<PAGE>   1




                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549


                                   FORM 10-Q


(Mark One)

    [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
        EXCHANGE ACT OF 1934 FOR QUARTER ENDED JUNE 30, 1999

                                       OR

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

Commission File Number: 1-12574

                        TEXAS BIOTECHNOLOGY CORPORATION
-------------------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)

          Delaware                                     13-3532643
-------------------------------------------------------------------------------
(State or other jurisdiction of            (I.R.S. Employer Identification No.)
incorporation or organization)

       7000 Fannin, Suite 1920, Houston, Texas                  77030
-------------------------------------------------------------------------------
       (Address of principal executive office)                (Zip code)

                                 (713) 796-8822
-------------------------------------------------------------------------------
              (Registrant's telephone number, including area code)

                                 Not Applicable
-------------------------------------------------------------------------------
        (Former name, former address and former fiscal year, if changed
                              since last report)

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

Yes  X  No
    ---    ---

Indicate the number of shares outstanding of each of the issuer's classes of
Common Stock, as of the latest practicable date.

<TABLE>
<CAPTION>
           Class                                    Outstanding at July 31, 1999
           -----                                    ----------------------------

<S>                                                            <C>
Common Stock, $0.005 par value                                 34,237,986
</TABLE>



<PAGE>   2


                        TEXAS BIOTECHNOLOGY CORPORATION

                               TABLE OF CONTENTS


<TABLE>
<CAPTION>
                                                                                                 PAGE NO.
                                                                                                 --------

<S>                                                                                                 <C>
PART I.    FINANCIAL INFORMATION

           ITEM 1:   FINANCIAL STATEMENTS

           Consolidated Balance Sheets as of June 30, 1999 and December 31, 1998                     1

           Consolidated Statements of Operations for the three months ended
           June 30, 1999 and 1998 and the six months ended June 30, 1999 and 1998                    2

           Consolidated Statements of Cash Flows for the six months ended
           June 30, 1999 and 1998                                                                    3

           Notes to Consolidated Financial Statements                                                4

           ITEM 2:   MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                     FINANCIAL CONDITION AND RESULTS OF OPERATIONS                                   9

           ITEM 3:   QUANTITATIVE AND QUALITATIVE DISCLOSURES
                     ABOUT MARKET RISK                                                              13


PART II.   OTHER INFORMATION

           ITEM 1:   Legal Proceedings                                                              14

           ITEM 2:   Changes in Securities                                                          14

           ITEM 3:   Defaults Upon Senior Securities                                                14

           ITEM 4:   Submission of Matters to a Vote of Security Holders                            14

           ITEM 5:   Other Information                                                              15

           ITEM 6:   Exhibits and Reports on Form 8-K                                               15



SIGNATURES                                                                                          16


INDEX TO EXHIBITS                                                                                   17
</TABLE>



<PAGE>   3


                 TEXAS BIOTECHNOLOGY CORPORATION AND SUBSIDIARY

                          CONSOLIDATED BALANCE SHEETS

                                     ASSETS

<TABLE>
<CAPTION>
                                                                                      JUNE 30,          DECEMBER 31,
                                                                                        1999                1998
                                                                                   --------------      --------------
                                                                                     (unaudited)          (audited)

<S>                                                                                <C>                 <C>
Current assets:
         Cash and cash equivalents                                                 $   10,035,748      $    4,176,911
         Short-term investments                                                         6,014,327          20,407,146
         Other current receivables                                                      1,310,056           1,426,959
         Prepaids                                                                       1,946,159             963,590
         Other current assets                                                              10,400              10,400
                                                                                   --------------      --------------
               Total current assets                                                    19,316,690          26,985,006

 Long-term investments                                                                  6,105,605           5,791,945

 Equipment and leasehold improvements, at cost less
         accumulated depreciation and amortization                                      3,089,828           3,269,438

 Other assets                                                                              59,591              59,591
                                                                                   --------------      --------------

               Total assets                                                        $   28,571,714      $   36,105,980
                                                                                   ==============      ==============

                                           LIABILITIES AND STOCKHOLDERS' EQUITY

 Current liabilities:
         Accounts payable                                                          $    1,099,565      $    1,209,853
         Accrued expenses                                                               1,451,865           1,659,907
                                                                                   --------------      --------------
               Total current liabilities                                                2,551,430           2,869,760

 Commitments and contingencies                                                                 --                  --

 Stockholders' equity:
         Preferred stock, par value $.005 per share.  At June 30, 1999,
               5,000,000 shares authorized; none outstanding.  At
               December 31,1998, 5,000,000 shares authorized;                                  --                  --
               none outstanding.
         Common stock, par value $.005 per share. At June 30, 1999, 75,000,000
               shares authorized; 34,235,250 shares issued and outstanding. At
               December 31, 1998, 75,000,000 shares
               authorized; 34,128,017 shares issued and outstanding.                       171,176             170,640
         Additional paid-in capital                                                   117,885,470         117,667,479
         Accumulated deficit                                                          (92,036,362)        (84,601,899)
                                                                                   --------------      --------------
               Total stockholders' equity                                              26,020,284          33,236,220
                                                                                   --------------      --------------

               Total liabilities and stockholders' equity                          $   28,571,714      $   36,105,980
                                                                                   ==============      ==============
 </TABLE>

