<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, 2002

                                       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, 20th Floor, 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, exclusive of treasury shares, as of the latest practicable date.

           Class                                 Outstanding at May 6, 2002
           -----                                 --------------------------

common stock, $0.005 par value                            43,745,872


<PAGE>



                         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 March 31, 2002 and December 31, 2001                    3

           Consolidated Statements of Operations and Comprehensive Income for the
           three months ended March 31, 2002 and 2001                                                4

           Consolidated Statements of Cash Flows for the three months ended
           March 31, 2002 and 2001                                                                   5

           Notes to Consolidated Financial Statements                                                6

           ITEM 2:   MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                     FINANCIAL CONDITION AND RESULTS OF OPERATIONS                                  17

           ITEM 3:   QUANTITATIVE AND QUALITATIVE DISCLOSURES
                     ABOUT MARKET RISK                                                              23


PART II.   OTHER INFORMATION

           ITEM 1:  Legal Proceedings                                                               25

           ITEM 2:  Changes in Securities                                                           25

           ITEM 3:  Defaults Upon Senior Securities                                                 25

           ITEM 4:  Submission of Matters to a Vote of Security Holders                             25

           ITEM 5:  Other Information                                                               25

           ITEM 6:  Exhibits and Reports on Form 8-K                                                25


SIGNATURES                                                                                          26
</Table>


<PAGE>

                TEXAS BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                        ($ IN THOUSANDS, EXCEPT PER DATA)

<Table>
<Caption>

                                                                           MARCH 31,     DECEMBER 31,
ASSETS                                                                       2002           2001
------                                                                   ------------    ------------
                                                                         (unaudited)
<S>                                                                      <C>             <C>
Current assets:
       Cash and cash equivalents                                         $     26,308    $     10,086
       Short-term investments                                                  29,416          46,465
       Accounts receivable                                                        943             655
       Other current receivables                                                  326             618
       Receivable from related party under collaborative arrangement              665           1,144
       Prepaids                                                                 2,225           1,350
                                                                         ------------    ------------
            Total current assets                                               59,883          60,318

Long-term investments                                                          30,680          38,876
Equipment and leasehold improvements, net                                       5,306           4,300
Other assets                                                                      841             868
                                                                         ------------    ------------
            Total assets                                                 $     96,710    $    104,362
                                                                         ============    ============

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
       Accounts payable                                                  $      2,455    $      2,187
       Accrued expenses                                                         2,617           3,902
       Deferred revenue from related party                                      1,159           1,159
       Deferred revenue from unrelated parties                                    748             748
                                                                         ------------    ------------
            Total current liabilities                                           6,979           7,996

Liability to related party                                                      3,872           3,533
Deferred revenue from related party                                             1,434           1,722
Deferred revenue from unrelated parties                                         2,854           3,041
Deferred credit                                                                 2,620           2,620
Minority interest in Revotar                                                      956           1,213

Commitments and contingencies

Stockholders' equity:
       Preferred stock, par value $.005 per share. At March 31, 2002,
            and December 31, 2001, 5,000,000 shares authorized;
            none outstanding                                                       --              --
       Common stock, par value $.005 per share. At March 31, 2002
            75,000,000 shares authorized; 43,913,972 shares issued
            At December 31, 2001, 75,000,000 shares authorized;
            43,783,638 shares issued                                              220             218
       Additional paid-in capital                                             211,483         210,616
       Deferred compensation expense                                             (300)             --
       Treasury stock, 213,000 shares at March 31, 2002, and
            December 31, 2001                                                  (1,602)         (1,602)
       Accumulated other comprehensive loss                                      (360)           (299)
       Accumulated deficit                                                   (131,446)       (124,696)
                                                                         ------------    ------------
            Total stockholders' equity                                         77,995          84,237
                                                                         ------------    ------------
            Total liabilities and stockholders' equity                   $     96,710    $    104,362
                                                                         ============    ============
</Table>


           See accompanying notes to consolidated financial statements




                                       3
<PAGE>

                TEXAS BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                            AND COMPREHENSIVE INCOME
                     ($ in thousands, except per share data)
                                   (unaudited)

<Table>
<Caption>


                                                        THREE MONTHS ENDED MARCH 31,
                                                        ----------------------------
                                                            2002            2001
                                                        ------------    ------------
<S>                                                     <C>             <C>
Revenues:
      Research agreements                               $        913    $      1,434
      Collaborative research and development from
           ICOS-TBC, L.P.                                        240             401
      Royalty income, net                                        965             177
      License fee and milestone income                           475             257
                                                        ------------    ------------
           Total revenues                                      2,593           2,269
                                                        ------------    ------------

Expenses:
      Research and development                                 5,190           3,509
      Equity in loss of ICOS-TBC, L.P.                         2,510           1,529
      General and administrative                               2,667           1,455
                                                        ------------    ------------
           Total expenses                                     10,367           6,493
                                                        ------------    ------------

           Operating loss                                     (7,774)         (4,224)

Investment income, net                                           767           1,653
                                                        ------------    ------------
           Net loss before minority interest                  (7,007)         (2,571)

Minority interest in loss of Revotar                             257              61
                                                        ------------    ------------

      Net loss                                                (6,750)         (2,510)

Other comprehensive loss:
      Unrealized loss on foreign currency translation            (61)           (295)
                                                        ------------    ------------

           Comprehensive loss                           $     (6,811)   $     (2,805)
                                                        ============    ============

Net loss per common share-
      basic and diluted                                 $      (0.15)   $      (0.06)
                                                        ============    ============

Weighted average common shares used to compute
      basic and diluted net loss per share                43,613,146      43,665,512
                                                        ============    ============
</Table>

           See accompanying notes to consolidated financial statements







                                       4
<PAGE>


                TEXAS BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                     ($ in thousands, except per share data)
                                   (unaudited)


<Table>
<Caption>

                                                                       THREE MONTHS ENDED MARCH 31,
                                                                       ----------------------------
                                                                           2002            2001
                                                                       ------------    ------------
<S>                                                                    <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net loss                                                            $     (6,750)   $     (2,510)
   Adjustments to reconcile net loss to net cash
     used in operating activities:
           Depreciation and amortization                                        257             223
           Equity in loss of ICOS-TBC, L.P.                                   2,510           1,529
           Minority interest in loss of Revotar                                (257)            (61)
           Expenses paid with stock                                             230              --
           Compensation expense related to stock options                        182              63
           Loss on disposition of fixed assets                                   --               6
          Amortization of premium/discount on investments                        66              --
     Change in operating assets and liabilities, net of
      effect of acquisition:
          Decrease in interest receivable included in short-term
             and long-term investments                                          278             143
          (Increase) decrease in accounts receivable                           (288)             12
          Increase in prepaids                                                 (875)           (149)
          Decrease (increase) in other current receivables                      292            (862)
          Decrease (increase) in receivable from related party under
             collaborative arrangement                                          479          (1,248)
          Decrease in current liabilities                                    (1,017)         (1,062)
          (Decrease) increase in liability to related party                  (2,171)              4
          Decrease in deferred revenue from unrelated parties                  (187)           (136)
          Decrease in deferred revenue from related party                      (288)           (125)
                                                                       ------------    ------------
     Net cash used in operating activities                                   (7,539)         (4,173)
                                                                       ------------    ------------

