<PAGE>
                                  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 MARCH 31, 2004

                                       OR

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

                         Commission File Number: 0-20117


                          ENCYSIVE PHARMACEUTICALS INC.
--------------------------------------------------------------------------------
             (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)


      6700 West Loop South, 4th Floor, Bellaire, Texas     77401
--------------------------------------------------------------------------------
          (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 by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).

Yes   X    No
    -----     -----

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

                    Class                   Outstanding at April 21, 2004
                    -----                   -----------------------------

       Common stock, $0.005 par value                  52,797,260


<PAGE>
                          ENCYSIVE PHARMACEUTICALS INC.

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                  PAGE NO.
                                                                                  --------
<S>        <C>                                                                       <C>
Part I.    Financial Information

           Item 1:   Financial Statements  (Unaudited)

           Consolidated Balance Sheets as of March 31, 2004 and December 31, 2003      1

           Consolidated Statements of Operations and Comprehensive Loss for the
           three months ended March 31, 2004 and 2003                                  2

           Consolidated Statements of Cash Flows for the three months ended
           March 31, 2004 and 2003                                                     3

           Notes to Consolidated Financial Statements                                  4

           Item 2:   Management's Discussion And Analysis Of
                     Financial Condition And Results Of Operations                    11

           Item 3:   Quantitative And Qualitative Disclosures
                     About Market Risk                                                19

           Item 4:   Controls And Procedures                                          20


Part II.   Other Information

           Item 1:   Legal Proceedings                                                21

           Item 2:   Changes In Securities, Use Of Proceeds and
                     Issuer Purchases of Equity Securities                            21

           Item 3:   Defaults Upon Senior Securities                                  21

           Item 4:   Submission Of Matters To A Vote Of Security Holders              21

           Item 5:   Other Information                                                21

           Item 6:   Exhibits And Reports On Form 8-K                                 21


SIGNATURES                                                                            22
</TABLE>




<PAGE>
                 ENCYSIVE PHARMACEUTICALS INC. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS
                     ($ IN THOUSANDS, EXCEPT PER SHARE DATA)
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                                        MARCH 31,        DECEMBER 31,
                                                                                           2004             2003
                                                                                        ---------        -----------
<S>                                                                                     <C>              <C>
ASSETS

Current assets:
       Cash and cash equivalents                                                        $  42,581        $  65,302
       Short-term investments                                                              26,098           11,218
       Short-term investments pledged as collateral for letter of credit                       --            7,011
       Accounts receivable                                                                  1,845            1,834
       Other current receivables                                                              211              712
       Prepaids                                                                             1,488              727
                                                                                        ---------        ---------
           Total current assets                                                            72,223           86,804

Long-term investments                                                                       2,969            1,957
Equipment and leasehold improvements, net                                                   5,005            4,980
Intangible and other assets, net of accumulated amortization of $395 and $368                 631              657
                                                                                        ---------        ---------
           Total assets                                                                 $  80,828        $  94,398
                                                                                        =========        =========

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
       Accounts payable                                                                 $   3,666        $   2,404
       Accrued expenses                                                                     5,693            5,904
       Deferred revenue                                                                       561              561
       Current maturity on long-term debt                                                      --            6,000
                                                                                        ---------        ---------
           Total current liabilities                                                        9,920           14,869

Deferred revenue                                                                            1,540            1,680
Long-term debt, less current maturity                                                       1,571            1,610
Minority interest in Revotar                                                                1,189            1,383

Commitments and contingencies

Stockholders' equity:
       Preferred stock, par value $.005 per share.  5,000,000 shares
           authorized, none issued or outstanding                                              --               --
       Common stock, par value $.005 per share.  At March 31, 2004
           75,000,000 shares authorized; 52,931,860 shares issued,
           52,718,860 shares outstanding.  At December 31, 2003,
           75,000,000 shares authorized; 52,457,167 shares issued,
           52,244,167 shares outstanding                                                      265              262
       Additional paid-in capital                                                         262,513          259,761
       Deferred compensation expense                                                         (146)            (185)
       Treasury stock, 213,000 shares                                                      (1,602)          (1,602)
       Accumulated other comprehensive income                                                 157               78
       Accumulated deficit                                                               (194,579)        (183,458)
                                                                                        ---------        ---------
           Total stockholders' equity                                                      66,608           74,856
                                                                                        ---------        ---------
           Total liabilities and stockholders' equity                                   $  80,828        $  94,398
                                                                                        =========        =========
</TABLE>

           See accompanying notes to consolidated financial statements


                                       1


<PAGE>
       ENCYSIVE PHARMACEUTICALS INC. AND SUBSIDIARIES
            CONSOLIDATED STATEMENTS OF OPERATIONS
                   AND COMPREHENSIVE LOSS
           ($ IN THOUSANDS, EXCEPT PER SHARE DATA)
                         (UNAUDITED)


<TABLE>
<CAPTION>
                                                                        THREE MONTHS ENDED MARCH 31,
                                                                      --------------------------------
                                                                          2004                2003
                                                                      ------------        ------------
<S>                                                                   <C>                 <C>
Revenues:
      Research agreements                                             $        761        $        742
      Collaborative research and development
          from Encysive, L.P.                                                   --                 664
      Royalty income, net                                                    1,792               1,148
      License fees, milestones and grants                                      282                 662
                                                                      ------------        ------------
          Total revenues                                                     2,835               3,216
                                                                      ------------        ------------

Expenses:
      Research and development                                              12,015               4,219
      Equity in loss of Encysive, L.P.                                          --               2,386
      General and administrative                                             2,485               2,154
                                                                      ------------        ------------
          Total expenses                                                    14,500               8,759
                                                                      ------------        ------------

          Operating loss                                                   (11,665)             (5,543)

Investment income, net                                                         350                 373
                                                                      ------------        ------------
          Loss before minority interest                                    (11,315)             (5,170)

Minority interest in loss of Revotar                                           194                 190
                                                                      ------------        ------------

      Net loss                                                             (11,121)             (4,980)

Other comprehensive income:
      Unrealized gain on foreign currency translation                           79                  61
                                                                      ------------        ------------

          Comprehensive loss                                          $    (11,042)       $     (4,919)
                                                                      ============        ============

Net loss per common share-basic and diluted                           $      (0.21)       $      (0.11)
                                                                      ============        ============

Weighted average common shares used to compute
      basic and diluted net loss per share                              52,178,130          43,945,274
                                                                      ============        ============
</TABLE>