         See accompanying notes to consolidated financial statements

                                                                         Page 1

<PAGE>   4


                 TEXAS BIOTECHNOLOGY CORPORATION AND SUBSIDIARY

                     CONSOLIDATED STATEMENTS OF OPERATIONS


<TABLE>
<CAPTION>
                                                        Three months ended                 Six months ended
                                                             June 30,                          June 30,
                                                       1999             1998             1999            1998
                                                   ------------     ------------     ------------     ------------
                                                   (unaudited)      (unaudited)      (unaudited)      (unaudited)

<S>                                                <C>                 <C>              <C>              <C>
Revenues:
     Research agreements                           $    495,130          621,788        1,030,055        1,243,388
                                                   ------------     ------------     ------------     ------------
         Total revenues                                 495,130          621,788        1,030,055        1,243,388
                                                   ------------     ------------     ------------     ------------

 Expenses:
     Research and development                         3,056,120        3,798,763        6,214,760        7,209,147
     General and administrative                       1,597,091        1,114,437        2,936,532        2,328,746
                                                   ------------     ------------     ------------     ------------
         Total expenses                               4,653,211        4,913,200        9,151,292        9,537,893
                                                   ------------     ------------     ------------     ------------

         Operating loss                               4,158,081        4,291,412        8,121,237        8,294,505

     Investment income                                  302,455          535,168          686,774        1,115,717
                                                   ------------     ------------     ------------     ------------

         Net loss                                     3,855,626        3,756,244        7,434,463        7,178,788
         Preferred dividend requirement                      --               --               --            1,690

         Net loss applicable to common shares      $  3,855,626        3,756,244        7,434,463        7,180,478

 Net loss per common share, basic and diluted:     $       0.11             0.11             0.22             0.21
                                                   ============     ============     ============     ============

 Weighted average common shares used to
     compute net loss per common share, basic
     and diluted:                                    34,216,941       33,909,344       34,192,905       33,782,048
                                                   ============     ============     ============     ============
 </TABLE>

         See accompanying notes to consolidated financial statements

                                                                         Page 2

<PAGE>   5


                 TEXAS BIOTECHNOLOGY CORPORATION AND SUBSIDIARY

                     CONSOLIDATED STATEMENTS OF CASH FLOWS


<TABLE>
<CAPTION>
                                                                                                SIX MONTHS ENDED
                                                                                                     JUNE 30,
                                                                                             1999               1998
                                                                                         -------------      -------------
                                                                                          (unaudited)        (unaudited)

<S>                                                                                      <C>                   <C>
 CASH FLOWS FROM OPERATING ACTIVITIES:
    Net loss                                                                             $  (7,434,463)        (7,178,788)
    Adjustments to reconcile net loss to net cash
      used in operating activities:
       Depreciation and amortization                                                           416,607            399,942
       Expenses paid with stock                                                                 11,332              9,682
       Loss on disposition of fixed assets                                                          --              7,895
       Decrease in preferred dividend payable not included in net loss                              --             11,912
    Change in operating assets and liabilities
      Increase in prepaids                                                                    (982,569)          (313,758)
      Decrease (increase) in receivables                                                       116,903           (243,385)
      Increase in other current assets                                                              --             (2,500)
      (Decrease) increase in current liabilities                                              (318,330)           637,977
                                                                                         -------------      -------------
             Net cash used in operating activities                                          (8,190,520)        (6,671,023)
                                                                                         -------------      -------------

 CASH FLOWS FROM INVESTING ACTIVITIES:
    Purchases of equipment and leasehold improvements                                         (236,997)          (394,684)
    Proceeds from disposition of fixed assets                                                       --              3,000
    Purchase of long-term investments                                                       (3,000,000)                --
    Maturity of long-term investments                                                        2,700,000                 --
    Purchase of short-term investments                                                      (4,417,855)       (27,653,176)
    Maturity of short-term investments                                                      18,532,712         33,087,858
    Decrease in interest receivable included in short-term and long-term investments           264,302             27,781
                                                                                         -------------      -------------
            Net cash provided by investing activities                                       13,842,162          5,070,779
                                                                                         -------------      -------------

 CASH FLOWS FROM FINANCING ACTIVITIES:
    Proceeds from sale of common stock and exercises of
       options and warrants, net                                                               207,195          1,112,900
                                                                                         -------------      -------------

       Net increase (decrease) in cash and cash equivalents                                  5,858,837           (487,344)

 Cash and cash equivalents at beginning of period                                            4,176,911         14,323,573
                                                                                         -------------      -------------

 Cash and cash equivalents at end of period                                              $  10,035,748         13,836,229
                                                                                         =============      =============


 Supplemental disclosure of noncash financing activities:
      Expenses paid with stock                                                           $      11,332              9,682
                                                                                         =============      =============
 </TABLE>

         See accompanying notes to consolidated financial statements

                                                                         Page 3

<PAGE>   6


                 TEXAS BIOTECHNOLOGY CORPORATION AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                JUNE 30, 1999 (UNAUDITED) AND DECEMBER 31, 1998


(1)    ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

       (a)    Organization

              Texas Biotechnology Corporation (the "Company" or "TBC"), a
              biopharmaceutical company, applies innovative drug discovery
              techniques and its specialized knowledge of the role of vascular
              cell biology in vascular diseases to the design and development
              of novel pharmaceutical compounds. Since its formation in 1989,
              the Company has been engaged principally in research and drug
              discovery programs and clinical development of certain drug
              compounds. On July 25, 1994, the Company acquired all of the
              outstanding Common Stock of ImmunoPharmaceutics, Inc. ("IPI")
              (now discontinued), a San Diego, California based company, in
              exchange for Common Stock of the Company. TBC consolidated the
              IPI operation into TBC in the first half of 1996.