CASH FLOWS FROM INVESTING ACTIVITIES:
   Purchases of equipment and leasehold improvements                         (1,236)           (248)
   Purchase of investments                                                  (32,888)        (54,403)
   Maturity of investments                                                   57,789          31,690
                                                                       ------------    ------------
     Net cash provided by (used in)  investing activities                    23,665         (22,961)
                                                                       ------------    ------------

CASH FLOWS FROM FINANCING ACTIVITIES:
   Proceeds from sale of common stock and option and
     warrant exercises, net                                                     157          21,107
                                                                       ------------    ------------
     Net cash provided by financing activities                                  157          21,107

Effect of exchange rate changes on cash                                         (61)           (295)
                                                                       ------------    ------------
     Net increase (decrease)  in cash and cash equivalents                   16,222          (6,322)

Cash and cash equivalents at beginning of year                               10,086          48,470
                                                                       ------------    ------------

Cash and cash equivalents at end of year                               $     26,308    $     42,148
                                                                       ============    ============

Supplemental schedule of noncash financing activities:
   deferred compensation expense                                       $        300    $         --
                                                                       ============    ============
   issuance of Common Stock for expenses                               $        230    $         --
                                                                       ============    ============
</Table>

           See accompanying notes to consolidated financial statements








                                       5
<PAGE>





                TEXAS BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                MARCH 31, 2002 (UNAUDITED) AND DECEMBER 31, 2001

(1)      BASIS OF PRESENTATION

         The accompanying unaudited consolidated financial statements of Texas
Biotechnology Corporation and its subsidiaries (collectively referred to as the
"Company" or "TBC") 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, 2001. 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. 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, 2002 are not necessarily
indicative of the results that may be expected for any other interim period, or
for the year ended December 31, 2002.

(2)      ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

         (a) Organization

                  Texas Biotechnology Corporation (the "Company" or "TBC"), a
         Delaware corporation, 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.
         On July 25, 1994, the Company acquired all of the outstanding common
         stock of ImmunoPharmaceutics, Inc. ("IPI") in exchange for common
         stock, par value $.005 per share (the "Common Stock"), of the Company.
         On June 6, 2000, TBC, through its wholly owned subsidiary, TBC-ET,
         Inc., a Delaware Corporation, and ICOS Corporation, a Delaware
         Corporation, ("ICOS") entered into an agreement and formed ICOS-Texas
         Biotechnology L.P., a Delaware limited partnership ("ICOS-TBC"), to
         develop and globally commercialize endothelin-A receptor antagonists.
         TBC and ICOS are both 50% owners in ICOS-TBC. During the third quarter
         of 2000, TBC formed Revotar Biopharmaceuticals AG ("Revotar"), a German
         corporation, to conduct research and development for novel small
         molecule compounds and to develop and commercialize TBC's selectin
         antagonists. The Company retained an approximately 55% interest in
         Revotar. 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 be unsuccessful. Sales of the Company's first 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, IPI and TBC-ET,
         Inc., and its majority controlled subsidiary, Revotar. All material
         intercompany balances and transactions have been eliminated.






                                       6
<PAGE>

         (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 March 31, 2002, approximately $396,000 was invested in
         demand and money market accounts, and approximately $25,912,000 was
         invested in corporate commercial paper and loan participations with a
         maturity of less than three months. Short-term investments are those
         investments which have an original maturity of less than one year and
         greater than three months at the purchase date. At March 31, 2002, the
         Company's short-term investments consisted of approximately $28,896,000
         in corporate commercial paper and loan participations, time deposits of
         $436,000 and accrued interest of $84,000. Long-term investments consist
         of approximately $23,991,000 in government agency bonds, and $6,329,000
         in corporate bonds and loan participations and $360,000 in accrued
         interest thereon, all with a remaining 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 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.

         (e) Investment in ICOS - TBC

                  The Company accounts for the investment in ICOS-TBC using the
         equity method. Because the Company had no basis in the technology
         transferred to ICOS-TBC as the Company's original investment, the
         Company did not record an amount for its original investment. The
         Company records its share of the ICOS-TBC loss as a liability to
         related party as the Company funds its portion of the loss.

                  ICOS-TBC paid a license fee and a milestone payment to the
         Company in 2000 and 2001, respectively. Because the Company has
         continuing obligations to ICOS-TBC, the Company deferred these amounts
         and is amortizing them into revenue over the estimated developmental
         period of the underlying technology.

         (f) 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. Salaries and
         benefits charged to research and development in the three-month period
         ended March 31, 2002 and 2001 were approximately $2,092,000 and
         $1,598,000, respectively. Payments related to the acquisition of
         in-process research and development, if any, are expensed as incurred
         until the development phase of the purchased compound is completed.

         (g) Net Loss Per Common Share

                  Basic net loss per common share is calculated by dividing the
         net loss applicable to common shares by the weighted average number of
         common and common equivalent shares outstanding during the period. For
         the three month periods ended March 31, 2002 and 2001, the weighted
         average common shares used to compute basic and diluted net loss per
         common share totaled 43,613,146 and 43,665,512 shares, respectively.
         Securities convertible into common stock, comprised of stock options
         and warrants totaling 5,485,252 and 4,313,914 shares at March 31, 2002
         and 2001, respectively, were not used in the calculation of diluted net
         loss per common share because the effect would have been antidilutive.

         (h) Revenue Recognition

                  Revenue from service contracts is recognized as services are
         performed. Royalty revenue is recognized as products are sold by a
         licensee and we have received sufficient information to record a
         receivable. The Company defers the recognition of milestone payments
         related to contractual




                                       7
<PAGE>

         agreements which are still in the developmental stage. Such deferred
         revenues are amortized into income over the estimated remaining
         development period. Milestone payments received under contractual
         agreements which 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. License fees
         received under the terms of licensing agreements for the Company's
         intellectual property are similarly deferred, and amortized into income
         over the estimated development period of the licensed item or items.
         The Company periodically evaluates its estimates of remaining
         development periods, and adjusts the recognition of remaining deferred
         revenues over the adjusted development period remaining. 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.

         (i) Patent Application Costs

                  Costs incurred in filing for, defending and maintaining
         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, liabilities, revenues
         and expenses and the disclosure of contingent assets and liabilities to
         prepare these consolidated financial statements in conformity with
         accounting principles generally accepted in the United States of
         America. Actual results could differ from these estimates.