           See accompanying notes to consolidated financial statements


                                       2


<PAGE>
                 ENCYSIVE PHARMACEUTICALS INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                                ($ in thousands)
                                   (Unaudited)
<TABLE>
<CAPTION>
                                                                                 THREE MONTHS ENDED MARCH 31,
                                                                               --------------------------------
                                                                                 2004                    2003
                                                                               --------                --------
<S>                                                                            <C>                     <C>
Cash flows from operating activities:
   Net loss                                                                    $(11,121)               $ (4,980)
   Adjustments to reconcile net loss to net cash
    used in operating activities:
         Depreciation and amortization                                              243                     263
         Equity in loss of Encysive, L.P.                                            --                   2,386
         Minority interest in loss of Revotar                                      (194)                   (190)
         Expenses paid with stock                                                   201                     325
         Stock-based compensation expense                                            67                      16
         Loss on disposition of fixed assets                                          3                      --
    Change in operating assets and liabilities:
         Interest receivable included in short-term
             and long-term investments                                              119                     218
         Accounts receivable                                                        (11)                    (40)
         Prepaids                                                                  (761)                   (753)
         Other current receivables                                                  498                     384
         Receivable from Encysive, L.P.                                              --                    (861)
         Accounts payable and accrued expenses                                    1,147                  (1,601)
         Payable to Encysive, L.P.                                                   --                  (2,675)
         Deferred revenue from unrelated parties                                   (140)                   (232)
         Deferred revenue from related party                                         --                    (136)
                                                                               --------                --------
    Net cash used in operating activities                                        (9,949)                 (7,876)
                                                                               --------                --------

Cash flows from investing activities:
   Purchases of equipment and leasehold improvements                               (275)                    (56)
   Purchases of investments                                                     (13,000)                 (8,307)
   Maturity of investments                                                        4,000                  22,048
                                                                               --------                --------
    Net cash (used in) provided by investing activities                          (9,275)                 13,685
                                                                               --------                --------

Cash flows from financing activities:
   Proceeds from sale of common stock and option and
       warrant exercises, net                                                     2,526                      --
   Repayment of long-term debt                                                   (6,000)                     --
                                                                               --------                --------
    Net cash used in financing activities                                        (3,474)                     --

Effect of exchange rate changes on cash                                             (23)                     (7)
                                                                               --------                --------
    Net (decrease) increase in cash and cash equivalents                        (22,721)                  5,802

Cash and cash equivalents at beginning of period                                 65,302                  21,228
                                                                               --------                --------

Cash and cash equivalents at end of period                                     $ 42,581                $ 27,030
                                                                               ========                ========

Supplemental schedule of noncash financing activities:
   Stock-based compensation expense                                            $     67                 $     16
   Issuance of Common Stock for expenses                                            201                      325
   Interest paid                                                                     39                       --
</TABLE>

        See accompanying notes to consolidated financial statements


                                       3



















<PAGE>
                 ENCYSIVE PHARMACEUTICALS INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           MARCH 31, 2004 (UNAUDITED)

(1)    BASIS OF PRESENTATION

       The accompanying unaudited consolidated financial statements of Encysive
Pharmaceuticals Inc., a Delaware corporation, and its subsidiaries (collectively
referred to as the "Company" or "Encysive") have been prepared in accordance
with accounting principles generally accepted in the United States of America
("USA") for interim financial information and with the instructions to Form 10-Q
and Rule 10-01 of Regulation S-X. They do not include all information and notes
required by accounting principles generally accepted in the USA for complete
financial statements. It is recommended that these interim condensed
consolidated financial statements be read in conjunction with the consolidated
financial statements and notes thereto included in the Company's Annual Report
on Form 10-K for the year ended December 31, 2003. Except as disclosed herein,
there has been no material change in the information disclosed in the notes to
the consolidated financial statements included in the Company's Annual Report on
Form 10-K for the year ended December 31, 2003. In the opinion of management,
all adjustments (consisting only of normal recurring accruals) considered
necessary for a fair presentation have been included. Operating results for the
three-month period ended March 31, 2004 are not necessarily indicative of the
results that may be expected for any other interim period, or for the year
ending December 31, 2004.

(2)    ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

       (a) Organization

           Encysive is a biopharmaceutical company focused on the discovery,
       development and commercialization of novel synthetic small molecule
       compounds for the treatment of a variety of cardiovascular, vascular and
       related inflammatory diseases. Since its formation in 1989, the Company
       has been engaged principally in research and drug discovery programs and
       clinical development of certain drug compounds

           The Company is presently working on a number of long-term development
       projects that involve experimental and unproven technology, which may
       require many years and substantial expenditures to complete, and which
       may or may not be successful. Sales of the Company's first FDA approved
       product, for which it receives royalty income, Argatroban, began during
       November 2000.

       (b) Basis of Consolidation

           The Company's consolidated financial statements include the accounts
       of the Company, its wholly owned subsidiaries, ImmunoPharmaceutics, Inc.
       ("IPI"), a California Corporation, Encysive, L.P. ("ELP"), a Delaware
       limited partnership, and EP-ET, LLP, a Delaware limited partnership, and
       its majority controlled subsidiary, Revotar Biopharmaceuticals AG
       ("Revotar"), a German corporation. All material intercompany balances and
       transactions have been eliminated.

       (c) Stock-Based Compensation

           At March 31, 2004, the Company has six stock-based compensation plans
       for employees and non-employee directors. The Company accounts for those
       plans under the recognition and measurement principles of Accounting
       Principles Board Opinion No. 25, Accounting for Stock Issued to
       Employees, and related interpretations. The Company's results of
       operations for the three month periods ended March 31, 2004 and 2003
       included $67,000 and $16,000, respectively, in stock-based compensation
       expense, arising from the grant of shares of restricted common stock to
       employees, and to the recognition of deferred compensation expense
       arising from the grant of stock options in March 2003, to certain
       employees which were subject to the approval of stockholders of an
       amendment to increase the authorized shares in the 1999 plan. No other
       stock-based employee


                                       4
<PAGE>
       compensation expense is reflected in net loss, however, as all options
       granted under those plans had an exercise price equal to the market price
       of the underlying Common Stock on the date of grant. The following table
       illustrates the effect on net loss and loss per share if the Company had
       applied the fair value recognition provisions of FASB Statement of
       Financial Accounting Standards No. 123, "Accounting for Stock-Based
       Compensation" to stock-based employee compensation (amounts in thousands,
       except for per share data).

       <Table>
       <Caption>
                                                   Three Months Ended
                                                        March 31,
                                                ------------------------
                                                  2004            2003
                                                ---------       --------
       <S>                                      <C>             <C>
       Net loss, as reported                    $ (11,121)      $ (4,980)
                                                =========       ========

       Add:    Stock-based employee
               compensation expense
               included in reported
               net loss                                67             16

       Deduct: Total stock-based
               employee compensation
               expense determined
               under fair value method
               for all awards                        (604)        (1,162)
                                                ---------       --------
       Pro forma net loss                       $ (11,658)      $ (6,126)
                                                =========       ========

       Loss per share:
               As reported, basic and diluted   $   (0.21)      $  (0.11)
               Pro forma, basic and diluted     $   (0.22)      $  (0.14)
       </Table>

           The per-share weighted average fair value of stock options granted
       during the three-month periods ended March 31, 2004 and 2003 was $5.99
       and $0.52, respectively, on the grant date using the Black-Scholes option
       pricing model with the following assumptions:

       <Table>
       <Caption>
                                                     Three Months Ended
                                                          March 31,
                                                 -------------------------
                                                   2004            2003
                                                 --------        ---------
       <S>                                          <C>             <C>
       Expected dividend yield                      0.0%            0.0%
       Risk-free interest rate                      2.6%            2.5%
       Expected volatility                         74.5%           71.9%
       Expected life in years                       4.79            4.24
       </Table>

(3)    CAPITAL STOCK

       The Company has reserved Common Stock for issuance as of March 31, 2004
as follows:

       <Table>
       <S>                                                       <C>
       Stock option plans...................................     6,187,834
       Warrants outstanding.................................       142,858
                                                                 ---------
             Total shares reserved..........................     6,330,692
                                                                 =========
       </Table>

         The Company has submitted a proposal to its stockholders to increase
the number of authorized shares in its 1999 plan by 2 million shares for
consideration at its annual meeting of stockholders scheduled to occur on May
11, 2004.