              The Company is presently working on a number of long-term
              development projects which involve experimental and unproven
              technology, which may require many years and substantial
              expenditures to complete, and which may be unsuccessful. To date,
              other than small amounts of monoclonal antibody compounds and
              services produced and sold by IPI, the Company has not developed
              or sold any products, and no assurance can be given that the
              Company will be able to develop, manufacture or market any
              products in the future. In addition, no assurance exists that
              future revenues will be significant, that any sales will be
              profitable, or that the Company will have sufficient funds
              available to complete its research and development programs or
              market any products which it may develop.

       (b)    Basis of Consolidation

              The Company's consolidated financial statements include the
              accounts of the Company and its wholly owned subsidiary, IPI. All
              material intercompany transactions have been eliminated. The
              Company's consolidated financial statements include the activity
              related to IPI since August 1, 1994.

       (c)    Cash, Cash Equivalents, Short-Term Investments and Long-Term
              Investments

              Cash equivalents are considered to be those securities or
              instruments with original maturities, when purchased, of three
              months or less. At June 30, 1999, approximately $9,775,000 was
              invested in demand and money market accounts. Short-term
              investments are those investments which have an original maturity
              of less than one year and greater than three months. At June 30,
              1999, the Company's short-term investments consisted of
              approximately $1,532,000 in United States government agency
              discount bonds and $4,482,000 in corporate commercial paper.
              Long-term investments consist of approximately $6,106,000 in
              United States government agency bonds with an original maturity
              of one year or more. Cash equivalents, short-term and long-term
              investments are stated at cost plus accrued interest, which
              approximates market value. Interest income is accrued as earned.
              The Company classifies all short-term investments and long-term
              investments as held to maturity.

       (d)    Equipment and Leasehold Improvements

              Equipment and leasehold improvements are stated at cost less
              accumulated depreciation and amortization. Depreciation of
              furniture and equipment is provided on the straight-line method
              over the estimated useful lives of the respective assets (3 to 10
              years). Amortization of leasehold improvements is provided on the
              straight-line method over the remaining minimum lease term.

                                                                         Page 4

<PAGE>   7


       (e)    Research and Development Costs

              All research and development costs are expensed as incurred and
              include salaries of research and development employees, certain
              rent and related building services, research supplies and
              services, clinical trial expenses and other associated costs. For
              the three months ended June 30, 1999 and 1998, salaries and
              benefits totaled approximately $1,663,000 and $1,501,000,
              respectively, of which approximately $1,277,000 and $1,122,000,
              respectively, was charged to research and development. For the six
              months ended June 30, 1999 and 1998, salaries and benefits totaled
              approximately $3,328,000 and $3,174,000, respectively, of which
              approximately $2,555,000 and $2,359,000, respectively, was charged
              to research and development. Payments related to the acquisition
              of in-process research and development are expensed.

       (f)    Net Loss Per Common Share

              Basic net loss per common share is calculated by dividing the net
              loss applicable to common shares after preferred dividend
              requirements by the weighted average number of common shares
              outstanding during the period. For the three and six months ended
              June 30, 1999 and 1998, there were no common dilutive shares used
              in the calculation of weighted average common shares outstanding.
              For the three months ended June 30, 1999 and 1998, the weighted
              average common shares used to compute basic net loss per common
              share totaled 34,216,941 and 33,909,344, respectively. For the
              six months ended June 30, 1999 and 1998, the weighted average
              common shares used to compute basic net loss per common share
              totaled 34,192,905 and 33,782,048, respectively.

       (g)    Reclassifications

              Certain reclassifications have been made to prior period
              financial statements to conform with the June 30, 1999
              presentation with no effect on net loss previously reported.

       (h)    Revenue Recognition

              Revenue from service contracts is recognized as the services are
              performed. Milestone payments related to contractual agreements
              are recognized as the milestones are achieved. Revenue from
              products and services is recognized when the products are shipped
              or the services are performed. Revenue from licensing fees is
              recorded when the license is granted. Revenue from grants is
              recognized as earned under the terms of the related grant
              agreements. Amounts received in advance of services to be
              performed under contracts are recorded as deferred revenue.

       (i)    Patent Application Costs

              Costs incurred in filing for patents are expensed as incurred.

       (j)    Use of Estimates

              Management of the Company has made a number of estimates and
              assumptions relating to the reporting of assets and liabilities
              and the disclosure of contingent assets and liabilities to prepare
              these consolidated financial statements in conformity with
              generally accepted accounting principles. Actual results could
              differ from these estimates.

       (k)    Interim Financial Information

              The Consolidated Balance Sheet as of June 30, 1999, and the
              related Consolidated Statement of Operations for the three and
              six months ended June 30, 1999 and 1998 and Consolidated
              Statements of Cash Flows for the six months ended June 30, 1999
              and 1998 are unaudited. In the opinion of management, all
              adjustments necessary for a fair presentation of such financial
              statements have been included. Such adjustments consisted of
              normal recurring items. Interim results are not necessarily
              indicative of results for a full year. The

                                                                         Page 5

<PAGE>   8


              consolidated financial statements and notes are presented as
              permitted by Form 10-Q and do not contain certain information
              included in the Company's Annual Consolidated Financial
              Statements and Notes which should be read in conjunction with
              these consolidated financial statements and notes.