         (k) Intangible Assets

                  Intangible assets, consisting of amounts paid for products
         approved by the United States Food and Drug Administration ("FDA"), are
         amortized on a straight-line basis over their estimated useful lives.
         The Company periodically reviews the useful lives of its intangible and
         long-lived assets, which may result in future adjustments to the
         amortization periods. Related amortization expense for each of the
         three month periods ended March 31, 2002 and 2001 was $27,000.
         Amortization of intangible assets is included in general and
         administrative expense in the consolidated statements of operations and
         comprehensive income.

         (l) Treasury Stock

                  Treasury stock is recorded at cost. On May 3, 2001, the
         Company announced a stock repurchase program to buy up to 3 million
         shares, or approximately 7 percent, of the Company's outstanding common
         stock over an 18 month period. Pursuant to the stock repurchase
         program, the Company had repurchased 213,000 shares for $1,602,000
         during the year ended December 31, 2001. No treasury shares were
         repurchased in the three month period ended March 31, 2002.

         (m) 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.



                                       8
<PAGE>

         (n) Impairment of Long-lived Assets

                  As circumstances dictate, the Company evaluates the
         recoverability of its intangible and long-lived assets by comparing the
         projected undiscounted net cash flows associated with such assets
         against their respective carrying values. Impairment, if any, is based
         on the excess of the carrying value over the fair value.

         (o) New Accounting Pronouncements

                  In July 2001, the Financial Accounting Standards Board (FASB)
         issued Statement of Financial Accounting Standards No. 141 (SFAS141),
         "Business Combinations." SFAS141 eliminates the pooling of interests
         method of accounting and requires that all business combinations
         initiated after June 30, 2001 be accounted for under the purchase
         method. The adoption of SFAS141 did not have a material impact on the
         Company because it currently has no planned or pending acquisitions.

                  In July 2001, the FASB also issued Statement of Accounting
         Standards No. 142, "Goodwill and Other Intangible Assets," (SFAS142)
         which was effective for the Company as of January 1, 2002. SFAS142
         requires goodwill and other intangible assets with indefinite lives no
         longer be amortized. SFAS142 further requires the fair value of
         goodwill and other intangible assets with indefinite lives be tested
         for impairment upon adoption of this statement, annually and upon the
         occurrence of certain events and be written down to fair value if
         considered impaired. The adoption of SFAS142 by the Company did not
         have a material impact on its business because it currently has no
         goodwill or other intangible assets with indefinite lives.

                  In August 2001, the FASB issued Statement of Accounting
         Standards No. 143, "Accounting for Asset Retirement Obligations,"
         (SFAS143) which addresses financial accounting and reporting for
         obligations associated with the retirement of tangible long-lived
         assets and the associated asset retirement costs. This statement
         applies to all entities that have legal obligations associated with the
         retirement of long-lived assets that result from the acquisition,
         construction, development or normal use of the assets. SFAS143 is
         effective for all fiscal years beginning after June 15, 2002. The
         Company does not expect the adoption of SFAS143 to have a significant
         impact on its financial condition or results of operations.

                  In October 2001, the FASB issued Statement of Accounting
         Standards No. 144, "Accounting for the Impairment or Disposal of
         Long-Lived Assets," (SFAS144) which addresses financial accounting and
         reporting for the impairment or disposal of long-lived assets. While
         SFAS144 supersedes SFAS No. 121, "Accounting for the Impairment of
         Long-Lived Assets and for Long-Lived Assets to be Disposed of," it
         retains many of the fundamental provisions of that statement. SFAS144
         also supersedes the accounting and reporting provisions of APB Opinion
         No. 30, "Reporting the Results of Operations - Reporting the Effects of
         Disposal of a Segment of a Business, and Extraordinary, Unusual and
         Infrequently Occurring Events and Transactions," for the disposal of a
         segment of a business. The adoption of SFAS144 as of January 1, 2002
         did not have a significant impact on the Company's financial condition.

         (p) Reclassifications

                  Certain reclassifications have been made to prior period
         financial statements to conform to the March 31, 2002 presentation with
         no effect on net loss previously reported.


(3)      CAPITAL STOCK

         In December 1993, the Company completed an initial public offering
comprised of 4,082,500 units, each unit consisting of one share of Common Stock
(par value $.005 per share) and one warrant to purchase one share of Common
Stock. Proceeds to the Company were approximately $24.2 million, net of selling
expenses of approximately $3.3 million. The securities included in the unit
subsequently separated into its



                                       9
<PAGE>

Common Stock and warrant components. The warrants were exercisable at $8.44 per
share. On December 13, 1998, the expiration date of the warrants was extended
from December 14, 1998 to September 30, 1999 for those warrant holders electing
such extension. On September 13, 1999, the expiration date of the warrants was
further extended to December 31, 2000. There were 2,386,645 warrants outstanding
as of December 31, 2000 which were exercised on January 3, 2001 for proceeds of
approximately $20.1 million.

       The Company has reserved Common Stock for issuance as of March 31, 2002
as follows:

<Table>

<S>                                                                 <C>
       Stock option plans...................................          6,020,409
       Warrants outstanding.................................            247,858
                                                                    -----------
             Total shares reserved..........................          6,268,267
</Table>

         Shareholders' Rights Plan

                  In January 2002, the Company adopted a shareholder rights plan
         under which the Board of Directors declared a dividend of one preferred
         stock purchase right ("Right") for each outstanding share of the
         Company's common stock held of record as of the close of business on
         January 22, 2002. Each Right initially entitles a shareholder to
         purchase a one one-thousandth fraction of a share of Preferred Stock -
         Junior Participating Series A (the "Preferred Stock") for $55.00. Each
         such fraction of a share of Preferred Stock has terms designed to make
         it essentially equivalent to one share of Common Stock. The Rights will
         become exercisable only in the event a person or group acquires 15% or
         more of the Company's Common Stock or commences a tender or exchange
         offer which, if consummated, would result in that person or group
         owning 15% of the Common Stock. Prior to such an event, the Rights will
         be evidenced by and traded in tandem with the Common Stock.

                  If a person or group acquires a 15% or larger position in the
         Company, each Right (except those held by the acquiring party) will
         then entitle its holder to purchase fractional shares of Preferred
         Stock having twice the value of the $55 exercise price, with each
         fractional Preferred Share valued at the market price of the Common
         Stock. Also, if following an acquisition of 15% or more of the
         Company's Common Stock, the Company is acquired by that person or group
         in a merger or other business combination transaction, each Right would
         then entitle its holder to purchase Common Stock of the acquiring
         company having a value of twice the $55.00 exercise price. The effect
         will be to entitle the Company's shareholders to buy stock in the
         acquiring company at 50% of its market price.

