
represented at the meeting and entitled to vote, although less than a quorum,
or, if no stockholder is present, by any officer entitled to preside at or to
act as Secretary of such meeting. It shall not be necessary to notify any
stockholder of any adjournment of less than 30 days if the time and place of the
adjourned meeting are announced at the meeting at which adjournment is taken,
unless after the adjournment a new record date is fixed for the adjourned
meeting. At the adjourned meeting, the corporation may transact any business
which might have been transacted at the original meeting.

1.8 Voting and Proxies. Each stockholder shall have one vote for each
share of stock entitled to vote held of record by such stockholder and
proportionate vote for each fractional share held, unless otherwise provided by
the General Corporation Law of the State of Delaware, the Certificate of
Incorporation or these Bylaws. Each stockholder of record entitled to vote at a
meeting of stockholders, or to express consent or dissent to corporate action in
writing without a meeting, may vote to express such consent or dissent in person
or may authorize another person or persons to vote or to act for him by written
proxy executed by the stockholder or his authorized agent and delivered to the
Secretary of the corporation. No such proxy shall be voted or acted upon after
three years from the date of its execution, unless the proxy expressly provides
for a longer period.

1.9 Action at Meeting. When a quorum is present at any meeting, the
holders of a majority of the stock present or represented and voting on a matter
(or if there are two or more classes of stock entitled to vote as separate
classes, then in the case of each such class, the holders of the majority of the
stock of the class present or represented and voting on a matter) shall decide
any matter to be voted upon by the stockholders at such meeting, except when a
different vote is required by express

2
<PAGE>

provision of the law, the Certificate of Incorporation or these Bylaws. Any
election by the stockholders shall be determined by a plurality of the votes
cast by the stockholders entitled to vote at the election.

1.10 Nomination of Directors. Only persons who are nominated in
accordance with the following procedures shall be eligible for election as
directors. Nomination for election to the Board of Directors of the corporation
at a meeting of stockholders may be made by the Board of Directors or by any
stockholder of the corporation entitled to vote for the election of the
directors at such meeting who compiles with the notice procedures set forth in
this Section 1.10. Such nominations, other than those made by or on behalf of
the Board of Directors, shall be made by notice in writing delivered or mailed
by first class United States mail, postage prepaid, to the Secretary, and
received not less than 60 days nor more than 90 days prior to such meeting;
provided, however, that if less than 70 days' notice or prior public disclosure
of the date of the meeting is given to stockholders, such nomination shall have
been mailed or delivered to the Secretary not later than the close of business
on the 10th day following the date on which the notice of the meeting was mailed
or such public disclosure was made, whichever occurs first. Such notice shall be
set forth (a) as to each proposed nominee (i) the name, age, business address
and, if known, residence address of each such nominee, (ii) the principal
occupation or employment of each such nominee, (iii) the number of shares of
stock of the corporation which are beneficially owned by each such nominee, and
(iv) any other information concerning the nominee that must be disclosed as to
such nominees in proxy solicitations pursuant to Regulation 14A under the
Securities Exchange Act of 1934, as amended ( including such person's written
consent to be named as a nominee and to serve as a director if elected); and (b)
as to the stockholder given the notice (i) the name and address, as they appear
on the corporation's books, of such stockholder and (ii) the class and number of
the shares of the corporation which are beneficially owned by such stockholder.
The corporation may require any proposed nominee to furnish such other
information as may reasonably be required by the corporation to determine the
eligibility of such proposed nominee to serve as a director of the corporation.

The chairman of the meeting may, if the facts warrant, determine and
declare to the meeting that a nomination was not made in accordance with the
foregoing procedure, and if he should so determine, he shall so declare to the
meeting and the defective nomination shall be disregarded.

NOTE: THE PROVISIONS OF THIS SECTION 1.10 OF ARTICLE I WERE APPROVED BY
THE STOCKHOLDERS OF THE CORPORATION AND MAY NOT BE AMENDED EXCEPT BY
THE STOCKHOLDERS IN ACCORDANCE WITH THE PROVISIONS OF SECTION 6.3 OF
ARTICLE 6 HEREOF.

1.11 Notice of Business at Annual Meeting. At an annual meeting of the
stockholders, only such business shall be conducted as shall have been properly
brought before the meeting. To be properly brought before an annual meeting,
business must be (a) specified in the notice of meeting (or any supplement
thereto) given by or at the

3
<PAGE>

direction of the Board of Directors, (b) otherwise properly brought before the
meeting by or at the direction of the Board of Directors, or (c) otherwise
properly brought before an annual meeting by a stockholder. For business to be
properly brought before an annual meeting by a stockholder, if such business
relates to the election of directors of the corporation, the procedures in
Section 1.10 must be compiled with. If any such business relates to any other
matter, the stockholders must have given timely notice thereof in writing to the
Secretary. To be timely, a stockholder's notice must be delivered to or mailed
and received at the principal executive offices of the corporation not less than
60 days nor more than 90 days prior to the meeting; provided, however, that in
the event that less than 70 days' notice or prior public disclosure of the date
of the meeting is given or made to stockholders, notice by the stockholder to be
timely must be so received not later than the close of business on the 10th day
following the date on which such notice of the date of the meeting was mailed or
such public disclosure was made, whichever occurs first. A stockholder's notice
to the Secretary shall set forth as to each matter the stockholder proposes to
bring before the annual meeting (a) a brief description of the business desired
to be brought before the annual meeting and the reasons for conducting such
business at the annual meeting, (b) the name and address, as they appear on the
corporation's books, of the stockholder proposing such business, (c) the class
and number of shares of the corporation which are beneficially owned by the
stockholder, and (d) any material interest of the stockholder in such business.
Notwithstanding anything in these Bylaws to the contrary, no business shall be
conducted at any annual meeting except in accordance with the procedures set
forth in this Section 1.11; provided, however, that any stockholder proposal
which complies with Rule 14a-8 of the proxy rules (or any successor provision)
promulgated under the Securities Exchange Act of 1934, as amended, and is to be
included in the corporation's proxy statement for an annual meeting of
stockholders shall be deemed to comply with the requirements of this Section
1.11.

The chairman of the meeting shall, if the facts warrant, determine and
declare to the meeting that business was not properly brought before the meeting
in accordance with the provisions of this Section 1.11, and if he should so
determine, the chairman shall so declare to the meeting that any such business
not properly brought before the meeting shall not be transacted.

NOTE: THE PROVISIONS OF THIS SECTION 1.11 OF ARTICLE I WERE APPROVED BY
THE STOCKHOLDERS OF THE CORPORATION AND MAY NOT BE AMENDED EXCEPT BY
THE STOCKHOLDERS IN ACCORDANCE WITH THE PROVISIONS OF SECTION 6.3 OF
ARTICLE 6 HEREOF.

1.12 Action without Meeting. Stockholders may not take any action by
written consent in lieu of a meeting.

NOTE: THE PROVISIONS OF THIS SECTION 1.12 OF ARTICLE I WERE APPROVED BY
THE STOCKHOLDERS OF THE CORPORATION AND MAY NOT BE AMENDED EXCEPT BY
THE STOCKHOLDERS IN ACCORDANCE WITH THE PROVISIONS OF SECTION 6.3 OF
ARTICLE 6 HEREOF.

4
<PAGE>

1.13 Organization. The Chairman of the Board, or in his absence the Vice
Chairman of the Board designated by the Chairman of the Board, or the President,
in the order named, shall call meetings of the stockholders to order, and shall
act as chairman of such meeting; provided, however that the Board of Directors
may appoint any stockholder to act as chairman of any meeting in the absence of
the Chairman of the Board. The Secretary of the corporation shall act as
secretary at all meetings of the stockholders; but in the absence of the
Secretary at any meeting of the stockholders, the presiding officer may appoint
any person to act as secretary of the meeting.

NOTE: THE PROVISIONS OF THIS SECTION 1.13 OF ARTICLE I WERE APPROVED BY
THE STOCKHOLDERS OF THE CORPORATION AND MAY NOT BE AMENDED EXCEPT BY
THE STOCKHOLDERS IN ACCORDANCE WITH THE PROVISIONS OF SECTION 6.3 OF
ARTICLE 6 HEREOF.

ARTICLE 2 - DIRECTORS

2.1 General Powers. The business and affairs of the corporation shall be managed
by or under the direction of a Board of Directors, who may exercise all of the
powers of the corporation, except as otherwise provided by law, the Certificate
of Incorporation or these Bylaws. In the event of a vacancy in the Board of
Directors, the remaining directors, except as otherwise provided by law or by
the Certificate of Incorporation of the corporation, may exercise the powers of
the full Board until the vacancy is filled.

2.2 Number; Election and Qualification. The number of directors which shall
constitute the whole Board of Directors shall be determined by resolution of the
Board of Directors, but in no event shall be less than three. The number of
directors may be decreased at any time and from time to time by a majority of
the directors then in office, but only to eliminate vacancies existing by reason
of the death, resignation, removal or expiration of the term of one or more
directors. The directors shall be elected at the annual meeting of stockholders
by such stockholders as have the right to vote on such election. Directors need
not be stockholders of the corporation.

