<PAGE>   1
                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549


                                    FORM 10-Q


(Mark One)

       [X]    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
              SECURITIES EXCHANGE ACT OF 1934 FOR QUARTER ENDED
              SEPTEMBER 30, 2000

                                       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, as of the latest practicable date.

              Class                         Outstanding at October 31, 2000
              -----                         -------------------------------

   common stock, $0.005 par value                      40,962,142


<PAGE>   2

                         TEXAS BIOTECHNOLOGY CORPORATION

                                TABLE OF CONTENTS




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

<S>        <C>                                                                                   <C>
PART I.    FINANCIAL INFORMATION

           ITEM 1:   FINANCIAL STATEMENTS

           Consolidated Balance Sheets as of September 30, 2000 and December 31, 1999                1

           Consolidated Statements of Operations for the three months ended
           September 30, 2000 and 1999 and the nine months ended September 30, 2000 and 1999         2

           Consolidated Statements of Cash Flows for the nine months ended
           September 30, 2000 and 1999                                                               3

           Notes to Consolidated Financial Statements                                                4

           ITEM 2:   MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                     FINANCIAL CONDITION AND RESULTS OF OPERATIONS                                  10

           ITEM 3:   QUANTITATIVE AND QUALITATIVE DISCLOSURES                                       14
                     ABOUT MARKET RISK


PART II.   OTHER INFORMATION

           ITEM 1:  Legal Proceedings                                                               15

           ITEM 2:  Changes in Securities                                                           15

           ITEM 3:  Defaults Upon Senior Securities                                                 15

           ITEM 4:  Submission of Matters to a Vote of Security Holders                             15

           ITEM 5:  Other Information                                                               15

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



SIGNATURES                                                                                          16


INDEX TO EXHIBITS                                                                                   17
</TABLE>



<PAGE>   3

                TEXAS BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS


<TABLE>
<CAPTION>
                                                                                    SEPTEMBER 30,       DECEMBER 31,
                                                                                        2000               1999
                                                                                    -------------      -------------
                                                                                     (Unaudited)

<S>                                                                                 <C>                <C>
ASSETS

Current assets:
       Cash and cash equivalents                                                    $  34,635,549      $   2,804,270
       Short-term investments                                                          47,291,184         11,366,066
       Other current receivables                                                          572,326          1,067,738
       Receivable from related party under collaborative arrangement                    2,769,617                 --
       Prepaids                                                                         1,155,926          1,453,090
                                                                                    -------------      -------------
           Total current assets                                                        86,424,602         16,691,164

Long-term investments                                                                  10,000,000          1,000,000

Equipment and leasehold improvements, at cost less
       accumulated depreciation and amortization                                        2,596,759          2,998,431

Other assets                                                                               59,591            115,096
                                                                                    -------------      -------------

           Total assets                                                             $  99,080,952      $  20,804,691
                                                                                    =============      =============

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
       Accounts payable                                                             $   1,023,274      $     556,664
       Accrued expenses                                                                 2,562,200          1,657,706
                                                                                    -------------      -------------
           Total current liabilities                                                    3,585,474          2,214,370

Liability to related party                                                              1,955,366                 --

Deferred income from related party                                                      1,737,928                 --

Commitments and contingencies                                                                  --                 --

Minority interest in Revotar                                                            4,286,982                 --

Stockholders' equity:
       Preferred stock, par value $.005 per share. At September 30, 2000,
           5,000,000 shares authorized; none outstanding. At December 31, 1999,
           5,000,000 shares authorized;
           none outstanding                                                                    --                 --
       Common stock, par value $.005 per share.  At September 30, 2000,
           75,000,000 shares authorized; 40,951,208 shares issued and
           outstanding.  At December 31, 1999, 75,000,000 shares
           authorized; 34,392,909 shares issued and outstanding                           204,756            171,964
       Additional paid-in capital                                                     188,107,747        118,317,599
       Accumulated deficit                                                           (100,797,301)       (99,899,242)
                                                                                    -------------      -------------
           Total stockholders' equity                                                  87,515,202         18,590,321
                                                                                    -------------      -------------

           Total liabilities and stockholders' equity                               $  99,080,952      $  20,804,691
                                                                                    =============      =============
</TABLE>



          See accompanying notes to consolidated financial statements


FORM 10-Q                                                                Page 1

<PAGE>   4


                TEXAS BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS


<TABLE>
<CAPTION>
                                                                        THREE MONTHS ENDED              NINE MONTHS ENDED
                                                                          SEPTEMBER 30,                   SEPTEMBER 30,
                                                                       2000            1999            2000           1999
                                                                   -----------     -----------     -----------     -----------
                                                                   (unaudited)     (unaudited)     (unaudited)     (unaudited)