         At March 31, 2004, the Company's only outstanding warrant is a warrant
to purchase 142,858 shares issued to Genentech in 1997. The Genentech warrant
expires in October 2004, and has an exercise price of $14.00 per share.

                                       5
<PAGE>

(4)      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 and are
recorded at cost. Short-term investments consist of debt securities with
original maturities of less than one year and greater than three months at the
purchase date. Long-term investments consist of debt securities with a remaining
maturity of one to four years. The Company classifies all short-term and
long-term investments as held-to-maturity. Held-to-maturity securities are those
securities in which the Company has the ability and intent to hold the security
until maturity. Short-term and long-term investments are stated at amortized
cost plus accrued interest. Interest income is accrued as earned. The Company
evaluates the carrying value of its securities by comparing the carrying values
of the securities to their market values. In the event that the fair value of a
security were to decline below its carrying cost, and in the opinion of
management such decline were other than temporary, the Company would record a
loss and reduce the carrying value of such security to its fair value. The
Company has classified as restricted, cash deposited with a bank as security for
certain foreign exchange futures contracts. Composition of cash and investments
was as follows ($ in thousands):

<Table>
<Caption>
                                                 March 31, 2004   December 31, 2003
                                                 --------------   -----------------
<S>                                                <C>               <C>
Cash and cash equivalents:
     Demand and money market accounts              $    1,080        $    1,043
     Corporate commercial paper                        41,501            64,259
                                                   ----------        ----------
Total cash and cash equivalents                    $   42,581        $   65,302
                                                   ==========        ==========
</Table>

Investments at March 31, 2004 and December 31, 2003 were as follows ($ in
thousands):

       <Table>
       <Caption>
                                                                As of March 31, 2004
                                                 --------------------------------------------------
                                                                Gross         Gross       Estimated
       Short-term investments                    Amortized    Unrealized    Unrealized      Fair
       Held-to-maturity                             Cost        Gains         Losses        Value
       ----------------                          ---------    ----------    ----------    ---------
       <S>                                       <C>          <C>           <C>           <C>
       U.S. Government agency securities         $   1,000    $    --       $    --       $   1,000

       Corporate commercial paper and
       loan participations                          21,058           12           (10)       21,060

       Corporate debt securities                     4,040           14          --           4,054
                                                 ---------    ---------     ---------     ---------

       Total short-term
       held-to-maturity investments              $  26,098    $      26     $     (10)    $  26,114
                                                 =========    =========     =========     =========
       </Table>



                                       6
<PAGE>
       <TABLE>
       <CAPTION>
                                                                As of March 31, 2004
                                                 --------------------------------------------------
                                                                Gross         Gross       Estimated
       Long-term investments                     Amortized    Unrealized    Unrealized      Fair
       Held-to-maturity                             Cost        Gains         Losses        Value
       ----------------                          ---------    ----------    ----------    ---------
       <S>                                       <C>          <C>           <C>           <C>
       U.S. Government agency securities         $   2,006    $    --       $      (5)    $   2,001

       Corporate commercial paper and
       loan participations                             963           31          --             994
                                                 ---------    ---------     ---------     ---------
       Total long-term
       held-to-maturity investments              $   2,969    $      31     $      (5)    $   2,995
                                                 =========    =========     =========     =========
       </Table>

       <TABLE>
       <CAPTION>
                                                               As of December 31, 2003
                                                 --------------------------------------------------
                                                                Gross         Gross       Estimated
       Short-term investments                    Amortized    Unrealized    Unrealized      Fair
       Held-to-maturity                             Cost        Gains         Losses        Value
       ----------------                          ---------    ----------    ----------    ---------
       <S>                                       <C>          <C>           <C>           <C>
       U.S. Government agency securities         $   2,010    $    --       $      (9)    $   2,001

       Corporate commercial paper                   10,057           19            (2)       10,074

       Corporate debt securities                     6,162         --             (61)        6,101
                                                 ---------    ---------     ---------     ---------

       Total short-term
       held-to-maturity investments              $  18,229    $      19     $     (72)    $  18,176
                                                 =========    =========     =========     =========
       </TABLE>

       <TABLE>
       <CAPTION>
                                                               As of December 31, 2003
                                                 --------------------------------------------------
                                                                Gross         Gross       Estimated
       Long-term investments                     Amortized    Unrealized    Unrealized      Fair
       Held-to-maturity                             Cost        Gains         Losses        Value
       ----------------                          ---------    ----------    ----------    ---------
       <S>                                       <C>          <C>           <C>           <C>
       Corporate commercial paper                $     956    $      36     $    --       $     992

       Corporate debt securities                     1,001         --              (1)        1,000
                                                 ---------    ---------     ---------     ---------

       Total long-term
       held-to-maturity investments              $   1,957    $      36     $      (1)    $   1,992
                                                 =========    =========     =========     =========
       </Table>

(5)      NET LOSS PER COMMON SHARE

         Basic net loss per common share is calculated by dividing the net loss
by the weighted average number of common and common equivalent shares
outstanding during the period. For the three-month periods ended March 31, 2004
and 2003, the weighted average common shares used to compute basic and diluted
net loss per common share totaled 52,178,130 and 43,945,274 shares,
respectively. Securities convertible into Common Stock comprised of stock
options, warrants and unvested shares of restricted common stock totaling
5,423,117 and 5,637,230 shares at March 31, 2004 and 2003, respectively, were
not used in the calculation of diluted net loss per common share because the
effect would have been antidilutive.

                                       7
<PAGE>
(6)      INCOME TAXES

     The Company did not incur tax expense during the three month periods ended
March 31, 2004 and 2003, due to operating losses and the related increase in the
valuation allowance.

(7)    ENTITY-WIDE GEOGRAPHIC DATA

       The Company operates in a single business segment that includes research
and development of pharmaceutical products. The following table summarizes the
Company's long-lived assets in different geographic locations ($ in thousands):

     <Table>
     <Caption>

                                       MARCH 31, 2004    DECEMBER 31, 2003
                                       --------------    -----------------
     <S>                                  <C>                <C>
     Long-lived assets:
        United States                     $   4,419          $   4,327
        Germany                               1,217              1,310
                                          ---------          ---------
     Total                                $   5,636          $   5,637
                                          =========          =========
     </Table>

         The following table summarizes the Company's revenues in different
geographic locations ($ in thousands):

     <Table>
     <Caption>
                                         THREE MONTHS ENDED MARCH 31,
                                         -----------------------------
                                           2004                2003
                                         ---------           ---------
     <S>                                 <C>                 <C>
     Revenues:
        United States                    $   2,693           $   2,933
        Germany                                142                 283
                                         ---------           ---------
     Total                               $   2,835           $   3,216
                                         =========           =========
     </Table>