2.3 Classes of Directors. The Board of Directors shall be and is divided into
three classes: Class I, Class II and Class III. No one class shall have more
than one director more than any other class. If a fraction is contained in the
quotient arrived at by dividing the designated number of directors by three,
then, if such fraction is one-third, the extra director shall be a member of
Class I, and if such fraction is two-thirds, one of the extra directors shall be
a member of Class I and one of the extra directors shall be a member of Class
II, unless otherwise provided from time to time by resolution adopted by the
Board of Directors.

2.4 Terms of Office. Each director shall serve for a term ending on the date of
the third annual meeting following the annual meeting at which such director was
elected; provided, that each initial director in Class I shall serve for a term
ending on the date of the annual meeting of stockholders in 1998; each initial
director in Class II shall serve for

5
<PAGE>

a term ending on the date of the annual meeting of stockholders in 1999; and
each initial director in Class III shall serve for a term ending on the date of
the annual meeting of stockholders in 2000; and provided further, that the term
of each director shall be subject to the election and qualification of his
successor and to his earlier death, resignation or removal.

2.5 Allocation of Directors Among Classes in the Event of Increases or Decreases
in the Number of Directors. In the event of any increase or decrease in the
authorized number of directors, (i) each director then serving as such shall
nevertheless continue as a director of the class of which he is a member and
(ii) the newly created or eliminated directorship resulting from such increase
or decrease shall be apportioned by the Board of Directors among the three
classes of directors so as to ensure that no one class has more than one
director more than any other class. To the extent possible, consistent with the
foregoing rule, any newly created directorships shall be added to those classes
whose terms of office are to expire at the latest dates following such
allocation, and any newly eliminated directorships shall be subtracted from
those classes whose terms of offices are to expire at the earliest dates
following such allocation, unless otherwise provided from time to time by
resolution adopted by the Board of Directors.

2.6 Vacancies. Any vacancy in the Board of Directors, however occurring,
including a vacancy resulting from an enlargement of the Board, shall be filled
only by vote of a majority of the directors then in office, although less than a
quorum, or by a sole remaining director. A director elected to fill a vacancy
shall be elected for the unexpired term of his predecessor in office, and a
director chosen to fill a position resulting from an increase in the number of
directors shall hold office until the next election of the class for which such
director shall have been chosen, subject to the election and qualification of
his successor and to his earlier death, resignation or removal.

2.7 Resignation. Any director may resign by delivering his written resignation
to the corporation at its principal office or to the President or Secretary.
Such resignation shall be effective upon receipt unless it is specified to be
effective at some other time or upon the happening of some other event.

2.8 Regular Meetings. Regular meetings of the Board of Directors may be held
without notice at such time and place, either within or without the State of
Delaware, as shall be determined from time to time by the Board of Directors;
provided that any director who is absent when such a determination is made shall
be given notice of the determination. A regular meeting of the Board of
Directors may be held without notice immediately after and at the same place as
the annual meeting of stockholders.

2.9 Special Meetings. Special meetings of the Board of Directors may be held at
any time and place, within or without the State of Delaware, designated in a
call by the Chairman of the Board, President, two or more directors, or by one
director in the event that there is only a single director in office.

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<PAGE>

2.10 Notice of Special Meetings. Notice of any special meeting of directors
shall be given to each director by the Secretary or by the officer or one of the
directors calling the meeting. Notice shall be duly given to each director (i)
by giving notice to such director in person or by telephone at least 24 hours in
advance of the meeting, (ii) by sending a telegram, telecopy, or telex, or
delivering written notice by hand, to his last known business or home address at
least 24 hours in advance of the meeting, or (iii) by mailing written notice to
his last known business or home address at least 72 hours in advance of the
meeting. A notice or waiver of notice of a meeting of the Board of Directors
need not specify the purposes of the meeting.

2.11 Meetings by Telephone Conference Calls. Directors or any members of any
committee designated by the directors may participate in a meeting of the Board
of Directors or such committee by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other, and participation by such means shall constitute
presence in person at such meeting.

2.12 Quorum. A majority of the total number of the whole Board of Directors
shall constitute a quorum at all meetings of the Board of Directors. In the
event one or more of the directors shall be disqualified to vote at any meeting,
then the required quorum shall be reduced by one for each such director so
disqualified; provided, however, that in no case shall less than one-third (1/3)
of the number so fixed constitute a quorum. In the absence of a quorum at any
such meeting, a majority of the directors present may adjourn the meeting from
time to time without further notice other than announcement at the meeting,
until a quorum shall be present.

2.13 Action at Meeting. At any meeting of the Board of Directors at which a
quorum is present, the vote of a majority of those present shall be sufficient
to take any action, unless a different vote is specified by law, the Certificate
of Incorporation or these Bylaws.

2.14 Action by Consent. Any action required or permitted to be taken at any
meeting of the Board of Directors or of any committee of the Board of Directors
may be taken without a meeting, if all members of the Board or committee, as the
case may be, consent to the action in writing, and the written consents are
filed with the minutes of proceedings of the Board or committee.

2.15 Removal. A Director may be removed from office with cause by the
affirmative vote of at least seventy-five percent (75%) of all eligible votes
present in person or by proxy at a meeting of stockholders at which a quorum is
present. A Director may be removed from office without cause by the affirmative
vote of seventy-five percent (75%) of all eligible votes present in person or by
proxy at a meeting of stockholders at which a quorum is present, provided that
removal without is recommended to the stockholders by the Board of Directors
pursuant to a vote of not less than seventy-five percent (75%) of the Directors
then in office. If a Director is elected by a separate voting

7
<PAGE>

group, only the members of that voting group may participate in the vote to
remove him. The entire Board of Directors may not be removed except pursuant o
the removal of individual Directors in accordance with the foregoing provisions.

2.16 Committees. The Board of Directors may, by resolution passed by a
majority of the whole Board, designate one or more committees, each committee to
consist of one or more of the directors of the corporation. The Board may
designate one or more directors as alternate members of any committee, who may
replace any absent or disqualified member at any meeting of the committee. In
the absence or disqualification of a member of a committee, the member or
members of the committee present at any meeting and not disqualified from
voting, whether or not he or they constitute a quorum, may unanimously appoint
another member of the Board of Directors to act at the meeting in the place of
any such absent or disqualified member. Any such committee, to the extent
provided in the resolution of the Board of Directors and subject to the
provisions of the General Corporation Law of the State of Delaware, shall have
and may exercise all the powers and authority of the Board of Directors in the
management of the business and affairs of the corporation and may authorize the
seal of the corporation to be affixed to all papers which may require it. Each
such committee shall keep minutes and make such reports as the Board of
Directors may from time to time request. Except as the Board of Directors may
otherwise determine, any committee may make rules for the conduct of its
business, but unless otherwise provided by the directors or in such rules, its
business shall be conducted as nearly as possible in the same manner as is
provided in these Bylaws for the Board of Directors.

2.17 Compensation of Directors. Directors may be paid such compensation
for their services and such reimbursement for expenses of attendance at meetings
as the Board of Directors may from time to time determine. No such payment shall
preclude any director from serving the corporation or any of its parent or
subsidiary corporations in any other capacity and receiving compensation for
such service.

NOTE: THE PROVISIONS OF THIS ARTICLE 2 WERE APPROVED BY THE
STOCKHOLDERS OF THE CORPORATION AND MAY NOT BE AMENDED EXCEPT BY THE
STOCKHOLDERS IN ACCORDANCE WITH THE PROVISIONS OF SECTION 6.3 OF
ARTICLE 6 HEREOF.

ARTICLE 3 - OFFICERS

3.1 Enumeration. The officers of the corporation shall consist of a
President, a Secretary, a Treasurer and such other officers with such other
titles as the Board of Directors shall determine, including a Chairman of the
Board, a Vice-Chairman of the

8
<PAGE>

Board, and one or more Vice Presidents, Assistant Treasurers, and Assistant
Secretaries. The Board of Directors may appoint such other officers as it may
deem appropriate.

3.2 Election. The President, Treasurer and Secretary shall be elected
annually by the Board of Directors at its first meeting following the annual
meeting of stockholders. Other officers may be appointed by the Board of
Directors at such meeting or at any other meeting.

3.3 Qualification. No officer need be a stockholder. Any two or more
offices may be held by the same person.

3.4 Tenure. Except as otherwise provided by law, by the Certificate of
Incorporation or by these Bylaws, each officer shall hold office until his
successor is elected and qualified unless a different term is specified in the
vote choosing or appointing him, or until his earlier death, resignation or
removal.

3.5 Resignation and Removal. Any officer may resign by delivering his
written resignation to the corporation at its principal office or to the
President or Secretary. Such resignation shall be effective upon receipt unless
it is specified to be effective at some other time or upon the happening of some
other event.

Any officer may be removed at any time, with or without cause, by vote
of a majority of the entire number of directors then in office.

Except as the Board of Directors may otherwise determine, no officer
who resigns or is removed shall have any right to any compensation as an officer
for any period following his resignation or removal, or any right to damages on
account of such removal, whether his compensation be by the month or by the year
or otherwise, unless such compensation is expressly provided in a duly
authorized written agreement with the corporation.