<S>                                                                <C>             <C>             <C>             <C>
Revenues:
     Research agreements                                           $   908,002         516,262       1,961,839       1,546,317
     Collaborative research and development from related party         548,023              --         701,425              --
     License fee and milestone income                                  193,548              --      10,758,064              --
                                                                   -----------     -----------     -----------     -----------
        Total revenues                                               1,649,573         516,262      13,421,328       1,546,317
                                                                   -----------     -----------     -----------     -----------

Expenses:
     Research and development                                        2,391,299       3,259,081       9,581,698       9,473,841
     Charge for purchase of in-process research
        and development                                                     --              --         965,970              --
     General and administrative                                      1,393,672       1,438,100       4,762,411       4,374,632
                                                                   -----------     -----------     -----------     -----------
        Total expenses                                               3,784,971       4,697,181      15,310,079      13,848,473
                                                                   -----------     -----------     -----------     -----------

        Operating loss                                               2,135,398       4,180,919       1,888,751      12,302,156

     Equity in loss of affiliate                                     1,388,708              --       1,955,366              --

     Investment income                                               1,486,408         282,683       2,817,090         969,457
                                                                   -----------     -----------     -----------     -----------

        Net loss before minority interest                          $ 2,037,698       3,898,236       1,027,027      11,332,699

     Minority interest in loss of Revotar                              128,968              --         128,968              --
                                                                   -----------     -----------     -----------     -----------

        Net loss                                                   $ 1,908,730       3,898,236         898,059      11,332,699
                                                                   ===========     ===========     ===========     ===========

Net loss per common share, basic and diluted:                             0.05            0.11            0.02            0.33

Weighted average common shares used to
     compute net loss per common share, basic
     and diluted:                                                   40,880,185      34,237,568      38,517,172      34,207,956
</TABLE>



          See accompanying notes to consolidated financial statements


FORM 10-Q                                                                Page 2

<PAGE>   5

                TEXAS BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS




<TABLE>
<CAPTION>
                                                                                                 NINE MONTHS ENDED
                                                                                                   SEPTEMBER 30,
                                                                                               2000              1999
                                                                                          ------------       -------------
                                                                                           (Unaudited)        (Unaudited)

<S>                                                                                       <C>                <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net loss                                                                               $   (898,059)      (11,332,699)
   Adjustments to reconcile net loss to net cash
    used in operating activities:
      Depreciation and amortization                                                            636,647           639,389
      Equity in loss of affiliate                                                            1,955,366                --
      Amortization of deferred revenue                                                        (262,072)               --
      Minority interest in loss of Revotar                                                    (128,968)               --
      Purchase of in-process research and development                                          965,970                --
      Expenses paid with stock and warrants                                                     23,196            17,377
      Loss on disposition of fixed assets                                                        6,568               227
   Change in operating assets and liabilities
    Decrease (increase) in prepaids                                                            297,164          (756,706)
    Decrease in receivables                                                                    495,412           630,697
    Decrease in other assets                                                                    55,505                --
    Increase in receivable from related party under collaborative arrangement               (2,769,617)               --
    Increase in other current assets                                                                --            (2,395)
    Increase (decrease) in current liabilities                                               1,371,104          (195,411)
                                                                                          ------------      ------------
            Net cash provided by (used in) operating activities                              1,748,216       (10,999,521)
                                                                                          ------------      ------------

CASH FLOWS FROM INVESTING ACTIVITIES:
   Purchases of equipment and leasehold improvements                                          (241,543)         (570,915)
   Proceeds from disposition of fixed assets                                                        --               731
   Purchases of  investments                                                               (77,740,272)      (16,203,533)
   Maturities of investments                                                                33,621,722        29,150,567
   (Increase) decrease in interest receivable included in short-term investments              (806,568)          321,921
   Increase in deferred revenue                                                              2,000,000                --
                                                                                          ------------      ------------
           Net cash (used in) provided by investing activities                             (43,166,661)       12,698,771
                                                                                          ------------      ------------

CASH FLOWS FROM FINANCING ACTIVITIES:
   Proceeds from sale of common stock and exercises of
      options and warrants, net                                                             68,833,774           212,197
   Contribution from minority interest in consolidated subsidiary                            4,415,950                --
                                                                                          ------------      ------------
           Net cash provided by financing activities                                        73,249,724           212,197
                                                                                          ------------      ------------

      Net increase in cash and cash equivalents                                             31,831,279         1,911,447

Cash and cash equivalents at beginning of period                                             2,804,270         4,176,911
                                                                                          ------------      ------------

Cash and cash equivalents at end of period                                                $ 34,635,549         6,088,358
                                                                                          ============      ============


Supplemental disclosure of noncash financing activities:
    Expenses and purchase of in-process research and development paid with stock          $    989,166            17,377
                                                                                          ============      ============
</TABLE>