                  The Company may redeem the Rights at $.001 per Right at any
         time on or prior to the tenth business day following the acquisition of
         15% or more of its Common Stock by a person or group or commencement of
         a tender offer for such 15% ownership. The Rights expire on January 2,
         2012.




                                       10
<PAGE>




(4)      STOCK OPTIONS

         The Company applies Accounting Principles Board Opinion No. 25,
Accounting for Stock Issued to Employees, and related interpretations in
accounting for its plans and applies FASB Statement No. 123, Accounting for
Stock-Based Compensation, and related interpretations in reporting for its
plans.

         A summary of stock options as of March 31, 2002, 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-$21.59     285,715        155,494     130,221        139,664             --
1992 Plan............     $ 1.41-$21.59   1,700,000        881,381     789,971        823,976         28,648
Director Plan........     $ 3.50-$ 4.54      71,429         34,242      37,187         34,242             --
1995 Plan............     $ 1.31-$21.59   2,000,000      1,584,506     395,133      1,447,412         20,361
1995 Director Plan...     $ 1.38-$11.31     500,000        326,596      44,535        264,096        128,869
1999 Plan ...........     $ 5.51-$20.13   3,000,000      2,255,175     139,688        477,410        605,137
                                          ---------    -----------   ---------     ----------    -----------
       TOTALS........                     7,557,144      5,237,394   1,536,735      3,186,800        783,015
                                          =========    ===========   =========     ==========    ===========
</Table>

         Pursuant to provisions contained within his employment agreement, in
March 2002 the Company's new chief executive officer was awarded 50,000 shares
of the Company's common stock out of the 1999 Plan. The awarded shares will vest
after completion of three years' service to the Company. The Company recorded
deferred compensation expense of $309,000, which will be recognized over the
vesting period. General and administrative expenses included $9,000 in
compensation expense during the quarter ended March 31, 2002.

         In conjunction with the retirement of the Company's former chief
executive officer, the Company modified vesting and time to exercise of certain
stock options of the officer and recorded compensation expense of approximately
$173,000, which was included in general and administrative expenses, during the
quarter ended March 31, 2002.

(5)    INCOME TAXES

       The Company did not incur tax expense during the three month periods
ended March 31, 2002 and 2001, due to operating losses and the related increase
in the valuation allowance.

       The reconciliation of income taxes at the statutory rate of 35% applied
to income before taxes for the three months ended March 31, 2002 and 2001 is as
follows:

<Table>
<Caption>

                                              2002                2001
                                          ------------       ------------
<S>                                       <C>                <C>
Computed "expected" tax expense           $ (2,362,000)      $   (879,000)
Effect of:
     Permanent differences                     178,000            122,000
     Increase in valuation allowance         2,184,000            757,000
                                          ------------       ------------
Tax expense                               $         --       $         --
                                          ============       ============
</Table>






                                       11
<PAGE>



         The tax effects of the temporary differences that give rise to
significant portions of the deferred tax assets as of March 31, 2002 and
December 31, 2001 are as follows:

<Table>
<Caption>

                                   MARCH 31, 2002    DECEMBER 31, 2001
                                   --------------    -----------------
<S>                                <C>               <C>
Loss carryforwards                  $ 33,529,000       $ 30,472,000
Start-up costs                        10,088,000         10,775,000
Property, plant and equipment            895,000            993,000
Deferred revenue                       2,167,000          2,333,000
Other                                    969,000            891,000
                                    ------------       ------------
     Gross deferred tax assets        47,648,000         45,464,000
     Valuation allowance             (47,648,000)       (45,464,000)
                                    ------------       ------------
     Net deferred tax assets        $         --       $         --
                                    ============       ============
</Table>

       The Company has established a valuation allowance for the full amount of
these deferred tax assets, as management believes that it is more likely than
not that the Company will not recover these assets. 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 2005
through 2022.

(6)      EQUIPMENT AND LEASEHOLD IMPROVEMENTS

         Equipment and leasehold improvements consist of the following:

<Table>
<Caption>

                                                        MARCH 31,       DECEMBER 31,
                                                          2002              2001
                                                      ------------      ------------
<S>                                                   <C>               <C>
Laboratory and office equipment                       $  9,640,000      $  8,407,000
Leasehold improvements                                   4,305,000         4,302,000
                                                      ------------      ------------
                                                        13,945,000        12,709,000
Less accumulated depreciation and amortization .         8,639,000         8,409,000
                                                      ------------      ------------
                                                      $  5,306,000      $  4,300,000
                                                      ============      ============
</Table>

(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:


<Table>
<Caption>

                       MARCH 31, 2002   DECEMBER 31, 2001
                       --------------   -----------------
<S>                     <C>             <C>
Long-lived assets:
   United States        $  5,067,000      $  4,446,000
   Germany                 1,080,000           722,000
                        ------------      ------------
Total                   $  6,147,000      $  5,168,000
                        ============      ============
</Table>

(8)      RESEARCH AGREEMENTS

         Under the terms of the Company's agreement with ICOS-TBC, the Company
will provide, and be reimbursed for, research and development activities
conducted on behalf of ICOS-TBC. See Note 9, License Agreements, below.

         The Company also receives reimbursement for certain research costs
pursuant to its agreements with Schering-Plough (Note 9), Revotar (Note 10) and
GlaxoSmithKline ("GSK") (Note 11).




                                       12
<PAGE>

(9)      LICENSE AGREEMENTS

         Mitsubishi Pharma Agreement

                  TBC has entered into an agreement with Mitsubishi Pharma
         Corporation, formerly Mitsubishi-Tokyo Pharmaceuticals, Inc.
         ("Mitsubishi") to license Mitsubishi's rights and technology relating
         to Argatroban and to license Mitsubishi's own proprietary technology
         developed with respect to Argatroban (the "Mitsubishi Agreement").
         Under the Mitsubishi Agreement, the Company has an exclusive license to
         use and sell Argatroban in the U.S. and Canada for all specified
         indications. The Company is required to pay Mitsubishi specified
         royalties on net sales of Argatroban by the Company and its
         sublicensees after its commercial introduction in the U.S. and Canada.
         Either party may terminate the Mitsubishi Agreement on 60 days notice
         if the other party defaults in its material obligations under the
         agreement, declares bankruptcy or is insolvent, or if a substantial
         portion of its property is subject to levy. Unless terminated sooner
         pursuant to the above described termination provisions, the Mitsubishi
         Agreement expires on the later of termination of patent rights in a
         particular country or 20 years after first commercial sale of products.
         Under the Mitsubishi Agreement, TBC has access to an improved
         formulation patent granted in 1993 which expires in 2010 and a use
         patent which expires in 2009. During 2000, we signed an additional
         agreement with Mitsubishi that provides TBC with royalties on sales of
         Argatroban in certain European countries, and up to a total of $5.0
         million in milestones for the development of ischemic stroke and
         certain other provisions. In conjunction with the Mitsubishi Agreement,
         a consulting firm involved in negotiations related to the agreement
         will receive a percentage of net sales received as a result of the
         agreement. The Company enrolled its first patient in a clinical trial
         for ischemic stroke in April 2001, and received a $2.0 million
         milestone payment in May, which is being recognized in revenues over
         the expected development period, and accordingly, revenues in the three
         month period ended March 31, 2002 include approximately $95,000 related
         to such milestone payment.