3.6 Vacancies. The Board of Directors may fill any vacancy occurring in
any office for any reason and may, in its discretion, leave unfilled for such
period as it may determine any offices other than those of President, Treasurer
and Secretary. Each such successor shall hold office for the unexpired term of
his predecessor and until his successor is elected and qualified, or until his
earlier death, resignation or removal.

3.7 Chairman of the Board and Vice Chairman of the Board. The Board of
Directors may appoint an Chairman of the Board. If the Board of Directors
appoints a Chairman of the Board, he shall perform such duties and possess such
powers as are assigned to him by the Board of Directors. If the Board of
Directors appoints a Vice Chairman of the Board, he shall, in the absence or
disability of the Chairman of the Board, perform the duties and exercise the
powers of the Chairman of the Board and shall perform such other duties and
possess such other powers as may from time to time be vested in him by the Board
of Directors.

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<PAGE>

3.8 President. The President shall, subject to the direction of the
Board of Directors, have general charge and supervision of the business of the
corporation. Unless otherwise provided by the Board of Directors, he shall
preside at all meetings of the stockholders and if he is a director, at all
meetings of the Board of Directors. Unless the Board of Directors has designated
the Chairman of the Board or another officer as Chief Executive Officer, the
President shall be the Chief Executive Officer of the corporation. The President
shall perform such other duties and shall have such other powers as the Board of
Directors may from time to time prescribe.

3.9 Vice President. Any Vice President shall perform such duties and
possess such powers as the Board of Directors or the President may from time to
time prescribe. In the event of the absence, inability or refusal to act of the
President, the Vice President (of if there shall be more than one, the Vice
Presidents in the order determined by the Board of Directors) shall perform the
duties of the President and when so performing shall have all the powers of and
be subject to all the restrictions upon the President. The Board of Directors
may assign to any Vice President the title of Executive Vice President, Senior
Vice President or any other title selected by the Board of Directors.

3.10 Secretary and Assistant Secretaries. The Secretary shall perform
such duties and shall have such powers as the Board of Directors or the
President may from time to time prescribe. In addition, the Secretary shall
perform such duties and have such powers as are incident to the office of the
secretary, including without limitation the duty and power to give notices of
all meetings of stockholders and special meetings of the Board of Directors, to
attend all meetings of stockholders and the Board of Directors and keep a record
of the proceedings, to maintain a stock ledger and prepare lists of stockholders
and their addresses as required, to be custodian of corporate records and the
corporate seal and to affix and attest to the same on documents.

Any Assistant Secretary shall perform such duties and possess such
powers as the Board of Directors, the President or the Secretary may from time
to time prescribe. In the event of the absence, inability or refusal to act of
the Secretary, the Assistant Secretary (or if there shall be more than one, the
Assistant Secretaries in the order determined by the Board of Directors) shall
perform the duties and exercise the powers of the Secretary.

In the absence of the Secretary or any Assistant Secretary at any
meeting of stockholders or directors, the person presiding at the meeting shall
designate a temporary secretary to keep a record of the meeting.

3.11 Treasurer and Assistant Treasurers. The Treasurer shall perform
such duties and shall have such powers as may from time to time be assigned to
him by the Board of Directors or the President. In addition, the Treasurer shall
perform such duties and have such powers as are incident to the office of
treasurer, including without limitation the duty and power to keep and be
responsible for all funds and securities of the corporation, to deposit funds of
the corporation in depositories selected in accordance

10
<PAGE>

with these Bylaws, to disburse such funds as ordered by the Board of Directors,
to make proper accounts of such funds, and to render as required by the Board of
Directors statements of all such transactions and of the financial condition of
the corporation.

The Assistant Treasurers shall perform such duties and possess such
powers as the Board of Directors, the President or the Treasurer may from time
to time prescribe. In the event of the absence, inability or refusal to act of
the Treasurer, the Assistant Treasurers (or if there shall be more than one, the
Assistant Treasurers in the order determined by the Board of Directors) shall
perform the duties and exercise the powers of the Treasurer.

3.12 Salaries. Officers of the corporation shall be entitled to such
salaries, compensation or reimbursement as shall be fixed or allowed from time
to time by the Board of Directors.

ARTICLE 4 - CAPITAL STOCK

4.1 Issuance of Stock. Unless otherwise voted by the stockholders and
subject to the provisions of the Certificate of Incorporation, the whole or any
part of any unissued balance of the authorized capital stock of the corporation
or the whole or any part of any unissued balance of the authorized capital stock
of the corporation held in its treasury may be issued, sold, transferred or
otherwise disposed of by vote of the Board of Directors in such manner, for such
consideration and on such terms as the Board of Directors may determine.

4.2 Certificates of Stock. Every holder of stock of the corporation
shall be entitled to have a certificate, in such form as may be prescribed by
law and by the Board of Directors, certifying the number and class of shares
owned by him in the corporation. Each such certificate shall be signed by, or in
the name of the corporation by, the Chairman or Vice Chairman, if any, of the
Board of Directors, or the President or a Vice President, and the Treasurer or
an Assistant Treasurer, or the Secretary or an Assistant Secretary of the
corporation. Any or all of the signatures on the certificate may be a facsimile.

Each certificate for shares of stock which are subject to any
restriction on transfer pursuant to the Certificate of Incorporation, the
Bylaws, applicable securities laws or any agreement among any number of
stockholders or among such holders and the corporation shall have conspicuously
noted on the face or back of the certificate either the full text of the
restriction or a statement of the existence of such restriction.

4.3 Transfers. Except as otherwise established by rules and regulations
adopted by the Board of Directors, and subject to applicable law, shares of
stock may be transferred on the books of the corporation by the surrender to the
corporation or its transfer agent of the certificate representing such shares
properly endorsed or accompanied by a written assignment or power of attorney
properly executed, and with such proof of authority or the authenticity of
signature as the corporation or its transfer

11
<PAGE>

agent may reasonably require. Except as may be otherwise required by law, by the
Certificate of Incorporation or by these Bylaws, the corporation shall be
entitled to treat the record holder of stock as shown on its books as the owner
of such stock for all purposes, including the payment of dividends and the right
to vote with respect to such stock, regardless of any transfer, pledge or other
disposition of such stock until the shares have been transferred on the books of
the corporation in accordance with the requirements of these Bylaws.

4.4 Lost, Stolen or Destroyed Certificates. The corporation may issue a
new certificate of stock in place of any previously issued certificate alleged
to have been lost, stolen, or destroyed, upon such terms and conditions as the
Board of Directors may prescribe, including the presentation of reasonable
evidence of such loss, theft or destruction and the giving of such indemnity as
the Board of Directors may require for the protection of the corporation or any
transfer agent or registrar.

4.5 Record Date. The Board of Directors may fix in advance a date as a
record date for the determination of the stockholders entitled to notice of or
to vote at any meeting of stockholders, or entitled to receive payment of any
dividend or other distribution or allotment of any rights in respect of any
change, conversion or exchange of stock, or for the purpose of any other lawful
action. Such record date shall not be more than 60 nor less than 10 days before
the date of such meeting, nor more than 60 days prior to any other action to
which such record date relates.

If no record date is fixed, the record date for determining
stockholders entitled to notice of or to vote at a meeting of stockholders shall
be at the close of business on the day before the day on which notice is given,
or, if notice is waived, at the close of business on the day before the day on
which the meeting is held. The record date for determining stockholders for any
other purpose shall be at the close of business on the day on which the Board of
Directors adopts the resolution relating to such purpose.

A determination of stockholders of record entitled to notice of or to
vote at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the Board of Directors may fix a new record date for the
adjourned meeting.

ARTICLE 5 - GENERAL PROVISIONS

5.1 Fiscal Year. Except as from time to time otherwise designated by
the Board of Directors, the fiscal year of the corporation shall begin on the
first day of January in each year and end on the last day of December in each
year.

5.2 Corporate Seal. The corporate seal shall be in such form as shall
be approved by the Board of Directors.

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<PAGE>

5.3 Waiver of Notice. Whenever any notice whatsoever is required to be
given by law, by the Certificate of Incorporation or by these Bylaws, a waiver
of such notice either in writing signed by the person entitled to such notice or
such person's duly authorized attorney, or by telegraph, cable or any other
available method, whether before, at or after the time stated in such waiver, or
the appearance of such person or persons at such meeting in person or by proxy,
shall be deemed equivalent to such notice.

5.4 Voting of Securities. Except as the directors may otherwise
designate, the President or Treasurer may waive notice of, and act as, or
appoint any person or persons to act as, proxy or attorney-in-fact for this
corporation (with or without power of substitution) at, any meeting of
stockholders or shareholders of any other corporation or organization, the
securities of which may be held by this corporation.

5.5 Evidence of Authority. A certificate by the Secretary, or an
Assistant Secretary, or a temporary Secretary, as to any action taken by the
stockholders, directors, a committee or any officer or representative of the
corporation shall as to all persons who rely on the certificate in good faith be
conclusive evidence of such action.

5.6 Certificate of Incorporation. All references in these Bylaws to the
Certificate of Incorporation shall be deemed to refer to the Certificate of
Incorporation of the corporation, as amended and in effect from time to time.