         The Company's revenues are primarily derived from several entities each
of whom represent a significant percentage of total revenues. The following
table summarizes the Company's sources of revenues from its principal entities
($ in thousands):

     <Table>
     <Caption>
                                         THREE MONTHS ENDED MARCH 31,
                                         -----------------------------
                                            2004                2003
                                         ---------           ---------
     <S>                                 <C>                 <C>
     Entities:
          GSK                            $   1,792           $   1,148
          Schering-Plough                      901                 882
          Encysive, L.P.                        --                 811
          Other                                142                 375
                                         ---------           ---------
     Total                               $   2,835               3,216
                                         =========           =========
     </Table>

(8)    FOREIGN SUBSIDIARY

       The Company owns approximately 55% of the outstanding common stock of
Revotar and has consolidated the financial results of Revotar into its
consolidated financial statements. The minority interest in Revotar at March 31,
2004 and December 31, 2003, was $1,189,000 and $1,383,000, respectively. The
Company's consolidated net loss for the three-month periods ended March 31, 2004
and 2003 was reduced by $194,000 and $190,000, respectively, for the Revotar
minority shareholders' interest in Revotar's losses.

       Revotar has been awarded research grants from the German government, and
earned approximately $142,000 and $283,000 during the three-month periods ended
March 31, 2004 and 2003, respectively, which is included in license fees,
milestones and grants.

                                       8
<PAGE>

       In addition to the research grants discussed above, Revotar has received
grants from the German government to purchase certain research equipment, which
are being recognized into income over the estimated useful life of the assets.

       The Company and the other stockholders of Revotar executed an agreement
to provide approximately $4.5 million in unsecured loans, of which the Company's
commitment was approximately $3.4 million. The terms of the loans require
quarterly interest payments and repayment of all principal on or before April 1,
2007. The interest rate for the first two years was seven percent, after which
the interest rate will be reset to the U.S. prime rate plus 2.5% if such rate is
higher than seven percent. Pursuant to such agreement, the Company has advanced
approximately $2.7 million to Revotar as of March 31, 2004. During 2003, the
minority shareholders of Revotar advanced approximately $1.5 million to Revotar.
Revotar's management has informed the Company that they anticipate Revotar will
borrow the remaining commitment from the Company of approximately $0.7 million
in the second quarter of 2004. The loan from the Company is denominated in U.S.
dollars. To mitigate the risk of fluctuations in foreign currency exchange
rates, Revotar entered into a forward contract with a bank to fix the exchange
rate at which it will borrow the remaining loan commitment.

(9)      LONG-TERM DEBT

         The Company was a party to a note arising from its acquisition of the
partnership interest of ICOS in ELP in April 2003. The note required a payment
of $4,000,000 on April 22, 2004, and a payment of $2,000,000 on October 22,
2004. The outstanding principal balance of the note accrued interest at a rate
which approximated the three-month London interbank offering rate for U.S.
Dollars ("LIBOR") plus 1.5%. The Company's obligations under the note were
secured with an irrevocable standby letter of credit, for which the Company
pledged marketable securities with an amortized cost of $7,011,000. On March 31,
2004, the Company prepaid its remaining $6,000,000 obligation under the note
plus accrued interest of $38,000.

         As of March 31, 2004, the minority shareholders of Revotar advanced
approximately $1.5 million to Revotar, see Note 8.

(10)   COMMITMENTS AND CONTINGENCIES

       (a) Foreign Currency Exchange Risk

           The Company is exposed to market risk primarily from changes in
foreign currency exchange rates.

           The Company has a majority-owned subsidiary in Germany and
       consolidates the results of operations into its consolidated financial
       results. Although not significant to date, the Company's reported assets,
       liabilities, expenses and cash flows from this subsidiary are exposed to
       changing exchange rates. The Company, accordingly, included unrealized
       gains of $79,000 and $61,000, respectively, in its comprehensive loss for
       the three-month periods ended March 31, 2004 and 2003, respectively. The
       Company had an intercompany receivable from its German subsidiary at
       March 31, 2004 and December 31, 2003; however, this amount is denominated
       in U.S. dollars and is not exposed to exchange risk. Loans by the Company
       to Revotar are denominated in U.S. dollars. To mitigate the risk of
       fluctuations in foreign currency exchange rates, Revotar entered into a
       forward contract with a bank to fix the exchange rate at which it will
       borrow the remaining loan commitment. The Company contracts with entities
       in other areas outside the U.S. and these transactions are denominated in
       a foreign currency. To date, the currencies of these other countries have
       not fluctuated materially.


                                       9
<PAGE>
       (b) Other Contingencies

           Like other biopharmaceutical companies, the Company is subject to
       other contingencies, including legal proceedings and claims arising out
       of its business that cover a wide range of matters, including, among
       others, environmental matters, contract and employment claims, and
       product liability. The Company may be involved in legal actions from time
       to time. The Company has used various substances in its research and
       development which have been or may be deemed to be hazardous or
       dangerous, and the extent of its potential liability, if any, under
       environmental, product liability and workers' compensation statutes,
       rules, regulations and case law is unclear.






                                       10
<PAGE>

ITEM 2.

                 ENCYSIVE PHARMACEUTICALS INC. AND SUBSIDIARIES

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

              THREE MONTHS ENDED MARCH 31, 2004 AND MARCH 31, 2003

                                    OVERVIEW

     The following discussion of our financial condition and results of
operations should be read in conjunction with our consolidated financial
statements and the related notes to the financial statements included in our
Annual Report on Form 10-K for the year ended December 31, 2003, and with the
consolidated financial statements and related notes to the financial statements
included elsewhere in this Form 10-Q. This discussion contains forward-looking
statements based on current expectations that are subject to risks and
uncertainties, such as statements of our plans, objectives, expectations and
intentions. When used in this discussion, the words "expect," "anticipate,"
"intend," "plan," "believe," "seek," "estimate" and similar expressions are
intended to identify forward-looking statements, although not all
forward-looking statements contain these identifying words. Our actual results
and the timing of events could differ materially from those anticipated or
implied by the forward-looking statements discussed here as a result of various
factors, including, among others, those set forth under the "Cautionary Note
Regarding Forward-Looking Statements" in our Annual Report on Form 10-K for the
year ended December 31, 2003. You should not place undue reliance on these
forward-looking statements, which speak only as of the date of this report.
Except as required by law, we undertake no obligation to update any of the
forward-looking statements in this discussion after the date of this report.

       Encysive is a biopharmaceutical company engaged in the discovery,
development and commercialization of novel, synthetic, small molecule compounds
to address unmet medical needs. Our research and development programs are
predominantly focused on the treatment and prevention of interrelated diseases
of the vascular endothelium and exploit our expertise in the area of the
intravascular inflammatory process, referred to as the inflammatory cascade, and
vascular diseases. We have successfully developed one FDA-approved drug,
Argatroban, for the treatment of heparin-induced thrombocytopenia, or HIT, that
is marketed by GlaxoSmithKline plc, also referred to as GSK. Our lead drug
candidate, Thelin(TM), is an endothelin receptor antagonist in Phase III
clinical trials for the treatment of pulmonary arterial hypertension, also
referred to as PAH. In addition, we have earlier stage clinical product
candidates in development including TBC3711, a next generation endothelin
receptor antagonist, and bimosiamose, being developed by our majority-owned
German affiliate, Revotar.