                  In exchange for the license from Genentech, Inc, (the "Former
         Licensor") of its Argatroban technology, TBC issued the Former Licensor
         285,714 shares of Common Stock during 1993 and issued an additional
         214,286 shares of Common Stock on October 9, 1997, after acceptance of
         the filing of the first New Drug Application ("NDA") with the United
         States Food and Drug Administration (the "FDA") for Argatroban. On June
         30, 2000, the Company issued an additional 71,429 shares of Common
         Stock to Genentech in conjunction with the approval of the NDA for
         Argatroban in patients with HIT. The value of $965,970 has been
         recorded as an intangible asset and is being amortized over the
         estimated useful life of the asset. Amortization expense recorded in
         the three month periods ended March 31, 2002 and 2001 was approximately
         $27,000 and $26,000, respectively. Additionally, on October 9, 1997,
         upon acceptance of the filing of the first NDA for Argatroban with the
         FDA, the Company granted the Former Licensor a warrant to purchase an
         additional 142,858 shares of Common Stock at an exercise price of
         $14.00 per share, subject to adjustment, which expires on October 9,
         2004. TBC has also granted the Former Licensor demand and piggyback
         registration rights with regard to shares of Common Stock issued to the
         Former Licensor.

         ICOS Corporation Partnership

                  On June 6, 2000, ICOS and the Company entered into the
         ICOS-TBC limited partnership agreement. The partnership seeks to
         develop and globally commercialize ET(A) receptor antagonists. As a
         result of the Company's contribution of technology, ICOS-TBC paid a
         license fee to the Company in June 2000, and has made a milestone
         payment that together with additional milestone payments could be as
         much as $53.5 million for the development and commercialization of
         products resulting from the collaboration. The license fee is being
         amortized over the estimated development period of the licensed
         technology, and the Company recognized approximately $121,000 of it as
         revenue during each of the three month periods ended March 31, 2002 and
         2001. See Note 2(h), Revenue Recognition, above.



                                       13
<PAGE>

                  Pursuant to the terms of the limited partnership agreement,
         ICOS-TBC has been initially capitalized by a cash contribution from
         ICOS and the Company's contribution of intellectual property associated
         with sitaxsentan sodium. The intellectual property contributed by the
         Company to ICOS-TBC had no basis for financial reporting purposes and,
         accordingly, the Company assigned no value to the transfer of
         technology.

                  In July 2001, the Company earned a milestone, as a result of
         the achievement of an objective defined in the partnership agreement.
         The Company is recognizing the revenue associated with the milestone
         over the expected development period, and revenues included
         approximately $167,000 in the three month period ended March 31, 2002.

                  During the three month periods ended March 31, 2002 and 2001,
         the Company recognized a loss of approximately $2,510,000 and
         $1,529,000, respectively, representing the Company's proportionate
         share of the losses of ICOS-TBC, including amounts billed by the
         Company to ICOS-TBC as discussed in Note 8, Research Agreements, above.

         Schering-Plough Research Collaboration and License Agreement

                  On June 30, 2000, TBC and Schering-Plough ("Schering") entered
         into a worldwide research collaboration and license agreement to
         discover, develop and commercialize VLA-4 antagonists. VLA-4
         antagonists represent a new class of compounds that has shown promise
         in multiple preclinical animal models of asthma. The primary focus of
         the collaboration will be to discover orally available VLA-4
         antagonists as treatments for asthma.

                  Under the terms of the agreement, Schering obtains the
         exclusive worldwide rights to develop, manufacture and market all
         compounds from TBC's library of VLA-4 antagonists, as well as the
         rights to a second integrin antagonist. TBC will be responsible for
         optimizing a lead compound and additional follow-on compounds. Schering
         is supporting research at TBC and will be responsible for all costs
         associated with the worldwide product development program and
         commercialization of the compound. In addition to reimbursing research
         costs, Schering paid an upfront license fee and will pay development
         milestones and royalties on product sales resulting from the agreement.
         This upfront license fee is being amortized into revenue over the
         expected development period. License fee and milestone income in the
         three month periods ended March 31, 2002 and 2001 included
         approximately $92,000 and $136,000, respectively, related to this
         upfront license fee. Total payments to TBC for both programs, excluding
         royalties, could reach $87.0 million.

(10)     FOREIGN SUBSIDIARY

         During the third quarter 2000, TBC formed Revotar to conduct research
and development of novel small molecule compounds and to develop and
commercialize selectin antagonists. Upon formation, Revotar received certain
development and commercialization rights to the Company's selectin antagonist
compounds as well as rights to certain other TBC research technology. Revotar
also received approximately $5 million in funding from three German venture
capital funds. The Company retained ownership of approximately 55% of the
outstanding common stock of Revotar and has consolidated the financial results
of Revotar into TBC's consolidated financial statements. Since the development
and commercialization rights contributed by the Company to Revotar had no basis
for financial reporting purposes, the Company assigned no value to its
contribution of intellectual property rights. The Company's equity in the
originally contributed assets by the minority shareholders is reported as a
deferred credit of $2,620,000 on its consolidated balance sheet at March 31,
2002 and December 31, 2001. The minority interest in Revotar at March 31, 2002
and December 31, 2001, was $956,000 and $1,213,000, respectively. The Company's
consolidated net loss for the three month periods ended March 31, 2002 and 2001
was reduced by $257,000 and $61,000, respectively, for the Revotar minority
shareholders' interest in Revotar's losses.

         The Company and the other stockholders of Revotar have executed an
agreement to provide approximately $4.5 million in unsecured loans, of which the
Company's commitment will be



                                       14
<PAGE>

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 will be seven percent, after which the interest
rate could then be reset to the U.S. prime rate plus 2.5 percent if such rate is
higher than seven percent.

         As part of the agreement to form Revotar, the Company and the other
initial investors agreed to issue rights to purchase common stock of Revotar
held by them to Aqua Partners LLC ("Aqua"), which assisted in the formation of
Revotar. The shareholders have signed an agreement that provides Aqua with the
option to acquire up to 3.26% of the shares owned by each shareholder for a
total amount of approximately $540,000, payable to the shareholders.