(2)    STOCK OPTIONS AND WARRANTS

       The Company applies APB Opinion 25 and related interpretations in
       accounting for its plans and applies FASB Statement 123 and related
       interpretations in reporting for its plans.

       A summary of stock options as of June 30, 1999, follows:


<TABLE>
<CAPTION>
                      Exercise Price                                    Exercised/                    Available
Stock Option Plans      Per Share        Authorized      Outstanding       Other        Exercisable   for Grant
-------------------- ----------------- ---------------- --------------- ------------  -----------------------------

<S>                   <C>                <C>             <C>              <C>         <C>              <C>
1990 Plan             $1.38 - $5.59        285,715         161,523         74,319       156,608           49,873

1992 Plan             $1.41 - $5.36      1,700,000       1,207,941        364,992     1,024,391          127,067

Director Plan         $3.50 - $4.54         71,429          34,242         37,187        34,242               --

1995 Plan             $1.31 - $8.13      2,000,000       1,785,950         21,851     1,017,501          192,199

1995 Director Plan    $1.38 - $5.69        300,000         217,505         10,909       137,255           71,586

1999 Plan                   --           1,000,000              --             --            --        1,000,000

                                         ---------       ---------        -------     ---------        ---------
             TOTALS                      5,357,144       3,407,161        509,258     2,369,997        1,440,725
                                         =========       =========        =======     =========        =========
</TABLE>


(3)   INCOME TAXES

      The Company uses the asset and liability method of accounting for income
      taxes. Under the asset and liability method, deferred tax assets and
      liabilities are recognized for the future tax consequences attributable
      to differences between the financial statement carrying amounts of
      existing assets and liabilities and their respective tax bases and
      operating loss and tax credit carryforwards. Deferred tax assets and
      liabilities are measured using enacted tax rates expected to apply to
      taxable income in the years in which those temporary differences are
      expected to be recovered or settled. The effect on deferred tax assets
      and liabilities of a change in tax rates is recognized in income in the
      period that includes the enactment date.

      At June 30, 1999 the net deferred tax asset, representing primarily net
      operating loss carryforwards, totaled approximately $32,212,000. The
      Company has established a valuation allowance for the full amount of
      these deferred tax assets, as management believes that it is not more
      likely than not that the Company will recover these assets. The Company
      did not incur any tax expense in any year due to operating losses.

      At June 30, 1999 the Company had net operating loss carryforwards of
      approximately $59,086,000 for federal income tax return purposes.
      Utilization of the Company's net operating loss carryforwards is subject
      to certain limitations due to specific stock ownership changes which have
      occurred or may occur. To the extent not utilized, the carryforwards will
      expire during the years beginning 2002 through 2019.

                                                                         Page 6

<PAGE>   9


(4)   EQUIPMENT AND LEASEHOLD IMPROVEMENTS

      Equipment and leasehold improvements consist of the following:

<TABLE>
<CAPTION>
                                                    June 30,1999    December 31, 1998
                                                    ------------    -----------------

<S>                                                 <C>               <C>
 Laboratory and office equipment                    $  5,655,846      $  5,418,849
 Leasehold improvements                                3,701,772         3,701,772
                                                    ------------      ------------
                                                       9,357,618         9,120,621
 Less accumulated depreciation and amortization       (6,267,790)       (5,851,183)
                                                    ------------      ------------
                                                    $  3,089,828      $  3,269,438
                                                    ============      ============
</TABLE>

(5)    COMMON STOCK RESERVED

      The Company has reserved Common Stock for issuance as of June 30, 1999 as
      follows:

<TABLE>
<S>                                                              <C>
Stock option plans                                               4,847,886
Issuable under licensing agreement                                  71,429
Publicly traded warrants outstanding                             3,995,394
Other warrants outstanding                                         660,578
                                                                 ---------
     Total shares reserved                                       9,575,287
                                                                 =========
</TABLE>

(6)   REGULATORY FILING

      During August, 1997, the Company filed a new drug application ("NDA")
      with the United States Food and Drug Administration (the "FDA") for its
      lead product candidate, NOVASTAN(R), for use as an anticoagulant in
      patients with heparin induced thrombocytopenia ("HIT") and heparin
      induced thrombocytopenia with thrombosis syndrome ("HITTS"). On May 11,
      1998, the Company announced that it had received a non-approvable letter
      from the FDA for NOVASTAN(R). Based on consultation with representatives
      from the FDA, TBC has focused on the collection and analysis of a new
      more comparable historical control group as the basis for demonstrating
      the safety and efficacy NOVASTAN(R). The Company amended its NDA with the
      FDA for NOVASTAN(R) as an anticoagulant for use in patients with HIT
      syndrome on March 19, 1999 and expects a response from the FDA to the
      amendment within approximately six months of filing. While the Company
      believes the amendment includes consistent, positive results and supports
      the use of NOVASTAN(R) in its proposed indication, there can be no
      assurances as to the timing or outcome of the FDA decision.

(7)   COMMITMENTS AND CONTINGENCIES

      Legal Proceedings

      On November 21, 1994, a class action shareholders' suit was filed in the
      United States District Court for the Southern District of Texas, Houston
      Division seeking damages in the amount of $16 million. Plaintiffs are two
      individuals who purchased shares of the Company on December 16, 1993
      following the Company's initial public offering ("IPO"). In their
      complaint, plaintiffs have sued the Company, certain members of the board
      of directors and certain officers alleging violations of Sections 11, 12
      and 15 of the Securities Act of 1933, as amended. A subsequently filed
      class action arising out of the IPO was dismissed in June 1996, leaving
      the first class action as the only pending litigation arising out of the
      IPO.