Thelin(TM)

         Thelin(TM) is being developed as a treatment for PAH, a
life-threatening disease characterized by the constriction of blood vessels
leading to the lungs. This constriction leads to very high blood pressure in the
pulmonary arteries as the heart struggles to pump blood to the lungs. PAH
patients suffer from extreme shortness of breath and, as the disease progresses,
are less able to perform the daily activities of living. Over time, PAH leads to
right ventricular failure (heart failure) and death. PAH may be a primary
condition, perhaps caused by genetic factors, or secondary to other diseases
like autoimmune diseases (such as scleroderma or lupus), congenital heart
disease, HIV infection or cirrhosis of the liver. PAH is an orphan disease
(defined in the U.S. as a prevalence of less than 200,000 patients) that
industry research analysts estimate to afflict approximately 80,000 to 100,000
individuals worldwide, many of whom are children and young women.

         In 2002, we successfully completed and announced results of our STRIDE
1 Phase IIb/III pivotal study in PAH with Thelin(TM). We have initiated and are
currently enrolling a Phase III pivotal clinical trial, STRIDE 2. In June 2003,
we received a Special Protocol Assessment, also referred to as an SPA, which is
a binding written agreement between a clinical trial sponsor and the FDA on the
design of pivotal

                                       11
<PAGE>
trials, confirming that, if successful, the STRIDE 2 trial results, together
with the results from STRIDE 1 and planned supportive trials, will be sufficient
for the submission to the FDA of Thelin(TM)'s new drug application, or NDA.

         STRIDE 2 is a 240-patient trial enrolling patients with Class II-IV
PAH, as classified by the World Health Organization, or WHO, of primary or
secondary causes. STRIDE 2 is of 18 weeks duration and tests two doses of
Thelin(TM) (100 mg and 50 mg), versus placebo, dosed once daily in a
double-blind fashion. In addition, a randomized bosentan arm is included. A
total of 50 to 70 centers worldwide will participate. The primary endpoint of
STRIDE 2 is six-minute walk distance, and secondary endpoints include change in
functional class, shortness of breath and the occurrence of clinical
deterioration events. Our goal of completing enrollment in the pivotal trial by
the end of Spring has not changed, although in order to achieve this goal,
recruitment rates need to continue accelerating. Since there is no guarantee
that this acceleration will continue, it is likely that we will need to recruit
patients into the Summer months, possibly up to the end of the third quarter.
Should that occur, we anticipate that the New Drug Application would be
submitted to the Food and Drug Administration on or around the end of the first
quarter in 2005.

         We have worldwide commercialization rights to Thelin(TM). Upon
regulatory approval we intend to commercialize Thelin(TM) in North America
through our own specialty sales force. We are seeking a marketing partner or
partners for sales in the rest of the world.

Argatroban

         Argatroban, licensed from Mitsubishi Pharma Corporation or Mitsubishi
and developed in North America by Encysive, is a synthetic direct thrombin
inhibitor approved by the FDA in 2000. It is indicated for prophylaxis or
treatment of thrombosis for patients with HIT, a profound allergic reaction to
anticoagulation therapy with heparin, and for use in HIT patients undergoing
precutaneous coronary intervention. Argatroban was approved in Canada in 2002
for use as an anticoagulant therapy in patients with HIT syndrome. GSK markets
Argatroban in the U.S. and Canada, and has Waxman Hatch market exclusivity in
the U.S. until June 2005. A pediatric study is underway which could prolong
exclusivity in the U.S. to the end of 2005. In 2003, Encysive earned royalties
from the sales of Argatroban totaling $5.4 million and expects to earn royalties
of $6.7-7.6 million in 2004.

Other Development Programs

         In addition to Thelin(TM) and Argatroban, we have a number of projects
in clinical and preclinical development. TBC3711, a next generation ET(A)
receptor antagonist, has completed Phase I clinical development for the
treatment of PAH. TBC3711 is more selective and more potent than Thelin(TM).

         Our majority-owned German affiliate, Revotar, is developing
bimosiamose, a selectin antagonist discovered in Encysive's laboratories, that
is designed to block inflammatory cells from leaving the vascular space to
travel to tissue sites of inflammation. Revotar recently initiated Phase IIa
clinical trials evaluating the use of topical bimosiamose for the treatment of
psoriasis and atopic dermatitis. An inhaled version of bimosiamose has completed
a 12-patient proof-of-concept study in asthma that demonstrated a statistically
significant improvement in the late asthmatic response, the same target
addressed by inhaled steroid use in asthma. Revotar plans to seek a licensing
partner for inhaled bimosiamose.

         We have entered into a worldwide research collaboration and license
agreement with Schering-Plough Corporation and Schering-Plough LTD, collectively
referred to as Schering-Plough, to discover, develop and commercialize VLA-4
antagonists. Schering-Plough is in the final stages of pre-clinical development
with TBC4746, an oral VLA-4 antagonist. If this work is successful, the next
development step would be to initiate studies in human volunteers. VLA-4 is a
potential target in the inflammatory cascade taking place within the
vasculature. TBC4746 has the potential to address a number of diseases,
including asthma and multiple sclerosis. Additionally, Schering-Plough has also
funded research on a follow-on compound pursuant to the research agreement and
such funding will most likely end on June 30, 2004.

                                       12
<PAGE>
Encysive's Research Programs

         Our research efforts are concentrated on targets within the
vasculature, and the potential indications of our drug candidates include
cardiovascular diseases and a potentially wide variety of inflammatory diseases
involving two complementary sets of targets. The first set of targets relate to
vascular G-protein coupled receptors, or GPCRs. Historically, GPCRs have been
some of the most amenable targets for developing commercially successful
pharmaceuticals, such as beta-blockers, antihistamines, and most anti-psychotics
and anti-depressants. Endothelin receptors, targeted by Thelin(TM) and TBC3711,
are examples of GPCRs.

         Encysive also has developed expertise in pharmacologically intervening
in the intravascular inflammatory cascade, representing a second set of
intravascular targets. Bimosiamose and TBC4746 are examples of drug candidates
that we designed to target two distinct steps in this cascade, the selectins and
VLA-4, respectively. Some of the targets in this cascade are GPCRs. Thus, our
focus on endothelial cell and related vascular biology has opened up a broad
range of disease targets with high unmet medical need.

CRITICAL ACCOUNTING POLICIES

Revenue Recognition

         o   We recognize revenue from service contracts as services are
             performed.

         o   Royalty revenue is recognized as products are sold by a licensee
             and we have received sufficient information to record a receivable.
             Our royalty revenue is based on net sales of product, that is,
             sales net of discounts, returns and allowances. We have estimated a
             percentage of gross sales, based on recent experience, as an
             allowance for future returns, however there can be no assurance
             that our estimate will be accurate. We believe, however, that
             differences between estimated and actual future returns will not
             have a material effect upon our results of operations or financial
             condition.

         o   Revenue from collaborative research and development activities is
             recognized as services are performed.

         o   We defer the recognition of milestone payments related to
             contractual agreements that are still in the development stage.
             Such deferred revenues are amortized into income over the estimated
             remaining development period. Milestone payments received under
             contractual agreements that have completed the development stage
             are evaluated, and either recognized into income when earned, or
             amortized over a future period, depending upon whether or not the
             Company continues to have obligations under the terms of the
             arrangement.

         o   License fees received under the terms of licensing agreements for
             our intellectual property are similarly deferred, and amortized
             into income over the estimated developmental period of the licensed
             item or items.

         o   Revenue from grants is recognized as earned under the terms of the
             related grant agreements, typically as expenses are incurred.