          See accompanying notes to consolidated financial statements


FORM 10-Q                                                                Page 3


<PAGE>   6


                TEXAS BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

              SEPTEMBER 30, 2000 (UNAUDITED) AND DECEMBER 31, 1999


(1)    ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

       (a)    Organization

              Texas Biotechnology Corporation (the "Company" or "TBC") is a
              biopharmaceutical company focused on the discovery, development
              and commercialization of novel synthetic small molecule compounds
              for the treatment of a variety of vascular 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 and
              ICOS Corporation ("ICOS") entered into an agreement and formed
              ICOS-Texas Biotechnology, Limited Partnership, 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 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 a majority interest in Revotar.

              The Company is presently working on a number of long-term
              development projects which involve experimental and unproven
              technology, which may require many years and substantial
              expenditures to complete, and which may be unsuccessful. The
              Company anticipates the launch of its first product, Argatroban,
              for the treatment of heparin-induced thrombocytopenia ("HIT") in
              2000.

       (b)    Basis of Consolidation

              The Company's consolidated financial statements include the
              accounts of the Company and its wholly owned subsidiaries, IPI and
              TBC-ET, Inc., a Delaware corporation ("TBC-ET"), and Revotar, a
              majority owned subsidiary. All material intercompany transactions
              have been eliminated.

       (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 September 30, 2000, approximately $5,834,000
              was invested in demand and money market accounts. Short-term
              investments are those investments which have an original maturity
              of less than one year and greater than three months at the
              purchase date. At September 30, 2000, the Company's short-term
              investments consisted of approximately $13,308,000 in government
              agency discount bonds and $33,983,000 in corporate commercial
              paper and loan participations. Long-term investments consist of
              approximately $10,000,000 in government agency discount bonds 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 shorter of the useful life or the
              remaining minimum lease term.



FORM 10-Q                                                                Page 4
<PAGE>   7


       (e)    Investment in ICOS - TBC

              ICOS-TBC is accounted for using the equity method. Accordingly,
              the investment is recorded at cost, adjusted for the Company's
              share of income or loss of the entity and amortization of revenues
              for upfront and milestone payments. See footnote 8 below.

       (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 for the three months ended September 30,
              2000 and 1999 were approximately $1,719,000 and $1,696,000,
              respectively, of which approximately $1,324,000 and $1,305,000,
              respectively, was charged to research and development. Salaries
              and benefits for the nine months ended September 30, 2000 and
              1999, were approximately $5,160,000 and $5,024,000, respectively,
              of which approximately $3,930,000 and $3,877,000, respectively,
              was charged to research and development. Payments related to the
              acquisition of in-process research and development are expensed.

       (g)    Net Loss Per Common Share

              Basic net loss per common share is calculated by dividing the net
              loss by the weighted average number of common shares outstanding
              during the period. For the three and nine months ended September
              30, 2000 and 1999, there were no common dilutive shares used in
              the calculation of weighed average common shares outstanding. For
              the three months ended September 30, 2000 and 1999, the weighted
              average common shares used to compute basic net loss per common
              share totaled 40,880,185 and 34,237,568, respectively. For the
              nine months ended September 30, 2000 and 1999, the weighted
              average common shares used to compute basic net loss per common
              share totaled 38,517,172 and 34,207,956, respectively. The
              exercise of stock options and warrants was not assumed in the
              calculation of diluted net loss per common share because the
              effect would have been antidilutive.

       (h)    Reclassifications

              Certain reclassifications have been made to prior period financial
              statements to conform with the September 30, 2000 presentation
              with no effect on net loss previously reported.

       (i)    Revenue Recognition

              Revenue from research agreements is recognized as the services are
              performed and/or milestones are met. Milestone payments related to
              contractual agreements are recognized as the milestones are
              achieved. Revenue from licensing fees is recorded when the license
              is granted subject to section (m) of this footnote (1) regarding
              accounting pronouncements dealing with revenue recognition.

       (j)    Patent Application Costs

              Costs incurred in filing for patents are expensed as incurred.

       (k)    Use of Estimates

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



FORM 10-Q                                                                Page 5

<PAGE>   8

       (l)    Interim Financial Information

              The Consolidated Balance Sheet as of September 30, 2000, and the
              related Consolidated Statement of Operations for the three and
              nine months ended September 30, 2000 and 1999 and Consolidated
              Statements of Cash Flows for the nine months ended September 30,
              2000 and 1999 are unaudited. In the opinion of management, all
              adjustments necessary for a fair presentation of such financial
              statements have been included. Such adjustments consisted of
              normal recurring items. Interim results are not necessarily
              indicative of results for a full year. The consolidated financial
              statements and notes are presented as permitted by Form 10-Q and
              do not contain certain information included in the Company's
              Annual Consolidated Financial Statements and Notes which should be
              read in conjunction with these consolidated financial statements
              and notes.