      In May, 1999, the Company reached an agreement in principle to settle the
      pending class action. The agreement in principle achieved with
      plaintiff's counsel provides for dismissal of all claims against the
      Company and the officers and directors named as defendants. The
      settlement amount is $800,000, of which approximately $202,500 will be
      paid by the Company and $597,500 will be paid by the Company's insurer.

      The agreement to settle is subject to negotiation and execution of a
      detailed stipulation of settlement between the parties, submission of the
      stipulation of settlement to the court, provision of notice to class
      members of the settlement

                                                                         Page 7

<PAGE>   10


      terms, a fairness hearing, and final approval of the settlement by the
      court. Discussions are ongoing with plaintiffs as to the schedule for
      completing these steps; however, it is expected that final dismissal will
      take place no sooner than 90 days. The Company cannot predict exactly
      when final dismissal can be obtained.

                                                                         Page 8

<PAGE>   11


ITEM 2.

                 TEXAS BIOTECHNOLOGY CORPORATION AND SUBSIDIARY

          MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                           AND RESULTS OF OPERATIONS

                JUNE 30, 1999 (UNAUDITED) AND DECEMBER 31, 1998


                                    OVERVIEW

The following Management's Discussion and Analysis of Financial Condition and
Results of Operations contains forward-looking statements that involve risks
and uncertainties.

Since its inception in 1989, the Company has primarily devoted its resources to
fund drug discovery research and development. The Company has been unprofitable
to date and expects to incur substantial losses for the next several years as
the Company invests in product research and development, preclinical and
clinical testing and regulatory compliance. The Company has sustained net
losses of approximately $92.0 million from inception to June 30, 1999. The
Company has primarily financed its operations to date through certain private
placements of Common Stock and shareholder loans which have raised an aggregate
of $21.3 million in net proceeds, the Initial Public Offering which raised an
aggregate of $24.2 million in net proceeds including the over-allotment sold in
January 1994, a private placement of Common Stock on February 13, 1996, which
raised $13.0 million in net proceeds, a private placement of the 5% Preferred
on March 14, 1997, which raised approximately $6.0 million in net proceeds, and
a secondary public offering in October 1997 which raised approximately $26.7
million in net proceeds.

On July 25, 1994, the Company acquired all of the outstanding stock of IPI in
exchange for 1,599,958 shares of Common Stock, and later issued 1,399,917
shares of Common Stock upon satisfaction of certain research milestones. IPI's
financial results have been included in the Company's financial statements
beginning August 1, 1994. In March 1996, IPI's remaining operations in
California were consolidated with the Company's Houston operations.

The Company signed a collaborative agreement with Synthelabo S.A.,
("Synthelabo") on October 11, 1994. Upon consummation of the transaction,
Synthelabo purchased 1,428,571 shares of Common Stock for a total of $5.0
million and paid a licensing fee of $3 million. In addition, Synthelabo has
paid $3.0 million annually in research payments for two years and paid $750,000
for the third year. During 1996, TBC signed agreements with Synthelabo to
provide copies of certain clinical data regarding NOVASTAN(R). Synthelabo has
paid a total of $2.88 million pursuant to these agreements as of June 30, 1999.

During October 1996, the Company executed a research and Common Stock purchase
agreement with LG Chemical, Ltd. ("LG Chemical"). LG Chemical purchased
1,250,000 shares of Common Stock for $5.0 million and committed to pay up to
$10.7 million over a five year period to develop two compounds in clinical
development. Of this amount, $5.1 million has been paid and $1.0 million will
be paid on each of December 31, 1999 and June 30 and December 31, of 2000, and
$1.3 million will be paid on June 30 and December 31, 2001.

In August 1997, the Company entered into a Product Development, License and
CoPromotion Agreement (the "SmithKline Agreement") whereby SmithKline Beecham,
PLC ("SmithKline") was granted exclusive rights to work with TBC in the
development and commercialization of NOVASTAN(R) in the U.S. and Canada for
specified indications. Upon execution of the agreement, SmithKline paid an $8.5
million license fee and during October 1997, paid a $5 million milestone
payment to TBC and has committed to pay up to a total of $15.0 million in
additional milestone payments based on the clinical development and FDA
approval of NOVASTAN(R) for the indications of HIT, HITTS and acute myocardial
infarction ("AMI"). Future milestone payments for the AMI indication are
subject to SmithKline's agreement to market NOVASTAN(R) for such indication. In
connection with the SmithKline Agreement, SmithKline purchased 176,922 shares
of Common Stock for $1.0 million and an additional 400,000 shares of Common
Stock for $2.0 million in conjunction with the Company's public offering which
closed during October, 1997. At this time, SmithKline has no plans to conduct

                                                                         Page 9

<PAGE>   12


development work for the AMI and stroke indications. TBC is evaluating the
feasibility of development of NOVASTAN(R) for stroke and possibly AMI.

The Company's operating results have fluctuated significantly during each
quarter, and the Company anticipates that such fluctuations, largely
attributable to varying research and development commitments and expenditures,
will continue for the next several years.

                             RESULTS OF OPERATIONS

                   THREE MONTHS ENDED JUNE 30, 1999 AND 1998

Revenues decreased from $621,788 in the three month period ended June 30, 1998
to $495,130 in the same period of 1999, a decrease of 20%. Revenues were
composed of earned revenues under research and development agreements. Revenue
from research agreements decreased primarily due to a decrease in reimbursable
expenses related to the SmithKline Agreement.