5.7 Transactions with Interested Parties. No contract or transaction
between the corporation and one or more of the directors or officers, or between
the corporation and any other corporation, partnership, association, or other
organization in which one or more of the directors or officers are directors or
officers, or have a financial interest, shall be void or voidable solely for
this reason, or solely because the director or officer is present at or
participates in the meeting of the Board of Directors or a committee of the
Board of Directors which authorizes the contract or transaction or solely
because his or their votes are counted for such purpose, if:

(1) The material facts as to his relationship or interest and
as to the contract or transaction are disclosed or are known to the
Board of Directors or the committee, and the Board or committee in good
faith authorizes the contract or transaction by the affirmative votes
of a majority of the disinterested directors, even though the
disinterested directors be less than a quorum;

(2) The material facts as to his relationship or interest and
as to the contract or transaction are disclosed or are known to the
stockholders entitled to vote thereon, and the contract or transaction
is specifically approved in good faith by vote of the stockholders; or

(3) The contract or transaction is fair as to the corporation
as of the time it is authorized, approved or ratified, by the Board of
Directors, a committee of the Board of Directors, or the stockholders.

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<PAGE>

Common or interested directors may be counted in determining the
presence of a quorum at a meeting of the Board of Directors or of a committee
which authorized the contract or transaction.

5.8 Severability. Any determination that any provision of these Bylaws
is for any reason inapplicable, illegal or ineffective shall not affect or
invalidate any other provision of these Bylaws.

5.9 Pronouns. All pronouns used in these Bylaws shall be deemed to
refer to the masculine, feminine or neuter, singular or plural, as the identity
of the person or persons may require.

ARTICLE 6 - AMENDMENTS

6.1 By the Board of Directors. These Bylaws may be altered, amended or
repealed or new Bylaws may be adopted by the affirmative vote of a majority of
the directors present at any regular or special meeting of the Board of
Directors at which a quorum is present.

6.2 By the Stockholders. Except as otherwise provided in Section 6.3,
these Bylaws may be altered, amended or repealed or new Bylaws may be adopted by
the affirmative vote of the holders of a majority of the shares of the capital
stock of the corporation issued and outstanding and entitled to vote at any
regular or special meeting of stockholders, provided notice of such alteration,
amendment, repeal or adoption of new Bylaws shall have been stated in the notice
of such regular or special meeting.

6.3 Certain Provisions. Notwithstanding any other provision of law, the
Certificate of Incorporation or these Bylaws, and notwithstanding the fact that
a lesser percentage may be specified by law, the affirmative vote of the holders
of at least seventy-five percent (75%) of the shares of the capital stock of the
corporation issued and outstanding and entitled to vote shall be required to
amend or repeal, or to adopt any provision inconsistent with Section 1.3,
Section 1.10, Section 1.11, Section 1.12, Section 1.13, Article 2 or Article 6
of these Bylaws.

NOTE: THE PROVISIONS OF THIS ARTICLE 6 WERE APPROVED BY THE
STOCKHOLDERS OF THE CORPORATION AND MAY NOT BE AMENDED EXCEPT BY THE
STOCKHOLDERS IN ACCORDANCE WITH THE PROVISIONS OF SECTION 6.3 OF THIS
ARTICLE 6.

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<PAGE>

THIS IS TO CERTIFY that the above Bylaws were duly adopted by the Board
Directors of the Corporation at a meeting held on July 2, 1997, conditioned upon
the happening of, and effective as of the closing of, the Initial Public
Offering of the Corporation's stock on ____________, 1997.

_________________________________
Matthew A. Megaro
Secretary

Trimeris, Inc.
4727 University Drive
Suite 100
Durham, North Carolina 27707

Re: 2,875,000 Shares of Common Stock of Trimeris, Inc.

Ladies and Gentlemen:

We have acted as counsel to Trimeris, Inc., a Delaware corporation (the
"Company"), in connection with the proposed issuance and sale by the Company of
up to 2,875,000 shares of the Company's Common Stock (the "Shares"), pursuant to
the Company's Registration Statement on Form S-1 No. 333-31109 filed on July 11,
1997 (the "Registration Statement").

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

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

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

Very truly yours,

/s/ HUTCHISON & MASON PLLC
------------------------------
HUTCHISON & MASON PLLC

PROMISSORY NOTE

$_________________ Durham, North Carolina
_________, 199__

FOR VALUE RECEIVED, _____________________ ("Borrower") promises to pay
to Trimeris, Inc., a Delaware corporation ("Lender"), or order, the principal
sum of _____________ Dollars ($____________), with interest as set forth below,
both principal and interest payable in lawful money of the United States of
America, at 4727 University Drive, Suite 100, Durham, North Carolina 27707, or
at such place as the legal holder hereof may designate in writing.

The principal and interest shall be due and payable as follows:

Interest shall accrue at the rate of eight percent (8%) per annum from
the date hereof up to and through the date on which all principal and
interest hereunder is paid in full. The entire aggregate unpaid
principal balance and accrued interest shall be due and payable on
_____________.

The Note may be prepaid in full or in part at any time without penalty or
premium; provided, however, that partial prepayments shall be applied first to
the payment of interest accrued to the date of such prepayment and then to the
payment of principal.

All parties to this Note, including maker and any sureties, endorsers, or
guarantors, hereby waive protest, presentment, notice of dishonor, and notice of
acceleration of maturity and agree to continue to remain bound for the payment
of principal, interest and all other sums due under this Note, notwithstanding
any change or changes by way of any extension or extensions of time for the
payment of principal and interest; and all such parties waive all and every kind
of notice of such change or changes and agree that the same may be made without
notice or consent of any of them.

As an inducement for Lender to accept from Borrower this Note and as collateral
security for the payment of any and all indebtedness and liabilities whatsoever
of Borrower to Lender evidenced by this Note, the parties hereto have executed a
certain Stock Pledge Agreement of even date herewith (the "Pledge Agreement"),
pursuant to which Borrower has delivered, assigned and pledged to Lender and has
granted to Lender a first priority security interest in shares of common stock
of Lender owned by Borrower.

This Note is to be governed and construed in accordance with the laws of the
State of North Carolina.

<PAGE>

IN TESTIMONY WHEREOF, the undersigned has executed this instrument under seal,
the day and year first above written.

_____________________________________ (SEAL)

__________________________

STOCK RESTRICTION AGREEMENT

AGREEMENT made as of the ___ day of ___________, 199__, between
TRIMERIS, INC., a Delaware corporation (the "Company"), and ___________________
(the "Stockholder").

For valuable consideration, receipt of which is acknowledged, the
parties hereto agree as follows:

1. Purchase of Shares. The Stockholder hereby subscribes for and, upon
acceptance hereof, shall purchase, subject to the terms and conditions set forth
in this Agreement, ____________ shares (the "Shares") of common stock, $0.001
par value, of the Company (the "Common Stock"), at a purchase price of $0.05 per
share. The aggregate purchase price for the Shares shall be paid by the
Stockholder by check payable to the order of the Company, promissory note in a
form acceptable to the Company or such other method as may be acceptable to the
Company. Upon receipt of payment by the Company for the Shares, the Company
shall issue to the Stockholder one or more certificates in the name of the
Stockholder for that number of Shares purchased by the Stockholder. The
Stockholder agrees that the Shares shall be subject to the Purchase Option set
forth in Section 2 of this Agreement and the restrictions on transfer set forth
in Section 4 of this Agreement.

2. Purchase Option and Vesting.

(a) In the event that the Stockholder ceases to be employed on
a full-time basis by the Company, for any reason or for no reason, with or
without cause, the Company shall have the right and option (the "Purchase
Option") to purchase from the Stockholder, for a sum of $0.05 per share (the
"Option Price") up to that percentage of the Shares which is unvested at the
time the Stockholder ceases to be employed on a full-time basis by the Company.
The Shares shall vest at the rate of 2.08333% per month beginning on and after
the first full calendar month of the Stockholder's continuous employment with
the Company, measured from ____________.

(b) For purposes of this Agreement, employment by the Company
shall include employment by a parent or subsidiary of the Company.

(c) Notwithstanding the provisions of Section 2(a) hereof, all
of the unvested shares shall immediately vest upon the occurrence of an
"Acceleration Event". An "Acceleration Event" shall be deemed to have occurred
upon the merger or consolidation of the Company with or into another entity, the
sale or other disposition of all or substantially all of its assets, the
liquidation or dissolution of the Company or the direct or indirect sale or
exchange by the stockholders of the Company of all or substantially all of the
stock of the Company, and the stockholders of the Company prior to such
transaction do not own a majority of the voting stock of the surviving entity
after such transaction.

(d) For purposes hereof, the Stockholder's employment with the
Company shall not be deemed to terminate if the Stockholder takes any military
leave, sick leave, or other bona fide leave of absence approved by the Company
of ninety (90) days or less. In the event of

<PAGE>

a leave in excess of ninety (90) days, the Stockholder's employment shall be
deemed to terminate on the ninety-first (91st) day of the leave unless the
Stockholder's right to reemployment with the Company remains guaranteed by
statute or contract

3. Exercise of Purchase Option and Closing.

(a) The Company may exercise the Purchase Option by delivering
or mailing to the Stockholder (or the Stockholder's estate), in accordance with
Section 14, written notice of exercise within 60 days after the termination of
the Stockholder's employment by the Company. Such notice shall specify the
number of Shares to be purchased. If and to the extent the Purchase Option is
not so exercised within such 60-day period, the Purchase Option shall
automatically expire and terminate effective upon the expiration of such 60-day
period.