         Amounts received in advance of services being performed under contracts
are recorded as deferred revenue, and recognized as services are performed. We
periodically evaluate our estimates of remaining development periods, and adjust
the recognition of remaining deferred revenues over the adjusted development
period remaining. At March 31, 2004, remaining deferred revenue was
approximately $2.1 million, of which we expect to recognize approximately $0.6
million over the next 12 months. A future change in our estimate of development
periods could accelerate or decelerate the timing of future recognition of
deferred revenue.

                                       13
<PAGE>
Stock Options

         We apply Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees," and related interpretations ("APB 25") in accounting
for our stock option plans and apply FASB Statement No. 123, "Accounting for
Stock-Based Compensation," and related interpretations ("FAS 123") in reporting
for our stock option plans. APB 25 utilizes the "intrinsic value" of stock
options, defined as the difference between the exercise price of an option and
the market price of the underlying share of common stock, on the "measurement
date" which is generally the date of grant. Since the exercise price of employee
stock options issued under our plans is set to match the market price of our
Common Stock, there is generally no compensation expense recognized upon grant
of employee stock options. Options granted to non-employees, if any, are valued
at the fair value of the option as defined by FAS 123, utilizing the
Black-Scholes option pricing model. We record compensation expense for the fair
value of options granted to non-employees. The pro forma effect of recognizing
the fair value of stock option grants to employees on our consolidated results
of operations is discussed in Note 2(c), Stock Based Compensation.

Drug Manufacturing and Packaging

         Costs arising from the manufacturing and packaging of drug product
which is intended for use in clinical trials are recognized as incurred and
included in research and development expenses.

                              RESULTS OF OPERATIONS

         The preparation of financial statements in conformity with accounting
principles generally accepted in the USA requires us to make estimates and
assumptions that affect the reported amounts of assets, liabilities, disclosures
of contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period. Our
operating results have fluctuated significantly during each quarter and year,
and we anticipate that such fluctuations, which are largely attributable to
varying research and development commitments and expenditures, will continue for
the next several years. We have been unprofitable to date and expect to incur
substantial operating losses for the next several years as we invest in product
research and development, preclinical and clinical testing and regulatory
compliance. We have sustained net losses of approximately $194.6 million from
the date of our inception to March 31, 2004. We have primarily financed our
operations to date through a series of private placements and public offerings
of our common stock and several collaborative agreements with third parties to
jointly pursue product research and development. See "Liquidity and Capital
Resources" below. See also "Additional Risk Factors" in Item 1 "Business" in our
Annual Report on Form 10-K for the year ended December 31, 2003.

         In April 2003, we acquired the interest of ICOS Corporation in ELP in a
transaction also referred to as the Acquisition. Of the $10 million purchase
price, $4 million was paid at closing, and the remaining $6 million was subject
to the terms of a note to ICOS which required a $4 million payment in April 2004
and a $2 million payment in October 2004. The Company prepaid its remaining $6
million obligation under the note on March 31, 2004.

         From its inception in June 2000 through December 31, 2002, we and ICOS
shared equally in the costs of ELP. ICOS informed us, however, that it had
reached the conclusion that joint development of the endothelin receptor
antagonist program through ELP should not continue. As a result, from January
2003 until the Acquisition, we agreed to be responsible for 100% of the costs of
ELP under the terms of a letter agreement, which expired upon the Acquisition.

         From its inception in June 2000 through March 31, 2003, we accounted
for our investment in ELP under the equity method. As a result of the
Acquisition, we now include the accounts of ELP in our consolidated financial
statements. A result of the consolidation of ELP into our financial statements
is that the revenue item, "Collaborative research and development from Encysive,
L.P." and the expense item, "Equity in loss of Encysive, L.P." are eliminated
and the operating expenses of ELP are included in our operating expenses.

                                       14
<PAGE>
                THREE MONTH PERIODS ENDED MARCH 31, 2004 AND 2003

REVENUES

         Royalty income increased $0.6 million in the three months ended March
31, 2004, compared with the three months ended March 31, 2003, due to higher net
sales of Argatroban in the current year period. As discussed above, the
operating results of ELP are included in our operating results and, accordingly,
collaborative research and development from Encysive, L.P. and certain license
fee and milestone revenues have been eliminated in consolidation. Total revenues
decreased $0.4 million to $2.8 million from $3.2 million in the three months
ended March 31, 2004 as compared with the three months ended March 31, 2003,
primarily due to the effect of consolidating the results of Encysive, L.P. in
the current year period.

RESEARCH AND DEVELOPMENT EXPENSE

         Research and development expense in the three months ended March 31,
2004 of $12.0 million included approximately $7.4 million in expenses related to
the Thelin(TM) development program, primarily consisting of clinical trials
costs. We believe research and development expenses throughout the remainder of
2004 will continue to be higher than in the comparable 2003 periods, due to the
anticipated costs of Thelin(TM) development. All of Thelin(TM) development costs
in the three months ended March 31, 2003 are reported as "Equity in Loss of
Encysive, L.P." Research and development expenses unrelated to the Thelin(TM)
development program of $4.6 million were comparable to research and development
expenses of $4.2 million in the three months ended March 31, 2003.

GENERAL AND ADMINISTRATIVE EXPENSE

         General and administrative expense in the three months ended March 31,
2004 and 2003 was $2.5 million and $2.2 million, respectively. The increase in
general and administrative expense in the current period is primarily due to
costs associated with our preparation for the future commercialization of
Thelin(TM) if it receives regulatory approval. We believe general and
administrative expense throughout the remainder of 2004 will continue to be
higher than in the comparable 2003 periods, due to costs of preparing for the
commercialization of Thelin(TM) in anticipation of receiving regulatory
approval.

TOTAL OPERATING EXPENSE

         Total operating expense in the three months ended March 31, 2004
increased $5.7 million compared to the three months ended March 31, 2003. As
discussed above, we believe that operating expense in the remainder of 2004 will
continue to be higher than the comparable 2003 periods, primarily due to costs
associated with the Thelin(TM) development and commercialization.

OPERATING LOSS

         Operating loss in the three months ended March 31, 2004 increased $6.2
million compared with the three months ended March 31, 2003, primarily due to
the costs associated with the Thelin(TM) program, discussed above.

INVESTMENT INCOME

         Investment income in the three months ended March 31, 2004 declined
$23,000 compared to the three months ended March 31, 2003. The decline is
primarily due to lower market interest rates during the current year periods.

                                       15
<PAGE>

                         LIQUIDITY AND CAPITAL RESOURCES

         We have financed our research and development activities and other
operations primarily through public and private offerings of our Common Stock
and from funds received through our collaborations, research agreements and
partnerships. We also have received royalty revenue from sales of Argatroban.