Total operating expenses decreased 5% from $4,913,200 in the three months ended
June 30, 1998 to $4,653,211 in the same period of 1999 due primarily to the
decrease in research and development expenses. Research and development expenses
decreased 20% from $3,798,763 in the three months ended June 30, 1998 to
$3,056,120 in the same period of 1999. This decrease was attributable to
completion of certain Phase II clinical trials related to sitaxsentan sodium
(TBC11251) and the selectin antagonist programs and expenses incurred during
1998 for the NDA submission for NOVASTAN(R). General and administrative expenses
increased 43% from $1,114,437 in the three months ended June 30, 1998 to
$1,597,091 in the same period of 1999 due primarily to increases in patent legal
fees and investor relations expenses incurred during 1999. The Company had 83
employees at June 30, 1999 and 76 employees at June 30, 1998.

Other income and expense is composed of investment income on invested funds.
The decrease of 43% from $535,168 in the three months ended June 30, 1998 to
$302,455 in the same period of 1999 is attributable primarily to lower
investment balances.

                    SIX MONTHS ENDED JUNE 30, 1999 AND 1998

Revenues decreased from $1,243,388 in the six months ended June 30, 1998 to
$1,030,055 in the same period of 1999, a decrease of 17%. Revenues were
primarily composed of earned revenues under research and development
agreements. Revenue from research agreements decreased primarily due to a
decrease in reimbursable expenses related to the SmithKline Agreement.

Total operating expenses decreased 4% from $9,537,893 in the six months ended
June 30, 1998 to $9,151,292 in the same period of 1999 due primarily to the
decrease in research and development expenses. Research and development
expenses decreased 14% from $7,209,147 in the six months ended June 30, 1998 to
$6,214,760 in the same period of 1999. This decrease was attributable to
completion of certain Phase II clinical trials related to sitaxsentan sodium
and the selectin antagonist programs and expenses incurred during 1998 for the
NDA submission for NOVASTAN(R). General and administrative expenses increased
26% from $2,328,746 in the six months ended June 30, 1998 to $2,936,532 in the
same period of 1999 due primarily to approximately $200,000 accrued for
settlement of a lawsuit, increased patent legal fees and increased investor
relations expenses incurred during 1999.

Other income and expense is composed of investment income on invested funds.
The decrease of 38% from $1,115,717 in the six months ended June 30, 1998 to
$686,774 in the same period of 1999 is attributable primarily to lower
investment balances.

                        LIQUIDITY AND CAPITAL RESOURCES

The Company has financed its research and development activities to date
principally through (i) public offerings and private placements of its equity
securities, (ii) issuances of Common Stock in conjunction with acquisitions and
research and collaboration agreements and exercises of stock options and
warrants, (iii) milestone and research payments received in conjunction with
research and collaborative agreements, and (iv) investment income, net of
interest expense. During the

                                                                        Page 10

<PAGE>   13


first six months of 1999, the Company utilized net cash in operating activities
of $8,190,520. The use of cash in operations was caused primarily by the
Company's net loss before preferred dividend requirements of $7,434,463.
Investing and financing activities primarily reflect the net effect of
purchases and redemptions of short term investments during the first six months
of 1999. At June 30, 1999, the Company had cash, cash equivalents and
short-term investments of $16,050,075. Additionally, at June 30, 1999, the
Company had long term investments of $6,105,605.

The Company expects to incur substantial research and development expenditures
as it designs and develops small molecule drugs for vascular diseases. The
Company anticipates that operating expenses may increase during 1999 and
subsequent years. The Company began to incur costs to develop NOVASTAN(R) during
the third quarter of 1993. These costs will continue during 1999 due to expenses
associated with the amendment of the new drug application with the FDA for
NOVASTAN(R) and costs associated with additional clinical and regulatory work
being completed for NOVASTAN(R). The Company also began incurring clinical trial
costs in 1997 for the compounds sitaxsentan sodium and TBC1269 and is
continuing its clinical trials for these compounds during 1999. In 1999, the
Company expects to begin to incur costs for clinical trials related to
additional compounds. These costs include, among other things, hiring personnel
to direct and carry out all operations related to the clinical trials, hospital
and procedural costs, services of a contract research organization and
purchasing and formulating large quantities of the compound to be used in such
trials. In addition, the Company anticipates that the administrative costs
associated with this effort will be significant. The amounts and timing of
expenditures will depend on the progress of the Company's ongoing research,
clinical development and commercialization efforts.

The Company anticipates that its existing capital resources, research payments
from LG Chemical and its other revenue sources should be sufficient to fund its
cash requirements through the second quarter of the year 2000. This date is
contingent upon various factors, including the rates of patient enrollment and
spending associated with the development and commercialization of NOVASTAN(R),
the level of research, development and clinical trial expenditures for
sitaxsentan sodium, TBC1269 and other compounds, results of clinical trials,
the costs and timing of regulatory approvals (including NOVASTAN(R)), the
success of sales and marketing efforts for NOVASTAN(R), if approved by the FDA,
the exercise of the Company's publicly traded warrants, if any, which expire on
September 30, 1999 and are presently not "in the money", and the timing and
terms of future corporate collaborations, if any, entered into by the Company.
If the Company does not receive timely FDA approval for NOVASTAN(R), or such
approval is significantly delayed or if NOVASTAN(R) cannot be successfully
marketed after FDA approval, the Company will need to re-examine the use of its
existing capital resources. No assurances can be given that the Company will be
able to continue its research and development programs at currently anticipated
levels. Moreover, TBC's agreement with Synthelabo requires the Company to
maintain a "net worth", as defined in the agreement, of at least $5.0 million
during the term of the agreement. If the Company fails to maintain at least
$5.0 million of "net worth", Synthelabo may require that the technology, as
defined in the agreement, be transferred to, and the development program be
conducted by, a joint venture owned by TBC and Synthelabo.