(b) Within 10 days after the Stockholder's receipt of the
Company's notice of the exercise of the Purchase Option pursuant to Section 3(a)
above, the Stockholder (or the Stockholder's estate) shall tender to the Company
at its principal offices the certificate or certificates representing the Shares
which the Company has elected to purchase, duly endorsed in blank by the
Stockholder or with duly endorsed stock powers attached thereto, all in form
suitable for the transfer of such Shares to the Company. Upon its receipt of
such Shares, the Company shall deliver or mail to the Stockholder (or the
Stockholder's estate) a check in the amount of the aggregate Option Price
therefor.

(c) After the time at which any Shares are required to be
delivered to the Company for transfer to the Company pursuant to Section 3(b)
above, the Company shall not pay any dividend to the Stockholder on account of
such Shares or permit the Stockholder to exercise any of the privileges or
rights of a Stockholder with respect to such Shares, but shall, in so far as
permitted by law, treat the Company as the owner of such Shares.

(d) The Option Price may be payable, at the option of the
Company, in cancellation of all or a portion of any outstanding indebtedness of
the Stockholder to the Company or in cash (by check) or both.

(e) The Company shall not purchase any fraction of a Share
upon exercise of the Purchase Option, and any fraction of a Share resulting from
a computation made pursuant to Section 2 of this Agreement shall be rounded to
the nearest whole Share (with any one-half Share being rounded upward).

4. Restrictions on Transfer.

(a) Except as otherwise provided in Section 4(b) or 4(c)
below, the Stockholder shall not sell, assign, transfer, pledge, hypothecate or
otherwise dispose of, by operation of law or otherwise (collectively
"transfer"), any of the Shares, or any interest therein.

(b) If, at any time or from time to time, the Stockholder
proposes to transfer any Shares not then subject to the Purchase Option (the
"Offered Shares"), the Stockholder shall first give written notice of the
proposed transfer (the "Transfer Notice") to the Company. The Transfer Notice
shall name the proposed transferee and state the number of Offered Shares to be

2
<PAGE>

transferred, the price per Offered Share and all other material terms and
conditions of the proposed transfer. The Company shall have the option to
purchase all, but not less than all, of the Offered Shares at the purchase price
and upon the other terms and conditions specified in the Transfer Notice. The
Company may accept the offer by notifying the Stockholder in writing, within 30
days after the date of its receipt of the Transfer Notice, of its acceptance.
The closing of the purchase of Offered Shares pursuant to this Section 4(b)
shall occur at the principal offices of the Company 15 days after receipt by the
Stockholder of the Company's notice of acceptance. At the closing, the
Stockholder shall tender to the Company the certificate or certificates
representing the Offered Shares, duly endorsed in blank or with duly endorsed
stock powers attached thereto, all in form suitable for the transfer of such
Offered Shares, free and clear of all liens, encumbrances and restrictions
(other than those imposed by the Company's Certificate of Incorporation or
Bylaws or applicable laws) to the Company against delivery by the Company to the
Stockholder of a check in the amount of the aggregate purchase price therefor,
provided, that if the terms of the payment set forth in the Transfer Notice were
other than cash against delivery, the Company may, at its option, pay for the
Offered Shares on the same terms and conditions set forth in the Transfer
Notice. Cancellation of any indebtedness of Stockholder to the Company shall be
treated as payment to Stockholder in cash to the extent of the unpaid principal
and any accrued interest cancelled. If the Company does not elect to acquire all
of the Offered Shares, the Stockholder may transfer to the proposed transferee,
within the 60-day period following the expiration of the rights granted to the
Company pursuant to this Section 4(b), all, but not less than all, the Offered
Shares, provided, that (i) such transfer shall not be on terms and conditions
more favorable to the transferee than those contained in the Transfer Notice,
(ii) such transfer shall comply with all applicable state and federal securities
laws, (iii) the Shares so transferred shall remain subject to this Agreement
(including without limitation the restrictions on transfer set forth in this
Section 4) and (iv) such transferee shall, as a condition to such transfer,
deliver to the Company a written instrument confirming that such transferee
shall be bound by all of the terms and conditions of this Agreement.

(c) Notwithstanding the foregoing, the Stockholder may
transfer Shares (whether or not subject to the Purchase Option) to or for the
benefit of any parent, spouse, child or grandchild, or to a trust or custodial
account for his, her or their benefit, without first offering such Shares to the
Company pursuant hereto, provided that (i) such transfer shall comply with all
applicable state and federal securities laws, (ii) such Shares shall remain
subject to this Agreement (including without limitation the Purchase Option, if
then applicable, and the restrictions on transfer set forth in this Section 4),
and (iii) such permitted transferee shall, as a condition to such transfer,
deliver to the Company a written instrument confirming that such transferee
shall be bound by all of the terms and conditions of this Agreement.

(d) Except as set forth in Section 4(c), the Stockholder may
not transfer any Shares subject to the Purchase Option.

(e) The restrictions on transfer set forth in subsections
4(a), (b) and (c) shall remain in effect from the date hereof until the date on
which the Company (or, in the event of a transaction to which Section 8(b)
applies, an Acquiring Company) first becomes subject to the reporting
requirements of Section 13 of the Securities and Exchange Act of 1934, as
amended (provided, however, that if the Company first becomes subject to such
reporting requirements in connection with the sale of the Company's Common Stock
in a public offering registered under

3
<PAGE>

the Securities Act of 1933, as amended (the "Securities Act"), the date
determined pursuant to this Section 4(e) shall be deemed to be the date of the
closing of such sale.)

5. Effect of Prohibited Transfer. The Company shall not be required (a)
to transfer on its books any of the Shares which shall have been sold or
transferred in violation of any of the provisions set forth in this Agreement,
or (b) to treat as owner of such Shares or to pay dividends to any transferee to
whom any such Shares shall have been so sold or transferred.

6. Escrow. In order to facilitate any repurchase of the Shares by the
Company under this Agreement and to insure shares subject to the Right of First
Refusal will be available for repurchase, the Company may require the
Stockholder to deposit the certificate or certificates evidencing the Shares
with the Company or with an escrow agent designated by the Company under the
terms and conditions of an escrow agreement approved by the Company. If the
Company does not require such deposit as a condition of issuance of the Shares,
the Company reserves the right at any time to require the Stockholder to so
deposit the certificate or certificates. The Company shall bear the expenses of
any escrow. The Stockholder agrees, upon request, to provide the Company with a
stock power or other instrument of transfer, appropriately enclosed in blank.

7. Investment Representations. The Stockholder represents, warrants and
covenants as follows:

(a) The Stockholder is purchasing the Shares for the
Stockholder's own account for investment only, and not with a view to, or for
sale in connection with, any distribution of the Shares in violation of the
Securities Act, or any rule or regulation under the Securities Act.

(b) The Stockholder has had such opportunity as the
Stockholder has deemed adequate to obtain from representatives of the Company
such information as is necessary to permit the Stockholder to evaluate the
merits and risks of the Stockholder's investment in the Company.

(c) The Stockholder has sufficient experience in business,
financial and investment matters to be able to evaluate the risks involved in
the purchase of the Shares and to make an informed investment decision with
respect to such purchase.

(d) The Stockholder can afford a complete loss of the value of
the Shares and is able to bear the economic risk of holding such Shares for an
indefinite period.

(e) The Stockholder understands that (i) the Shares have not
been registered under the Securities Act or any applicable state securities laws
and are "restricted securities" within the meaning of Rule 144 under the
Securities Act, (ii) the Shares cannot be sold, transferred or otherwise
disposed of unless they are subsequently registered under the Securities Act and
any applicable state securities laws or an exemption from registration under
federal and applicable state securities laws is then available; (iii) in any
event, the exemption from registration under Rule 144 will not be available
unless a public market then exists for the Common Stock, adequate information
concerning the Company is then available to the public,

4
<PAGE>

and other terms and conditions of Rule 144 are complied with; and (iv) there is
now no registration statement on file with the Securities and Exchange
Commission or with any state securities commission with respect to any stock of
the Company and the Company has no obligation or current intention to register
the Shares under the Securities Act or under any applicable state securities
laws.

8. Restrictive Legends. All certificates representing Shares shall have
affixed thereto a legend in substantially the following form, in addition to any
other legends that may be required under federal or state securities laws:

THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
UNDER ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD,
TRANSFERRED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND UNDER ANY
APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY TO THE EFFECT THAT SUCH
REGISTRATION IS NOT REQUIRED.

THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE ARE
SUBJECT TO RESTRICTIONS ON TRANSFER AND AN OPTION TO PURCHASE
SET FORTH IN A CERTAIN STOCK RESTRICTION AGREEMENT BETWEEN THE
COMPANY AND THE REGISTERED OWNER OF THIS CERTIFICATE (OR HIS
PREDECESSOR IN INTEREST), AND SUCH AGREEMENT IS AVAILABLE FOR
INSPECTION WITHOUT CHARGE AT THE OFFICE OF THE SECRETARY OF
THE COMPANY.

THE SHARES REPRESENTED BY THIS CERTIFICATE, AND THE TRANSFER
THEREOF, ARE SUBJECT TO THE PROVISIONS OF THE BYLAWS OF THE
COMPANY, A COPY OF WHICH IS ON FILE IN, AND MAY BE EXAMINED
AT, THE PRINCIPAL OFFICE OF THE COMPANY.

5
<PAGE>

9. Adjustments for Stock Splits, Stock Dividends, etc.

(a) If from time to time during the term of the Purchase
Option there is any stock split-up, stock dividend, stock distribution or other
reclassification of the Common Stock of the Company, any and all new,
substituted or additional securities to which the Stockholder is entitled by
reason of the Stockholder's ownership of the Shares shall be immediately subject
to the Purchase Option, the restrictions on transfer and other provisions of
this Agreement in the same manner and to the same extent as the Shares, and the
Option Price shall be appropriately adjusted.

(b) If the Shares are converted into or exchanged for, or
Stockholders of the Company receive by reason of any distribution in total or
partial liquidation, securities of another Company (an "Acquiring Company"), or
other property (including cash), pursuant to any merger of the Company or
acquisition of its assets by an Acquiring Company, then the rights of the
Company under this Agreement shall inure to the benefit of the Acquiring Company
and this Agreement shall apply to the securities or other property received from
the Acquiring Company upon such conversion, exchange or distribution in the same
manner and to the same extent as the Shares.

10. Initial Public Offering. Stockholder hereby agrees that in the
event of an initial public offering of stock made by the Company under the
Securities Act, the Stockholder shall not offer, sell, contract to sell, pledge,
hypothecate, grant any option to purchase or make any short sale of, or
otherwise dispose of any shares of stock of the Company (including the Shares)
or any rights to acquire stock of the Company for such period of time as may be
established by the underwriter for such initial public offering; provided,
however, that such period of time shall not exceed one hundred eighty (180) days
from the effective date of the registration statement to be filed in connection
with such initial public offering. The foregoing limitation shall not apply to
shares registered under the Securities Act.

11. Withholding Taxes.

(a) The Stockholder acknowledges and agrees that the Company
has the right to deduct from payments of any kind otherwise due to the
Stockholder any federal, state or local taxes of any kind required by law to be
withheld with respect to the purchase of the Shares by the Stockholder.

(b) If the Stockholder elects, in accordance with Section
83(b) of the Internal Revenue Code of 1986, as amended, to recognize ordinary
income in the year of acquisition of the Shares, the Company will require at the
time of such election an additional payment for withholding tax purposes based
on the difference, if any, between the purchase price for such Shares and the
fair market value of such Shares as of the day immediately preceding the date of
the purchase of such Shares by the Stockholder.

12. Severability. The invalidity or unenforceability of any provision
of this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, and each other provision of this Agreement shall be
severable and enforceable to the extent permitted by law.

6
<PAGE>

13. Waiver. Any provision contained in this Agreement may be waived,
either generally or in any particular instance, by the Board of Directors of the
Company on behalf of the Company.

14. Binding Effect. This Agreement shall be binding upon and inure to
the benefit of the Company and the Stockholder and their respective heirs,
executors, administrators, legal representatives, successors and assigns,
subject to the restrictions on transfer set forth in Section 4 of this
Agreement.

15. No Rights to Employment. Nothing contained in this Agreement shall
be construed as giving the Stockholder any right to be retained, in any
position, by the Company, whether as an employee of or consultant to the Company
or in any other capacity.

16. Notice. All notices required or permitted hereunder shall be in
writing and deemed effectively given upon personal delivery or upon deposit in
the United States Post Office, by registered or certified mail, postage prepaid,
addressed to the other party hereto at the address shown beneath the
Stockholder's or the Company's respective signature to this Agreement, or at
such other address or addresses as either party shall designate to the other in
accordance with this Section 16.

17. Pronouns. Whenever the context may require, any pronouns used in
this Agreement shall include the corresponding masculine, feminine or neuter
forms, and the singular form of nouns and pronouns shall include the plural, and
vice versa.

18. Entire Agreement. This Agreement constitutes the entire agreement
between the parties, and supersedes all prior agreements and understandings,
relating to the subject matter of this Agreement.

19. Amendment. This Agreement may be amended or modified only by a
written instrument executed by both the Company and the Stockholder.

20. Governing Law. This Agreement shall be construed, interpreted and
enforced in accordance with the laws of the State of North Carolina.

7
<PAGE>

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

TRIMERIS, INC.

___________________________________________
By: __________________________________
Its: __________________________________

Address: 4727 University Drive, Suite 100
Durham, North Carolina 27707

STOCKHOLDER:

___________________________________________
Name: ____________________________________

Address: __________________________________
__________________________________
8

STOCK PLEDGE AGREEMENT

AGREEMENT (the "Agreement") dated as of this ____ day of ________,
199__, by and between ______________ ("Pledgor"), and TRIMERIS, INC., a Delaware
corporation (the "Lender").

WHEREAS, Lender has extended a loan to Pledgor in the principal amount
of up to ______________ Dollars ($_______________) (the "Loan"), which Loan is
evidenced by a promissory note in favor of Lender (the "Note"); and

WHEREAS, to secure the payment and performance of all obligations under
the Note, Pledgor wishes to pledge to Lender all of his right, title and
interest in the capital stock of Lender owned by Pledgor and listed on Exhibit A
hereto (the "Stock").

NOW, THEREFORE, the parties hereto agree as follows:

1. Warranty. Pledgor hereby represents and warrants to Lender that
except for the security interest created hereby, Pledgor owns the stock free and
clear of all liens, charges and encumbrances, that the Stock is duly issued,
fully paid and nonassessable, and that Pledgor has the unencumbered right to
pledge the stock.

2. Security Interest. Pledgor hereby unconditionally grants and assigns
to Lender, it successors and assigns, a continuing security interest in the
security title to the Stock. Pledgor has delivered to and deposited with Lender
herewith all of its right, title and interest in and to the Stock, together with
certificates representing the Stock and stock powers endorsed in blank by
Pledgor, as security for (i) all obligations of Pledgor to Lender hereunder; and
(ii) payment and performance of all obligations of Pledgor to Lender under the
Note or any extension, renewal, amendment or modification of the Note, however
created, acquired, arising or evidenced, whether direct or indirect, absolute or
contingent, now or hereafter existing, or due or to become due. Beneficial
ownership of the Stock, including, without limitation, all voting, consensual
and dividend rights, shall remain in Pledgor until the occurrence of a Default
under the terms hereof (as defined in Section 4 below).

3. Additional Shares. In the event that, during the term of this
Agreement:

(a) any stock dividend, stock split, reclassification,
readjustment, or other change is declared or made in the capital structure of
Lender, all new, substituted, and additional shares, or other securities, issued
by reason of any such change and received by Pledgor or to which Pledgor shall
be entitled shall be immediately delivered to Lender, together with stock powers
endorsed in blank by Pledgor, and shall thereupon constitute Stock to be held by
Lender under the terms of this Agreement; and

<PAGE>

(b) subscriptions, warrants or any other rights or options are
issued in connection with the Stock, all new stock or other securities acquires
through such subscriptions, warrants, rights or options by Pledgor shall be
immediately delivered to Lender and shall thereupon constitute Stock to be held
by Lender under the terms of this Agreement.

4. Default. Failure to Pledgor to pay any amount of principal or
interest when due pursuant to the terms of the Note and after ten (10) business
days after Lender's written request to cure such failure or a default by Pledgor
under this Agreement shall constitute a default under the terms of this
Agreement (any of such occurrences being hereinafter referred to as a
"Default"). Upon the occurrence of a Default, Lender may sell or make other
commercially reasonable disposition of the Stock or any portion thereof after
ten (10) business days' written notice to Pledgor, and Lender may purchase the
Stock of any portion thereof at any public sale. The proceeds of the public or
private sale or other disposition shall be applied (i) to the costs incurred in
connection with the sale, (ii) to any unpaid interest which may have accrues on
any obligations secured hereby; (iii) to any unpaid principal; and (iv) to
damages incurred by Lender by reason of any breach secured against hereby, in
such order as Lender may determine, and any remaining proceeds shall be paid
over to Pledgor or others as law provided. Pledgor shall be liable to Lender for
any deficiency in the event the proceeds of the sale or other disposition of the
Stock are insufficient to pay such expenses, interest, principal, obligations
and damages.

5. Additional Rights of Secured Parties. In addition to other rights
and privileges under this Agreement, Lender shall have the rights, powers and
privileges of secured parties under the Uniform Commercial Code.

6. Return of Stock to Pledgor. Upon payment in full of all principal
and interest on the Note Lender shall return to Pledgor all of the then
remaining Stock and all rights received by Lender as agent for Pledgor as a
result of its possessory interest in the Stock.