(11)     COMMERCIALIZATION AGREEMENT

         In connection with TBC's development and commercialization of
Argatroban, in August 1997, TBC entered into a Product Development, License and
CoPromotion Agreement with GSK (the "GSK Agreement") whereby GSK was granted
exclusive rights to work with TBC in the development and commercialization of
Argatroban in the U.S. and Canada for specified indications. GSK paid $8.5
million in upfront license fees during August 1997, a $5 million milestone
payment in October 1997, and a $7.5 million milestone payment in June 2000.
Additional milestone payments may be earned upon the clinical development and
FDA approval for the acute myocardial infarction indication. Future milestone
payments for the acute myocardial infarction indication are subject to GSK's
agreement to market Argatroban for such indication. The parties have also formed
a joint development committee to analyze the development of additional
Argatroban indications to be funded 60% by GSK except for certain Phase IV
trials which shall be funded entirely by GSK. At this time, GSK has no plans to
conduct development work for the acute myocardial infarction and stroke
indications. TBC began a Phase II clinical trial in March 2001 to evaluate the
use of Argatroban for ischemic stroke. GSK has the exclusive right to
commercialize all products arising out of the collaboration, subject to the
obligation to pay royalties on net sales to TBC and to the rights of TBC to
co-promote these products through its own sales force in certain circumstances.
TBC will retain the rights to any indications which GSK determines it does not
wish to pursue (such as ischemic stroke), subject to the requirement that TBC
must use its own sales force to commercialize any such indications. Any
indications which TBC elects not to pursue will be returned to Mitsubishi. In
conjunction with the GSK Agreement, a consulting firm involved in negotiations
related to the agreement will receive a percentage of all consideration received
by TBC as a result of the agreement.

         At present, Mitsubishi is the only manufacturer of Argatroban, and has
entered into the Mitsubishi Supply Agreement with GSK to supply Argatroban in
bulk in order to meet GSK and TBC's needs under the GSK Agreement. Should
Mitsubishi fail during any consecutive nine-month period to supply GSK at least
80% of its requirements, and such requirements cannot be satisfied by existing
inventories, the Mitsubishi Supply Agreement provides for the nonexclusive
transfer of the production technology to GSK. If GSK cannot commence
manufacturing of Argatroban or alternate sources of supply are unavailable or
uneconomic, the Company's results of operations would be materially and
adversely affected.

         The GSK Agreement generally terminates on a country by country basis
upon the earlier of the termination of TBC's rights under the Mitsubishi
Agreement, the expiration of applicable patent rights or, in the case of royalty
payments, the commencement of substantial third-party competition. GSK also has
the right to terminate the agreement on a country by country basis by giving TBC
at least three months written notice at any time before GSK first markets
products in that country based on a reasonable determination by GSK that the
commercial profile of the product in question would not justify continued
development in that country. GSK has similar rights to terminate the GSK
Agreement on a country by country basis after marketing has commenced. In
addition, either party may terminate the GSK Agreement on 60 days notice if the
other party defaults in its obligations under the agreement, declares bankruptcy
or is insolvent.




                                       15
<PAGE>

(12)     401(k) PLAN

         The Company has a 401(k) plan under which all employees with three
months of service are eligible to participate and may contribute up to 15
percent of their compensation, with a maximum contribution of $11,000 per
employee in 2002. Under the terms of the Economic Growth and Tax Relief
Reconciliation Act, employees aged 50 or older may contribute an additional
$1,000 to the 401(k) Plan in 2002, such additional contribution would be
eligible for employer matching. Effective on January 1, 2001, the Compensation
and Personnel Committee of the Board of Directors approved an employer matching
contribution of $0.50 on the dollar of employee contributions up to 6% of
salaries and the 401(k) plan was amended. Charges to operating expense for
employer match during the three month periods ended March 31, 2002 and 2001 were
approximately $50,000 and $40,000, respectively.

(13)     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 losses of $61,000 and $295,000, respectively, in its
         comprehensive loss for the three month periods ended March 31, 2002 and
         2001. The Company had an intercompany receivable from its German
         subsidiary at March 31, 2002; however, this amount is denominated in
         U.S. dollars and is not exposed to exchange risk. 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. At this time,
         management has not deemed it cost effective to engage in a program of
         hedging the effect of foreign currency fluctuations on the Company's
         operating results using derivative financial instruments.

         (b) Legal proceedings

                  The Company is presently involved in several legal actions,
         none of which are expected to have a material adverse effect upon the
         results of operations or financial condition of the Company when
         considered either individually or in the aggregate.




                                       16
<PAGE>




ITEM 2

                TEXAS BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES

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

              THREE MONTHS ENDED MARCH 31, 2002 AND MARCH 31, 2001


                                    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, 2001, and our
condensed consolidated financial statements and the related notes to the
financial statements included in this Quarterly Report on Form 10-Q.

         Since our inception in 1989, we have primarily devoted our resources to
funding drug discovery, research and development. We are 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. Our research and
development programs are focused on inhibitors (also referred to as antagonists
or blockers) that can interrupt certain disease processes. Our programs seek to
address unmet medical needs in cardiovascular diseases, thrombocytopenia,
pulmonary arterial hypertension, heart failure and inflammatory diseases such as
asthma.

         Our strategy is to identify and develop novel product candidates for
underserved indications, and to commercialize those candidates through
collaborations with other pharmaceutical and biotechnology companies. An
important part of our strategy is the selection of corporate partners to enhance
our drug discovery and development efforts. We and our partners currently have
four products in clinical development. In addition, during 2001, our VCAM/VLA-4
antagonist, TBC4746, entered preclinical development for the treatment of
asthma. Further clinical development of this compound will be conducted by our
research and development partner, Schering-Plough.

              MAJOR COMPOUNDS IN RESEARCH AND DEVELOPMENT PROGRAMS

ARGATROBAN

         Argatroban was approved by the FDA in 2000, is indicated for
prophylaxis or treatment of thrombosis in patients with HIT and began shipping
in November 2000. A key element of our continuing development strategy is to
seek regulatory approvals and expand the marketed uses of Argatroban for other
indications. GSK is our development, manufacturing and marketing partner for
Argatroban. In April 2002, we received approval from the FDA on our sNDA for
Argatroban for use in HIT patients undergoing PCI. Argatroban is in an on-going
Phase II human clinical trial to evaluate its use in acute ischemic stroke, and
we are evaluating, in conjunction with GSK, the use of Argatroban for use in
hemodialysis patients.

SITAXSENTAN

         In June 2000, we established ICOS-TBC, a 50/50-owned limited
partnership with ICOS, to develop and commercialize endothelin receptor
antagonists, including sitaxsentan and TBC3711. During 2001, we initiated a
pivotal phase IIb/III clinical trial for pulmonary arterial hypertension
("PAH"), in which we expect to complete enrollment during the second quarter
of 2002.