The Company anticipates that it may need to raise substantial funds for future
operations through collaborative arrangements, public or private issuance of
debt and equity, or other arrangements. These financings could result in the
issuance of equity securities which dilute the existing holders of the
Company's Common Stock. The Company expects that as additional product
candidates enter clinical trials, the Company may incur increased expenditures
for laboratory space, scientific and administrative personnel, and services of
contract research organizations. There can be no assurance that the Company
will be able to obtain such additional financings or establish corporate
collaborations on acceptable terms or in time to fund its research and
development programs. It is likely that the Company's ability to raise
additional funds will be adversely affected by unfavorable results of its
clinical trials and the failure to obtain regulatory approvals for its product
candidates, including NOVASTAN(R). In the event such financing is not obtained,
the Company's drug discovery or development programs may be delayed, scaled
back or eliminated. The Company may also be required in this event to obtain
funds through arrangements with collaborative partners or others that may
require the Company to relinquish rights to certain of its technologies,
product candidates or products that it would not otherwise relinquish.

                 HAZARDOUS MATERIALS AND ENVIRONMENTAL MATTERS

The Company's research and development activities involve the controlled use of
hazardous and radioactive materials. The Company is subject to federal, state,
and local laws and regulations governing the use, manufacture, storage,
handling and disposal of such materials and certain waste products. Management
believes that the Company is in compliance with such laws, regulations and
standards currently in effect and that the cost of compliance with such laws,
regulation, and standards will not have a material adverse effect on the
Company. The Company does not expect to incur any material capital expenditures
for environmental control in the foreseeable future.

                                                                        Page 11

<PAGE>   14


                    IMPACT OF INFLATION AND CHANGING PRICES

The pharmaceutical research industry is labor intensive, and wages and related
expenses increase in inflationary periods. The lease of space and related
building services for the Houston facility contains a clause that escalates
rent and related services each year based on the increase in building operating
costs and the increase in the Houston Consumer Price Index, respectively. To
date, inflation has not had a significant impact on the operations of the
Company.

                                YEAR 2000 ISSUE

The Year 2000 ("Y2K") issue is the result of computer programs being written
using two digits rather than four to define the applicable year. Computer
equipment, software and other devices with imbedded technology that are
time-sensitive, such as computer systems, related software, research equipment,
alarm systems and telephone systems may recognize a date using "00" as the year
1900 rather than the year 2000. This could result in a system failure or
miscalculations causing disruptions of operations, including, among other
things, temporary inability to process data, and may materially impact the
Company's financial condition.

The Company has undertaken various initiatives intended to ensure that it is
prepared for the Y2K issue. The Company is in the process of assessing its
state of readiness. Presently, the Company has reviewed its scientific
equipment, computer systems and related software to identify systems which may
exhibit Y2K issues. This review was performed by internal teams from various
disciplines within the Company. These teams evaluated the Company's equipment,
computer systems and software for Y2K issues and is currently performing
testing to insure proper operation after January 1, 2000. If necessary,
specific remediation plans will be developed for non-compliant items after
testing is completed. As a part of this review the Company will determine the
known risks related to the consequences of a failure to correct any Y2K
deficiencies. The Company has initiated formal communications with material
third parties to determine the extent to which the Company may be vulnerable to
those third parties' failure to remediate their Y2K problems. The Company and
its licensee, SmithKline are dependent upon Mitsubishi Chemical Corporation for
supply of bulk NOVASTAN(R) for clinical trial material and for its inventory
needs should the FDA approve the compound for marketing. The Company has
received communication from Mitsubishi Chemical Corporation which states that
it has undertaken to become Y2K compliant. Any Y2K issues which would result in
significant interruptions of delivery schedules could have a material effect on
the Company's operations. However, the Company is presently not aware of any
Y2K issues that have been encountered by any third party which could materially
affect the Company's operations.

The Company has developed a contingency plan to address potential Y2K issues.
This contingency plan addresses problems that the Company may encounter after
January 1, 2000 and will be updated to include issues identified during the
course of its remediation efforts and reasonably foreseeable problems that may
arise as a result of Y2K, including, but not limited to, computer hardware and
software and research equipment. The contingency plan will be continually
refined as additional information becomes available. However, it is unlikely
that any contingency plan can fully address all events that may arise.

The Company estimates that the costs associated with the Y2K issue will not be
material, and as such will not have a significant impact on the Company's
financial position or operating results. The Company's current estimate of Y2K
remediation costs is approximately $50,000 which may be revised should other
remediation costs be discovered in the review of Y2K issues. However, the
failure to discover or correct a material Y2K problem could result in an
interruption in the Company's normal business activities or operations. Such
failure could materially and adversely affect the Company's results of
operation, liquidity and financial condition.