7. Voting Rights. Pledgor shall retain all rights to vote the Stock
until such time as Lender either cancels or sells the Stock after a Default
under the Note.

8. Notices. All notices and other communications required or permitted
hereunder shall be in writing and, if mailed by prepaid certified mail, shall be
deemed to have been received on the earlier of the date shown on the receipt or
three (3) business days after the postmarked date thereof. In addition, notices
hereunder may be delivered by hand in which event such notice shall be deemed
effective when delivered. Notice of change of address for notice shall also be
governed by this Section. Notices shall be address as follows:

2
<PAGE>

If to Pledgor: _______________________
_______________________
_______________________

If to Lender: Trimeris, Inc.
4727 University Drive
Suite 100
Durham, North Carolina 27707

9. Binding Agreement. The provisions of this Agreement shall be
construed and interpreted, and all rights and obligations of the parties hereto
determined, in accordance with the laws of the State of North Carolina. This
Agreement, together with all documents referred to herein, constitutes the
entire agreement between Pledgor and Lender with respect to the matters
addressed herein and may not be modified except by a writing executed by Lender
and Pledgor. This Agreement may be executed in multiple counterparts, each of
which shall be deemed an originally but all of which, taken together, shall
constitute one and the same instrument.

10. Severablility. If any paragraph of part thereof shall for any
reason be held or adjudged to be invalid, illegal or unenforceable by any court
of competent jurisdiction, such paragraph or part thereof so adjudicated
invalid, illegal or unenforceable shall be deemed separate, distinct and
independent, and the remainder of this Agreement shall remain in full force and
effect and shall not be affected by such holding or adjudication.

11. Assignability. This Agreement, and the rights and obligations of
the Lender hereunder, may be assigned by the Lender to any person or entity to
which the Note is transferred by the Lender, and such transferee shall be deemed
the "Lender" for purposes of this Agreement; provided that the transferee
provides written notice of such assignment to the Borrower and agrees to be
bound by the terms of this Agreement.

IN WITNESS WHEREOF, the undersigned have hereunto set their hands and
affixed their seals, by and through their duly authorized officers, as of the
day and year first above written.

Pledgor: _____________________________(SEAL)
Name:

Lender: TRIMERIS, INC.

By: ________________________________
[CORPORATE SEAL] Its: ________________________________

3
<PAGE>

EXHIBIT A

STOCK CERTIFICATE NUMBERS

Number Owner Number of Shares Represented

AGREEMENT

This Agreement (the "Agreement") is made and entered into by and
between Max N. Wallace ("Wallace") and Trimeris, Inc., a Delaware corporation
(the "Company").

WHEREAS, Wallace has been employed by the Company as Executive Vice
President, General Counsel and Secretary, and has served as a member of the
Board of Directors of the Company; and

WHEREAS, as of July 10, 1997, Wallace resigned as an employee of the
Company and from his positions as Executive Vice President, General Counsel and
Secretary and as a member of the Board of Directors of the Company; and

WHEREAS, as of July 10, 1997, Wallace became an independent consultant
to the Company and will remain employed by the Company in that capacity until
December 31, 1997; and

WHEREAS, the Company is willing to extend, and Wallace is willing to
accept, the benefits and agreements specified in this Agreement.

NOW, THEREFORE, in consideration of all the above and of mutual
promises contained in this Agreement, Wallace and the Company agree as follows:

1. The Company will employ Wallace as an independent consultant at his
current monthly salary of $13,625.00. Wallace will perform consulting services
for the Company in the following areas: (a) completing its current public
offering; (b) in developing a strategy for interacting and working cooperatively
with AIDS activist groups and other third party groups interested in the
development and commercialization of T-20; (c) transitional legal matters; and
(d) other matters as mutually agreed upon. Wallace agrees to perform his duties
in a diligent, trustworthy and efficient manner and to use his best efforts to
advance the business and goodwill of the Company. Wallace agrees to keep all
confidential or proprietary information of the Company disclosed to him during
the term of his employment and consultancy in confidence, and will refrain from
disclosing such information to any third party, except with the express written
consent of the Company.

Wallace agrees to devote a reasonable amount of his business
and professional time, skill, energy and attention to the business of the
Company as necessary to fulfill his obligations set forth in the previous
paragraph. During the term of his consultancy, Wallace will not engage in any
other business activity, or render any services, give any advice or serve in any
advisory or consulting capacity, whether gratuitously or otherwise, to or for
any other person, firm, corporation or other entity in direct competition with
the Company in the field of viral membrane fusion.

The term of Wallace's consultancy with the Company shall extend until
December 31, 1997, upon the terms and conditions specified in this Agreement.
Thereafter, the Company will continue to pay to Wallace his current monthly
salary through and including June 30, 1998. All

<PAGE>

such payments shall be made according to the Company's usual payroll
schedulesand shall be subject to usual and customary withholdings.

2. The Company will continue its coverage of Wallace under the
Company's health, life, disability insurance and other employee benefit programs
through and including June 30, 1998, pursuant to the terms of those programs as
they apply to all employees of the Company. If the Company is unable to provide
such coverage, it shall pay to Wallace an amount sufficient on an after tax
basis to obtain such coverage. The Company will also pay Wallace for any accrued
unused vacation through July 10, 1997, subject to usual and customary
withholdings. The Company will reimburse Wallace for any reasonable necessary
expenses incurred by him in fulfilling his consultancy for the Company, subject
to the Company's policies on expense reimbursement.

3. The payments described in Sections 1 and 2 hereof shall continue
regardless of the death or disability of Wallace.

4. As of the date hereof and taking into account the 1 for 8.5 reverse
stock split of the Company effective as of July 11, 1997, Wallace owns the
shares of Common Stock of the Company in the amounts and bearing the certificate
numbers listed in Schedule A attached hereto and incorporated herein by
reference, which shares are subject to certain vesting and other restrictive
provisions. The Company agrees that, as reflected in Schedule A and effective as
of the date of execution of this Agreement (and assuming no subsequent
revocation of this Agreement by Wallace pursuant to Section 16 hereof), (i)
vesting of the 24,015 shares which were unvested as of July 10, 1997 under
Certificate Nos. 126 and 127 shall be accelerated and such 24,015 shares shall
become fully vested, and (ii) the 34,588 shares represented by Certificate No.
128 and issued pursuant to that certain Stock Restriction Agreement dated June
2, 1997 (the "June Stock Restriction Agreement") shall not be so accelerated and
instead shall continue to vest according to the vesting schedule set forth in
the June Stock Restriction Agreement through and including June 30, 1998. At
such time, 12,971 of such shares shall be vested, and the remaining 21,617
shares shall cease to vest and shall become subject to the repurchase rights
described in the June Stock Restriction Agreement. The Company agrees to amend
any agreements and take all other necessary or appropriate corporate action as
may be required to effectuate the provisions of this Section 3.

5. Wallace expressly acknowledges and reaffirms the obligations in the
Proprietary Information and Inventions Agreement dated February 11, 1994 by and
between the Company and Wallace (the "Proprietary Information and Inventions
Agreement"), and agrees that he will not use for himself, or for any other
business, or divulge or convey to any other companies or individuals, any secret
or confidential information, knowledge or data of or about the Company or its
business, or that of or about third parties obtained by him or divulged to him
during the period of his employment or consultancy with the Company.

6. During the term of his consultancy under this Agreement, Wallace
will remain fully subject to Section 3 of his Proprietary Information and
Inventions Agreement with the Company so long as such inventions arise out of
his efforts with the Company.

2
<PAGE>

7. (a) In consideration of the promises and covenants set forth in this
Agreement, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Wallace hereby releases, and
forever irrevocably discharges the Company, its past, present and future
officers, directors, agents, shareholders, employees, and representatives (the
"Releasees"), jointly and individually, from any and all claims, demands,
charges, lawsuits, debts, defenses, actions or causes of action, obligations,
damages, sums of money, loss of services, compensation, pain and suffering,
attorneys' fees, cost and expenses of suit, and liabilities whatsoever, which
Wallace had, now has or may have, whether the same be at law, in equity, or
mixed, upon or by reason of any matter or cause whatsoever, with respect to
events which occurred prior to the date of execution of this Agreement
(including, but not limited to, any claim arising under the Age Discrimination
in Employment Act, the Civil Rights Act of 1964 (Title VII) and 1991, the
Employee Retirement Income Security Act, the Americans with Disabilities Act,
all federal, state and local civil rights statutes, and any other statutory,
equitable, or common law claims, including but not limited to impairment of
economic opportunity, wrongful discharge, or intentional or negligent infliction
of emotional distress), except such rights, benefits and claims of Wallace which
expressly accrue under and pursuant to this Agreement or under Wallace's
existing stock restriction agreements as modified hereby.

(b) In consideration of the promises and covenants set forth
in this Agreement, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company hereby releases, and
forever irrevocably discharges Wallace from any and all claims, demands,
charges, lawsuits, debts, defenses, actions or causes of action, obligations,
damages, sums of money, loss of services, compensation, pain and suffering,
attorneys' fees, cost and expenses of suit, and liabilities whatsoever, which
the Company had, now has or may have, whether the same be at law, in equity, or
mixed, upon or by reason of any matter or cause whatsoever, with respect to
events which occurred prior to the date of execution of this Agreement, except
such rights, benefits and claims of the Company which expressly accrue, under
and pursuant to this Agreement or under Wallace's existing stock restriction
agreements as modified hereby.