                                       17
<PAGE>

TBC3711

         TBC3711 is our second oral endothelin A receptor selective antagonist
to enter clinical development. Endothelin receptor antagonists are believed to
be effective in the treatment of a variety of diseases where the regulation of
vascular constriction and tone is important. Two Phase I clinical studies of
TBC3711 were completed in year 2001 to determine the safety and tolerability of
TBC3711. The product candidate is being developed as a potential treatment for
cardiovascular diseases beyond PAH.

TBC1269

         We are developing a selectin antagonist, TBC1269, for the treatment of
asthma and psoriasis. The intravenous form of the drug has been tested in Phase
II clinical trials. During 2000, we formed Revotar, a majority owned German
subsidiary located in Berlin, to further the development of this program. During
2001, Revotar completed Phase I clinical trials for asthma utilizing an inhaled
form of TBC1269 and a Phase IIa clinical trial in psoriasis is being conducted
with an injectable form of TBC1269 as a proof-of-concept.

                              RESULTS OF OPERATIONS

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.

         o        We defer the recognition of milestone payments related to
                  contractual agreements which are still in the developmental
                  stage. Such deferred revenues are amortized into income over
                  the estimated remaining developmental period. Milestone
                  payments received under contractual agreements which have
                  completed the developmental 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.

Partnership Accounting

         We recognize our share of the operating results of ICOS-TBC in
proportion to our ownership interest and record it as equity in loss of
ICOS-TBC. Operating results of ICOS-TBC include expenses related to our internal
research staff that we recognize as revenue and record as collaborative research
and development revenue from ICOS-TBC. Due to the nature of the ICOS-TBC
collaborative agreement, our collaborative research and development revenue from
ICOS-TBC largely depends on the continued progression of clinical trial and
development activities, and can be expected to vary from quarter to quarter and
year to year.




                                       18
<PAGE>

GENERAL

         Our operating results have fluctuated significantly during each
quarter, 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 $131.4 million from the date of our
inception to March 31, 2002. We have primarily financed our operations to date
through a series of private placement and public offerings of our common stock
and several collaborative agreements with third parties to jointly pursue
product research and development. See discussion of "Liquidity and Capital
Resources" below. See also "Additional Risk Factors" in Item 1 "Business" of our
Annual Report on Form 10-K for the year ended December 31, 2001.

                THREE MONTH PERIODS ENDED MARCH 31, 2002 AND 2001

         Revenues in the quarter ended March 31, 2002 increased approximately
$324,000, compared with the quarter ended March 31, 2001. The increase is
attributable to increased royalty income earned on sales of Argatroban,
partially offset by reduced collaborative research and development revenues,
discussed below.

         Royalties earned on sales of Argatroban were $965,000 in the first
quarter of 2002, an increase of $788,000 over the first quarter of 2001. During
the quarter ended March 31, 2002, Argatroban achieved its best quarterly sales
results since sales began in November 2000. Net sales during the first quarter
of 2002 were approximately $6.2 million, an increase of $1.7 million over the
fourth quarter of 2001.

         Collaborative research and development revenues received from the
ICOS-TBC partnership declined approximately $161,000 in the first quarter of
2002, compared with the first quarter of 2001. The involvement of the Company's
research and development staff will vary from quarter to quarter, depending upon
the activities being performed.

         Research agreement revenues, resulting from the Company's collaborative
efforts with unrelated parties, declined $521,000 in the first quarter of 2002,
compared with the first quarter of 2001. Research agreement revenues in the
first quarter of 2001 included approximately $325,000 from the Company's
research agreement with LG Chemical, which was terminated in August 2001.

         Total research and development expenses (including the Company's share
of expenses incurred by the ICOS-TBC partnership) were $7,700,000 in the first
quarter of 2002, an increase of $2,662,000 over the comparable amount in the
first quarter of 2001. The increase is primarily due to costs of clinical trials
ongoing throughout the quarter ended March 31, 2002. Trials ongoing during the
first quarter of 2002 include a Phase II study of Argatroban in ischemic stroke
and a Phase IIb/III trial of sitaxsentan for pulmonary hypertension, conducted
by the ICOS-TBC partnership.

         General and administrative expenses in the first quarter of 2002 were
$2,667,000, an increase of $1,212,000 over the first quarter of 2001. The
increase is comprised of additional selling and marketing support of Argatroban,
increased costs at Revotar, which began operation late in year 2000, and costs
associated with the retirement, recruiting and hiring of key personnel,
including a non-cash charge of approximately $182,000 in compensation expense
primarily related to modifications to stock options of our retired CEO.

         Investment income declined to $767,000 in the first quarter of 2001,
compared with $1,653,000 in the first quarter of 2001. The decline is primarily
due to a combination of lower prevailing interest rates during 2002 compared
with 2001 and to reduced funds available for investment during the quarter ended
March 31, 2002.



                                       19
<PAGE>

         In the quarter ended March 31, 2002, the Company reported a net loss of
$6,750,000, or $0.15 per share, basic and diluted. The comparable net loss in
the quarter ended March 31, 2001 was $2,510,000, or $0.06 per share. The
increased loss in the current quarter, compared to the quarter ended March 31,
2001, is primarily due to higher research and development costs, increased
general and administrative expenses, and lower investment income, as discussed
above.

                         LIQUIDITY AND CAPITAL RESOURCES

         Cash, cash equivalents and investments in marketable securities,
including accrued interest thereon, was $86,400,000 at March 31, 2002, compared
with $95,400,000 at December 31, 2001. We used $7,539,000 in cash on operating
activities during the three months ended March 31, 2002, compared to cash used
on operating activities of $4,173,000 during the quarter ended March 31, 2001.
The increased use of cash in the current quarter is due to higher operating
expenses and reduced investment income, compared with the first quarter of 2001,
as discussed above.

         Investing activities generated $23,665,000 during the quarter ended
March 31, 2002, compared to a use of cash of $22,961,000 in the quarter ended
March 31, 2001. Purchases of equipment and leasehold improvements increased
$988,000 in the first quarter of 2002, compared with the first quarter of 2001.
In the quarter ended March 31, 2002, the effect of increased capital
expenditures was offset by a decline in investments in marketable securities. In
the quarter ended March 31, 2001, invested funds increased, primarily because of
the investment of the proceeds received upon the exercise of public warrants in
January 2001, discussed below.

         Financing activities generated $157,000 during the quarter ended March
31, 2002, from the exercise of stock options and the sale of stock at market
price to the Company's new CEO, pursuant to his employment agreement. In the
quarter ended March 31, 2001, we received proceeds of $21,107,000 upon the
exercise of public and non-public common stock purchase warrants.