                DISCLOSURE REGARDING FORWARD LOOKING STATEMENTS

This Report includes "forward looking statements" within the meaning of Section
27A of the Securities Act of 1933, as amended (the "Securities Act") and
Section 21E of the Securities Exchange Act of 1934, as amended. All statements
other than statements of historical fact included in this Report are forward
looking statements. Such forward looking statements include, without
limitation, statements under (a) "Business" regarding Texas Biotechnology
Corporation's expectations for future drug discovery and development and
related expenditures and (b) "Management's Discussion and Analysis of Financial
Condition and Results of Operations - Liquidity and Capital Resources"
regarding TBC's estimate of sufficiency

                                                                        Page 12

<PAGE>   15


of existing capital resources and its ability to raise additional capital to
fund cash requirements for future operations. Although TBC believes that the
expectations reflected in such forward looking statements are reasonable, it
can give no assurance that such expectations reflected in such forward looking
statements will prove to have been correct. The ability to achieve TBC's
expectations is contingent upon a number of factors which include (i) ongoing
cost of research and development activities, (ii) cost of clinical development
of product candidates, (iii) attainment of research and clinical goals of
product candidates, (iv) timely approval of TBC's product candidates by
appropriate governmental and regulatory agencies, (v) effect of any current or
future competitive products, (vi) ability to manufacture and market products
commercially, (vii) retention of key personnel and (viii) capital market
conditions.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

To date, interest rate risk has not had a significant impact on the operations
of the Company.

                                                                        Page 13

<PAGE>   16


PART II OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

On November 21, 1994, a class action shareholders' suit was filed in the United
States District Court for the Southern District of Texas, Houston Division
seeking damages in the amount of $16 million. Plaintiffs are two individuals
who purchased shares of the Company on December 16, 1993 following the
Company's initial public offering ("IPO"). In their complaint, plaintiffs have
sued the Company, certain members of the board of directors and certain
officers alleging violations of Sections 11, 12 and 15 of the Securities Act of
1933, as amended. A subsequently filed class action arising out of the IPO was
dismissed in June 1996, leaving the first class action as the only pending
litigation arising out of the IPO.

In May, 1999, the Company reached an agreement in principle to settle the
pending class action. The agreement in principle achieved with plaintiff's
counsel provides for dismissal of all claims against the Company and the
officers and directors named as defendants. The settlement amount is $800,000,
of which approximately $202,500 will be paid by the Company and $597,500 will
be paid by the Company's insurer.

The agreement to settle is subject to negotiation and execution of a detailed
stipulation of settlement between the parties, submission of the stipulation of
settlement to the court, provision of notice to class members of the settlement
terms, a fairness hearing, and final approval of the settlement by the court.
Discussions are ongoing with plaintiffs as to the schedule for completing these
steps; however, it is expected that final dismissal will take place no sooner
than 90 days. The Company cannot predict exactly when final dismissal can be
obtained.

ITEM 2.  CHANGES IN SECURITIES

       None

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

       None

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

       On May 4, 1999, an annual meeting of the stockholders of the Company was
       held. The holders of 29,599,066 shares of Common Stock were present in
       person or represented by proxy at the meeting. At the meeting, the
       stockholders took the following actions:

       (a)    Election of Directors

              The stockholders elected the following persons to serve as
              directors of the Company until the next annual meeting of
              stockholders, or until their successors are duly elected and
              qualified:

<TABLE>
<CAPTION>
                            NUMBER OF                 NUMBER OF
     NAME                   VOTES FOR             VOTES ABSTAINING
     ----                   ---------             ----------------

<S>                         <C>                       <C>
 Ron J. Anderson            26,049,891                3,549,175

 Frank C. Carlucci          26,048,179                3,550,887

 Robert J. Cruikshank       26,045,451                3,553,615

 Richard A.F. Dixon         26,048,839                3,550,227

 David B. McWilliams        26,049,751                3,549,315

 Suzanne Oparil             26,040,441                3,558,625

 John M. Pietruski          26,046,751                3,552,315

 James A. Thomson           26,051,391                3,547,675

 James T. Willerson         25,653,352                3,945,714
</TABLE>

                                                                        Page 14

<PAGE>   17


(b)      Approval of the Company's 1999 Stock Incentive Plan

         The stockholders approved the proposal to adopt the Company's 1999
         Stock Incentive Plan. Votes were cast as follows:

<TABLE>
<CAPTION>
NUMBER OF                  NUMBER OF                 NUMBER OF
VOTES FOR                VOTES AGAINST            VOTES ABSTAINING
---------                -------------            ----------------

<S>                        <C>                        <C>
28,194,684                 1,289,610                  114,772
</TABLE>


ITEM 5.  OTHER INFORMATION

       None


ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

     EXHIBIT NO.             DESCRIPTION

       27.1                  Financial Data Schedule


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

                                                                        Page 15

<PAGE>   18


                        TEXAS BIOTECHNOLOGY CORPORATION

                                 JUNE 30, 1999

                                   SIGNATURES


Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized, on the 16th day of August, 1999.



                                       TEXAS BIOTECHNOLOGY CORPORATION


                                       By: /s/ David B. McWilliams
                                           -------------------------------------
                                           David B. McWilliams
                                           President and Chief Executive Officer




                                       By: /s/ Stephen L. Mueller
                                           -------------------------------------
                                           Stephen L. Mueller
                                           Vice President, Finance and
                                           Administration Secretary and
                                           Treasurer (Principal Financial and
                                           Accounting Officer)

                                                                        Page 16

<PAGE>   19


                               INDEX TO EXHIBITS


<TABLE>
<CAPTION>
   Exhibit No.                            Description of Exhibit
   -----------                            ----------------------


<S>                         <C>
       27.1                 Financial Data Schedule
</TABLE>


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