8. (a) As a material inducement to the Company to enter into this
Agreement, Wallace agrees to indemnify and hold the Company and each of the
Releasees harmless from and against any and all loss, cost, damage, or expense,
including, without limitation, attorneys' fees, incurred by Releasees or any of
them, arising out of any material breach of this Agreement by Wallace or the
fact that any material representation made herein by him was knowingly false
when made.

(b) As a material inducement to Wallace to enter into this
Agreement, the Company agrees to indemnify Wallace from and against any and all
loss, cost, damage or expense, including, without limitation, attorneys' fees,
incurred by Wallace, arising out of any material breach of this Agreement by the
Company or the fact that any material representation made herein by it was
knowingly false when made.

9. Each of the parties acknowledge and recognize that a violation of
this Agreement and its covenants will cause irreparable damage to the other
party and that the other party will have no adequate remedy at law for such
violation. Accordingly, each of the parties agrees that the other party will be
entitled, as a matter of right, to an injunction from any court of competent

3
<PAGE>

jurisdiction restraining any further violation of the Agreement or covenant.
This right to injunctive relief will be cumulative and in addition to whatever
remedies the parties may otherwise have at law.

10. Wallace acknowledges that, except as set forth herein, he is not
entitled to any compensation, monies or benefits from the Company, including but
not limited to compensation for accrued vacation, bonuses, commissions, expenses
or other forms of compensation. Wallace hereby waives all rights to any payments
other than for outstanding bona fide business expenses that occurred prior to
July 10, 1997.

11. This Agreement represents and contains the entire agreement and
understanding between Wallace and the Company with respect to its subject
matter, and it supersedes any and all prior oral and written agreements and
understandings, and no representation, warranty, condition, understanding, or
agreement of any kind with respect to the subject matter of this Agreement will
be relied upon by Wallace unless specifically incorporated in this Agreement;
provided, however, that Wallace's existing stock restriction agreements, as
modified hereby, his Proprietary Information and Inventions Agreement and the
Indemnification Agreement dated July 2, 1997, by and between the Company and
Wallace, will each remain in full force and effect. Further, this Agreement is
intended to be a binding contract between the parties and shall not be modified,
except by writing signed by both parties.

12. Certain payments made under this Agreement may be subject to
required income and other tax withholdings. Wallace will be responsible for any
taxes which may be due as a result of any payments made by the Company as
described above, and Wallace agrees to indemnify and hold the Company harmless
from any claim and expense that the Company may incur as a result of any failure
by Wallace to pay any such taxes.

13. Wallace acknowledges and agrees that the payment by the Company of
sums described in this Agreement is made in good faith and will not, for any
purpose, be considered an admission of liability on the part of the Company, by
whom liability is expressly denied, and no past or present wrongdoing on the
part of the Company is implied by such payment. Wallace and the Company will
maintain in confidence the contents of this Agreement and the consideration of
this Agreement (hereinafter collectively referred to as "such information") and
shall take every reasonable precaution to prevent disclosure of such information
to third parties. Such information may be disclosed, however, if either Wallace
or the Company is ordered to do so by a judge in any court proceeding, or is
required to do so by law (including, without limitation, any requirement to
include this Agreement as an Exhibit to any amendment to the Company's
registration statement on Form S-1 filed with the Securities and Exchange
Commission on July 11, 1997). Such disclosure will not, however, terminate the
continuing confidentiality obligations of the parties to this Agreement.

14. Wallace agrees that for a period of one (1) year following the
execution of this Agreement, Wallace shall not, directly or indirectly, acting
alone or as a member of a partnership or as an officer, director, stockholder,
employee, consultant or representative of any company or other business entity,
(i) engage in any business activity involving viral membrane fusion, or (ii)
request any present or future customers or suppliers of the Company to curtail
or cancel their

4
<PAGE>

business with the Company. Wallace further agrees that for a period of one (1)
year following the execution of this Agreement, Wallace will not induce or
attempt to induce, directly or indirectly, any employees or consultants of the
Company to terminate his or her employment or association with the Company.

15. By executing this Agreement, Wallace represents that he has
completely read the terms of this Agreement, and that he fully understands and
voluntarily and knowingly accepts those terms, including all releases of claims
Wallace may have against the Company, in exchange for valuable consideration
that Wallace was not otherwise entitled to receive.

16. The Company hereby advises Wallace to consult with an attorney
prior to executing this Agreement. Wallace is also advised that Wallace has
twenty-one (21) days from the date on which Wallace was given a copy of this
Agreement to review fully and consider whether or not he wishes to accept and
agree to all the terms and conditions set forth herein.

17. Wallace may revoke this Agreement within seven (7) days of signing
it. Revocation must be made by delivering a written notice of revocation to
Trimeris, Inc., 4727 University Drive, Suit 100, Durham, North Carolina 27707,
Attn: M. Ross Johnson, President and CEO. The Agreement shall not be effective
and enforceable until this seven (7) day revocation period has expired.

18. If one or more of the provisions, or portions thereof, of this
Agreement are determined to be illegal or unenforceable, the remainder of this
Agreement will not be affected by that determination and each remaining
provision, or portion thereof, will continue to be valid and effective and will
be enforceable to the fullest extent permitted by law.

19. This Agreement shall be binding upon and inure to the benefit of
Wallace, Wallace's, heirs, executors, representatives and administrators, as
well as the predecessors, successors, purchasers and assigns of the Company.
Wallace shall not assign this Agreement or delegate his obligations hereunder
without the prior written consent of the Company.

20. This Agreement may be plead as a full and complete defense to, and
may be used as the basis for an injunction against, any action, suit, or other
proceeding which may be instituted, prosecuted or attempted in breach of this
Agreement, except for an action based on a breach of this Agreement.

21. This Release is made and entered into in the State of North
Carolina and will be interpreted, enforced, and governed by the laws of the
State of North Carolina, except to the extent preempted by Federal law.

22. Wallace acknowledges receiving this Agreement on the ____ day of
July, 1997.

PLEASE READ CAREFULLY. THIS AGREEMENT INCLUDES A RELEASE OF ALL KNOWN
AND UNKNOWN CLAIMS.

5
<PAGE>

IN WITNESS WHEREOF, the parties hereto, intending to be legally bound hereby,
have executed this RELEASE AND SETTLEMENT AGREEMENT this the 11th day of July,
1997.

TRIMERIS, INC.

By: /s/ M. Ross Johnson
M. Ross Johnson, President & CEO
WITNESS:

____________________________ /s/ Max N. Wallace
Max N. Wallace

6
<PAGE>

SCHEDULE A

COMMON STOCK OWNED BY WALLACE

- --------------------------------------------------------------------------------------------------------------------------
PRE-STOCK SPLIT POST-STOCK SPLIT
- -----------------------------------------------------------------
CERT. NO. ORIGINAL NUMBER OF CERT. NUMBER OF VESTING RESTRICTIONS
ISSUE DATE SHARES NO. SHARES
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
11 01/15/93 250,000 124 29,412 Fully vested.
- --------------------------------------------------------------------------------------------------------------------------
26 03/01/95 50,000 125 5,882 None.
- --------------------------------------------------------------------------------------------------------------------------
45 10/31/96 60,000 126 7,059 Fully vested.
- --------------------------------------------------------------------------------------------------------------------------
50 05/02/97 448,500 127 52,765 Fully vested.
- --------------------------------------------------------------------------------------------------------------------------
60 06/02/97 294,000 128 34,588 2.08333% vests on the first day of each month during
the period February 1, 1997 through June 1, 1998.
Pursuant to this Agreement, an additional 2.08333% shall
vest on June 30, 1998 after which date no further vesting
shall take place.
- --------------------------------------------------------------------------------------------------------------------------
TOTAL SHARES GRANTED AS OF JULY 10, 1997 129,706
- --------------------------------------------------------------------------------------------------------------------------
LESS UNVESTED SHARES AS OF JUNE 30, 1998 (21,617)
PURSUANT TO THIS AGREEMENT
- --------------------------------------------------------------------------------------------------------------------------
TOTAL VESTED SHARES AS OF JUNE 30, 1998 PURSUANT 108,089
TO THIS AGREEMENT
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
7

EXHIBIT 23.2

INDEPENDENT AUDITORS' CONSENT

The Board of Directors
Trimeris, Inc.:

We consent to the use of our report included herein and to the reference to
our firm under the heading "Experts" in the prospectus.

/s/ KPMG PEAT MARWICK LLP

Raleigh, North Carolina
August 27, 1997

<PAGE>
EXHIBIT 23.3

CONSENT OF COUNSEL

The undersigned hereby consents to the use of our name and the statement
with respect to us appearing under the heading "Experts" in Amendment No. 1 to
the Registration Statement on Form S-1 of of Trimeris, Inc.

/s/ PENNIE & EDMONDS LLP

PENNIE & EDMONDS LLP

New York, New York
August 27, 1997