Material Commitments

         Our only material contractual commitments are comprised of a loan
commitment to Revotar and office and laboratory facility leases. We and the
minority shareholders of Revotar have committed to lend Revotar, on an unsecured
basis, approximately $4.5 million, of which our commitment will be approximately
$3.4 million. The terms of the loans require quarterly interest payments and
repayment of all principal on or before April 1, 2007. Our portion of the loan
is denominated in U.S. dollars at an interest rate of seven percent fixed for
the first two years and resets to the greater of seven percent or U.S. prime
plus two and one-half percent on April 1, 2004. It is likely that Revotar may
need to seek additional funding through collaborative arrangements and/or
through public or private financings during 2002. A likely result of additional
financings would be to reduce our ownership percentage in Revotar.

         The Company had long-term obligations under our office and laboratory
leases 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>
           Operating Leases         $7,826      $1,617       $3,573        $2,636       ---
</Table>


Outlook for 2002

         We expect revenues in year 2002 to be in the range of $8.5 to $11.0
million, including royalties on Argatroban sales, reimbursements from
collaborative partners of research and development expenses, research
reimbursements from ICOS-TBC for the development of endothelin antagonist
products, and amortization of earned license fees and milestones. We expect
sales of Argatroban by GSK to be in the range of $18 to $22 million. We believe
investment income will be in the range of $1.8 million to $2.5 million,
depending upon prevailing interest rates and invested balances.



                                       20
<PAGE>

         Expenses in year 2002 are expected to be between $45 and $48 million.
The expected increase over year 2001 expenses is primarily in the area of
clinical development and reflects the Company's intention to expand the use of
Argatroban in ischemic stroke and PCI, demonstrate the safety and efficacy of
sitaxsentan as a treatment of PAH, advance the development of TBC3711 and
continue development work of TBC1269 as a treatment for asthma and other
indications.

         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
"Additional Risk Factors" in Item 1, "Business" of our annual report on Form
10-K for the year ended December 31, 2001, and "Longer-Term Outlook", below.

         Below is a summary of our ongoing research and development projects,
and an estimation of the distribution of our year 2002 research and development
expenditures for each of them.


<Table>
<Caption>

                                                        Expected Distribution of
Research and Development Programs                         2002 R&D Expenditures
---------------------------------------                 ------------------------
<S>                                                     <C>
Argatroban                                                             21%
Endothelin Antagonist                                                  27%
   (Sitaxsentan and TBC3711)
Selectin Antagonist (TBC1269)                                          13%
VCAM/VLA-4                                                             10%
Other                                                                  29%
                                                            -------------
                                  Total                               100%

</Table>

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 diseases. We anticipate that our operating
expenses will increase in subsequent years because:

         o        We expect to incur significant expenses in conjunction with
                  the ICOS-TBC partnership for endothelin antagonists associated
                  with clinical trial costs for sitaxsentan and TBC3711 and
                  research and clinical trial costs for development of TBC1269
                  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.

         o        We anticipate that expenditures for completion of the ongoing
                  Argatroban Phase II clinical trial for ischemic stroke and the
                  magnitude of additional trials beyond Phase II will be
                  significant. It is difficult at this time to estimate the
                  magnitude of costs until results are obtained from the ongoing
                  trial.



                                       21
<PAGE>

         o        There will be additional costs in future periods related to
                  Argatroban in complying with ongoing FDA requirements and
                  possible clinical trial expenditures for additional
                  therapeutic indications.

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

         We have been unprofitable to date and expect to incur operating losses
for the next several years as we invest in product 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 Argatroban;

         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 through year 2003 without considering the impact of revenues from
Argatroban. 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.

Off-Balance Sheet Arrangements

         We do not engage in off-balance sheet financing arrangements; however
we are obligated to fund our proportionate share (50%) of any contractual
obligations of ICOS-TBC.

                  HAZARDOUS MATERIALS AND ENVIRONMENTAL MATTERS

         Our research and development processes involve the controlled use of
hazardous materials, chemicals and radioactive materials and produce waste
products. We are subject to federal, state and local laws and regulations
governing the use, manufacture, storage, handling and disposal of hazardous
materials and waste products. Although we believe that our safety procedures for
handling and disposing of hazardous materials comply with the standards
prescribed by laws and regulations, the risk of accidental contamination or
injury from these materials cannot be eliminated completely. In the event of an
accident, we could be held liable for any damages that result. This liability
could exceed our resources or not be covered by our insurance. Although we
believe that we are in compliance in all material respects with



                                       22
<PAGE>

applicable environmental laws and regulations, there can be no assurance that we
will not be required to incur significant costs to comply with environmental
laws and regulations in the future. There can also be no assurance that our
operations, business or assets will not be materially adversely affected by
current or future environmental laws or regulations.

                     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. 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,
2001 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 subsidiary in Germany and consolidate the
results of operations into our consolidated financial results. Although not
significant to date, our reported assets, liabilities, expenses and



                                       23
<PAGE>

cash flows from this subsidiary are exposed to changing exchange rates. The
Company, accordingly, included an unrealized loss of approximately $61,000 in
its comprehensive loss for the three months ended March 31, 2002. The Company
had an intercompany receivable from our German subsidiary at March 31, 2002;
however, this amount is denominated in U.S. dollars and is not exposed to
exchange risk. We have 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. At this
time, we have not deemed it cost effective to engage in a program of hedging the
effect of foreign currency fluctuations on our operating results using
derivative financial instruments.



                                       24
<PAGE>




PART II OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

         None

ITEM 2.  CHANGES IN SECURITIES

RECENT SALES OF UNREGISTERED SECURITIES

         On March 25, 2002, we issued 5,000 shares of common stock to an officer
and director, pursuant to provisions in his employment agreement, for cash
proceeds of $31,500. The issuance of common stock was exempt from registration
under Rule 144 of the Securities Act of 1933 as amended. The common stock may
not be sold in the United States absent registration or compliance with the
requirements of Rule 144.

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

         None

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

         None.

ITEM 5.  OTHER INFORMATION

         None.

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

         Four reports on Form 8-K were filed during the quarter ended March 31,
2002. A Report on Form 8-K dated January 3, 2002 was filed regarding the
issuance of rights under the Shareholder Rights Plan. A Report on Form 8-K dated
February 5, 2002 was filed regarding confirmation of the Company's 2001 guidance
and a review of the outlook for 2002. A Report on Form 8-K dated February 26,
2002 was filed regarding the Company's 2001 fourth quarter and year-end
financial results. A Report on Form 8-K dated March 21, 2002 was filed regarding
Bruce D. Given, M.D. being named as President and CEO and the retirement of
David McWilliams.



                                       25
<PAGE>






                         TEXAS BIOTECHNOLOGY CORPORATION

                                 MARCH 31, 2002

                                   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 14th day of May, 2002.




                                    TEXAS BIOTECHNOLOGY CORPORATION


                                    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)




                                       26