         Cash, cash equivalents and investments in marketable securities,
including accrued interest thereon, was $71.6 million at March 31, 2004,
compared with $85.5 million at December 31, 2003. We used $9.9 million in cash
in operating activities, during the three months ended March 31, 2004, compared
to $7.9 million during the three months ended March 31, 2003. The primary
operating uses of cash in the 2004 and 2003 periods were to fund our general
operating expenses and the ongoing research and development programs conducted
by Encysive, Revotar and ELP, reduced by cash received from investment income,
milestones, and research payments from our collaborative partners.

         Investing activities are primarily comprised of our investments in debt
securities. Cash is generated from investing activities when marketable
securities mature, and the resulting cash is utilized, primarily to fund
operating activities. Cash used in investing activities during the three months
ended March 31, 2004 primarily was comprised of the investment of funds received
from our public offering of common stock in December 2003, and purchases of
equipment. Cash provided by investing activities during the three months ended
March 31, 2003 was primarily comprised of the maturity of investments, the
proceeds of which were used to fund operating activities.

         Cash used in financing activities of $3.5 million during the three
months ended March 31, 2004 included a payment of $6 million to ICOS to repay a
note arising from our acquisition of their partnership interest of ELP,
partially offset by approximately $2.5 million in proceeds from the exercise of
employee stock options.

Material Commitments

         Our material contractual obligations are comprised of (i) amounts
borrowed by Revotar from its minority shareholders (see Note 8), (ii)
obligations under our operating lease agreements and (iii) a contigent
obligation to pay the other party of a research agreement a termination fee in
the event that we elect to terminate the project prior to completion.

         As of March 31, 2004, the Company had contractual obligations as
follows ($ in thousands):

         <Table>
         <Caption>
                                                      Less than       1-3          4-5       After 5
         Contractual Obligations          Total         1 year       years        years       years
         -----------------------          -----         ------       -----        -----       -----
         <S>                            <C>            <C>         <C>           <C>         <C>
           Long-term debt                 $ 1,571          ---          ---      $ 1,571        ---
           Operating leases                 5,782      $ 1,704      $ 4,078          ---        ---
           Purchase obligations               600          600          ---          ---        ---
                                          -------      -------      -------       ------      -----
           Total                          $ 7,953      $ 2,304      $ 4,078      $ 1,571        ---
        </Table>

Outlook for 2004

     In 2004, we expect to have the following results:

         <Table>

         <S>                                                <C>
         Royalties......................................    $6.7 to $7.6 million
         Revenues (including royalties).................    $9.0 to $10.0 million
         Expenses (net of Revotar minority interest)....    $55.0 to $58.0 million
         Investment income..............................    $0.8 to $1.0 million
         Net loss.......................................    $(46.0) to $(48.0) million
         Cash and investments at year end...............    $32.0 to $34.0 million
         </Table>

                                       16
<PAGE>
         For a number of reasons discussed elsewhere in this Form 10-Q, we
cannot estimate, with a reasonable degree of certainty, total completion costs
or dates of completion of our ongoing research and development projects. See
also "Additional Risk Factors" in Item 1 "Business" in our Annual Report on Form
10-K for the year ended December 31, 2003, and "Longer-Term Outlook," below.

         These expectations are based upon various assumptions, which are
subject to certain risks, trends and uncertainties that could cause actual
results to differ materially from those projected. Among these risks, trends and
uncertainties are timing and cost of our clinical trials, attainment of research
and clinical goals and milestones of product candidates, and sales levels of
Argatroban. We have assumed that sales trends of Argatroban over the previous
year will continue. While we do not sell Argatroban, our revenues include a
royalty from GSK, which is based on sales and will, accordingly, vary with
sales. Our actual royalty revenues could vary from our assumptions to the extent
that the actual sales of Argatroban differ from assumed levels.

         Projected revenues contain continued amortization of deferred license
fees and milestones previously received from Schering-Plough which are being
deferred over the estimated development period of the respective compound or
program. We periodically review our estimates of development periods, and actual
recognized revenues could increase or decrease to the extent that we decrease or
increase our estimated development periods. Since we believe that
Schering-Plough will most likely not extend the research agreement, we have not
assumed research agreement revenues from Schering-Plough beyond June 30, 2004.

         Projected operating expenses are based upon our approved operating
budget for the year. In the budgeting process, we have not assumed significant
changes in the number of employees during year 2004, and have assumed continued
development of Thelin(TM). Our budgeted expenses also include basic research
efforts on our other programs, and levels of administrative support we believe
to be necessary.

         Projected investment income assumes that the rate of return on invested
funds of approximately 2% on an average of approximately $50 million in funds
available for investment throughout the year.

         Cash and investments at year-end is projected based upon our projected
sources and uses of cash during the year. In projecting our end of year cash and
investment balances, we have not assumed additional financing or collaborative
arrangements other than those in place at this time.

         The range of estimated net loss is based upon our projected revenues
and expenses, as discussed above.

Longer-Term Outlook

         We expect to incur substantial research and development expenditures as
we design and develop biopharmaceutical products for the prevention and
treatment of cardiovascular and other interrelated diseases of the vascular
endothelium. We anticipate that our operating expenses will increase in
subsequent years because:

         o   We expect to incur significant expenses in conjunction with
             additional clinical trial costs for Thelin(TM) and research and
             clinical trial costs for development of bimosiamose compounds and
             expect to begin to incur costs for clinical trials related to
             additional compounds. These costs include:

             -  hiring personnel to direct and carry out all operations related
                to 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.


                                       17
<PAGE>
         o   There may be additional costs in future periods related to
             Argatroban in complying with ongoing FDA requirements.

         o   Our administrative costs and costs to commercialize our products
             will increase as our products are further developed and marketed.

         o   If Thelin(TM) receives regulatory approval, we will incur
             significant commercialization expenses.

         We have been unprofitable to date and expect to incur operating losses
for the next several years as we invest in research and development, preclinical
and clinical testing and regulatory compliance. We will require substantial
additional funding to complete the research and development of our product
candidates, to establish commercial scale manufacturing facilities, if
necessary, and to market our products. Estimates of our future capital
requirements will depend on many factors, including:

         o   market acceptance and commercial success of Argatroban;

         o   expenses and risks associated with clinical trials to expand the
             indications for Thelin(TM);

         o   continued scientific progress in our drug discovery programs;

         o   the magnitude of these programs;

         o   progress with preclinical testing and clinical trials;

         o   the time and costs involved in obtaining regulatory approvals;

         o   the costs involved in filing, prosecuting and enforcing patent
             claims;

         o   competing technological and market developments and changes in our
             existing research relationships;

         o   our ability to maintain and establish additional collaborative
             arrangements; and

         o   effective commercialization activities and arrangements.

         Subject to these factors, we anticipate that our existing capital
resources and other revenue sources, should be sufficient to fund our cash
requirements into the third quarter of 2005. Notwithstanding revenues, which may
be produced through sales of potential future products, if approved, we
anticipate that we will need to secure additional funds to continue the required
levels of research and development to reach our long-term goals. We intend to
seek such additional funding through collaborative arrangements and/or through
public or private financings. Upon regulatory approval, we intend to
commercialize Thelin(TM) in North America through our own specialty sales force.
We are seeking a marketing partner or partners for sales in the rest of the
world.

         In 2002, the stockholders of Revotar executed an agreement to provide
approximately $4.5 million in unsecured loans, of which our commitment was
approximately $3.4 million. Under the loan agreement, we have advanced
approximately $2.7 million to Revotar as of March 31, 2004, and we expect to
advance an additional $0.7 million to Revotar during the second quarter of 2004.
We believe that Revotar's existing funds, the remaining commitment under the
loan agreement and proceeds under German government scientific grants will be
sufficient to fund Revotar into the first quarter of 2005. In order to continue
to operate beyond that time, Revotar will need to seek additional funding
through collaborative arrangements and/or through public or private financings
in the future. Revotar is actively seeking a partner or partners to develop the
inhaled indications of bimosiamose.

                                       18
<PAGE>
Off-Balance Sheet Arrangements

         We do not engage in off-balance sheet financing arrangements.

                     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 our
operations.

              CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

         This Form 10-Q contains forward-looking statements within the meaning
of Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). All statements other than
statements of historical fact included in and incorporated by reference into
this Form 10-Q are forward-looking statements. These forward-looking statements
include, without limitation, statements regarding our estimate of the
sufficiency of our existing capital resources and our ability to raise
additional capital to fund cash requirements for future operations, and
regarding the uncertainties involved in the drug development process and the
timing of regulatory approvals required to market these drugs. Although we
believe that the expectations reflected in these forward-looking statements are
reasonable, we cannot give any assurance that such expectations reflected in
these forward-looking statements will prove to have been correct.

         When used in this Form 10-Q, the words "expect," "anticipate,"
"intend," "plan," "believe," "seek," "estimate" and similar expressions are
intended to identify forward-looking statements, although not all
forward-looking statements contain these identifying words. Because these
forward-looking statements involve risks and uncertainties, actual results could
differ materially from those expressed or implied by these forward-looking
statements for a number of important reasons, including those discussed under
"Management's Discussion and Analysis of Financial Condition and Results of
Operations - Liquidity and Capital Resources."

         You should read these statements carefully because they discuss our
expectations about our future performance, contain projections of our future
operating results or our future financial condition, or state other
"forward-looking" information. Before you invest in our Common Stock, you should
be aware that the occurrence of any of the contingent factors described herein
under "Management's Discussion and Analysis of Financial Condition and Results
of Operations - Liquidity and Capital Resources" and described under "Additional
Risk Factors" in our Annual Report on Form 10-K for the year ended December 31,
2003 could substantially harm our business, results of operations and financial
condition. Upon the occurrence of any of these events, the trading price of our
Common Stock could decline, and you could lose all or part of your investment.

         We cannot guarantee any future results, levels of activity, performance
or achievements. Except as required by law, we undertake no obligation to update
any of the forward-looking statements in this Form 10-Q after the date of this
Form 10-Q.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

                         FOREIGN CURRENCY EXCHANGE RISK

         We are exposed to market risk primarily from changes in foreign
currency exchange rates. The following describes the nature of this risk that is
not believed to be material to us.

         We have a majority-owned affiliate in Berlin, Germany and consolidate
the results of operations into our consolidated financial results. Although not
material to date, our reported expenses and cash flows


                                       19
<PAGE>
from this affiliate are exposed to changing exchange rates. We also have
contracts with entities in other areas outside the U.S. that are denominated in
a foreign currency. To date, these currencies have not fluctuated materially. At
March 31, 2004, Revotar had a foreign-exchange forward contract with a bank to
mitigate the effect of foreign currency fluctuations on approximately $0.7
million in future loan payments from us.

ITEM 4.  CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

         As of the end of the period covered by this report, our management
carried out an evaluation, with the participation of our principal executive
officer (the "CEO") and our principal financial officer (the "CFO"), of the
effectiveness of our disclosure controls and procedures pursuant to Rule 13a-15
of the Securities Exchange Act of 1934. Based on those evaluations, the CEO and
CFO believe:

         (i)  that our disclosure controls and procedures are designed to ensure
that information required to be disclosed by us in the reports that we file or
submit under the Securities Exchange Act of 1934 is recorded, processed,
summarized and reported within the time periods specified in the SEC's rules and
forms, and that such information is accumulated and communicated to our
management, including the CEO and CFO, as appropriate to allow timely decisions
regarding required disclosure; and

         (ii) that our disclosure controls and procedures are effective.

Changes in Internal Controls Over Financial Reporting

         There have been no significant changes in our internal controls over
financial reporting during the period covered by this report that has materially
affected, or are reasonably likely to materially affect, our control over
financial reporting.





                                       20
<PAGE>
PART II OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

         None

ITEM 2.  CHANGES IN SECURITIES, USE OF PROCEEDS AND ISSUER PURCHASES OF
         EQUITY SECURITIES
         None.

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

         None

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

         None

ITEM 5.  OTHER INFORMATION

         None

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

         One report on Form 8-K was filed during the quarter ended March 31,
     2004. A report on Form 8-K was filed on February 19, 2004 regarding the
     Company's full year 2003 results.

     EXHIBIT NO.             DESCRIPTION
     -----------             -----------

       31.1                  Certification of Chief Executive Officer pursuant
                             to Rule 13a-14(a) / Rule 15d-14(a), promulgated
                             under the Securities Exchange Act of 1934, as
                             amended.

       31.2                  Certification of Chief Financial Officer pursuant
                             to Rule 13a-14(a) / Rule 15d-14(a), promulgated
                             under the Securities Exchange Act of 1934, as
                             amended.

       32.1                  Certification Pursuant to 18 U.S.C. Section 1350,
                             as Adopted Pursuant to Section 906 of the
                             Sarbanes-Oxley Act of 2002.

       32.2                  Certification Pursuant to 18 U.S.C. Section 1350,
                             as Adopted Pursuant to Section 906 of the
                             Sarbanes-Oxley Act of 2002.



                                       21
<PAGE>

                          ENCYSIVE PHARMACEUTICALS INC.

                                   MAY 3, 2004

                                   SIGNATURES

Pursuant to the requirements of the Securities 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 3rd day of May, 2004.

                                          ENCYSIVE PHARMACEUTICALS INC.


                                          By: /s/  Bruce D. Given, M.D.
                                              ----------------------------------
                                          Bruce D. Given, M.D.
                                          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)




                                       22
<PAGE>
                                INDEX TO EXHIBITS



     EXHIBIT NO.             DESCRIPTION
     -----------             -----------

       31.1                  Certification of Chief Executive Officer pursuant
                             to Rule 13a-14(a) / Rule 15d-14(a), promulgated
                             under the Securities Exchange Act of 1934, as
                             amended.

       31.2                  Certification of Chief Financial Officer pursuant
                             to Rule 13a-14(a) / Rule 15d-14(a), promulgated
                             under the Securities Exchange Act of 1934, as
                             amended.

       32.1                  Certification Pursuant to 18 U.S.C. Section 1350,
                             as Adopted Pursuant to Section 906 of the
                             Sarbanes-Oxley Act of 2002.

       32.2                  Certification Pursuant to 18 U.S.C. Section 1350,
                             as Adopted Pursuant to Section 906 of the
                             Sarbanes-Oxley Act of 2002.