       (m)    New Accounting Bulletins

              In December 1999, the United States Securities and Exchange
              Commission ("SEC") issued Staff Accounting Bulletin No. 101
              ("SAB101"), Revenue Recognition in Financial Statements. SAB101
              summarizes certain of the SEC staff's views in applying generally
              accepted accounting principles to revenue recognition in financial
              statements. The Company will be required to implement SAB101 in
              the fourth quarter of the year ended December 31, 2000. The
              Company may be required to adjust current year revenues and record
              a cumulative effect adjustment for previously reported amounts
              based on implementation of SAB101.

              In March 2000, the Financial Accounting Standards Board issued
              FASB Interpretation No. 44 ("FIN44"), Accounting for Certain
              Transactions involving Stock Compensation. The provisions of FIN44
              which were effective July 1, 2000 have not had a material effect
              on the Company's financial position or results of operations.

              In June 1998, the Financial Accounting Standards Board issued FASB
              Statement No. 133 ("SFAS 133"), Accounting for Derivative
              Instruments and Hedging Activities, as amended by SFAS No. 137 and
              SFAS No. 138. SFAS 133 standardizes the accounting for derivative
              instruments, including certain derivative instruments embedded in
              other contracts. Under the standard, entities are required to
              carry all derivative instruments in the statement of financial
              position at fair value. We will adopt SFAS 133 beginning in fiscal
              year 2001. We do not expect the adoption of SFAS 133 will have a
              material effect on our financial condition or results of operation
              because we, historically, have not entered into derivative or
              other financial instruments for trading or speculative purposes
              nor do we use or intend to use derivative financial instruments or
              derivative commodity instruments.

(2)    CAPITAL STOCK

       In April 2000, the Company sold 5,750,000 shares of Common Stock for
       $12.50 per share in an underwritten public offering. The net proceeds to
       the Company from this offering were approximately $65.2 million after
       deducting selling commissions and expenses of approximately $4.6 million
       related to the offering and approximately $2.1 million in proceeds
       allocable to selling shareholders.



FORM 10-Q                                                                Page 6

<PAGE>   9



(3)    STOCK OPTIONS AND WARRANTS

       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 Financial Accounting Standards Board
       Statement No. 123, Accounting for Stock-Based Compensation and related
       interpretations in reporting for its plans.

       A summary of stock options as of September 30, 2000, 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           190,495          95,220       139,496             --

       1992 Plan            $ 1.41 - $21.59      1,700,000           948,934         749,749       670,154          1,317

       1995 Plan            $ 1.31 - $21.59      2,000,000         1,490,112         334,360     1,156,028        175,528

       1999 Plan            $20.13 - $20.13      1,000,000           181,000              --            --        819,000

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

       1995 Director Plan   $ 1.38 - $11.31        500,000           259,096          36,860       175,096        204,044

                                                 ---------         ---------       ---------     ---------      ---------
                    TOTALS                       5,557,144         3,103,879       1,253,376     2,175,016      1,199,889
                                                 =========         =========       =========     =========      =========
</TABLE>

       As of March 6, 2000, the Compensation and Personnel Committee of the
       Board of Directors approved an increase in the number of shares
       authorized of 200,000 shares in the Amended and Restated 1995
       Non-Employee Director Stock Option Plan which was approved by
       stockholders at the annual meeting on June 8, 2000 and are included
       above.

(4)    INCOME TAXES

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

       At September 30, 2000 the net deferred tax asset, representing primarily
       net operating loss carryforwards and deferred start-up costs, totaled
       approximately $36,891,000. The Company has established a valuation
       allowance for the full amount of these deferred tax assets, as management
       believes that it is not more likely than not that the Company will
       recover these assets. The Company did not incur any tax expense in any
       year due to operating losses.

       At September 30, 2000 the Company had net operating loss carryforwards of
       approximately $64,750,000 and deferred start-up costs of approximately
       $36,174,000 for federal income tax return purposes. Utilization of the
       Company's net operating loss carryforwards is subject to certain
       limitations due to specific stock ownership changes which have occurred
       or may occur. To the extent not utilized, the carryforwards will expire
       during the years beginning 2002 through 2020.



FORM 10-Q                                                                Page 7

<PAGE>   10



 (5)   EQUIPMENT AND LEASEHOLD IMPROVEMENTS

       Equipment and leasehold improvements consist of the following:

<TABLE>
<CAPTION>
                                                                         September 30, 2000       December 31, 1999
                                                                         ------------------       -----------------

<S>                                                                          <C>                   <C>
       Laboratory and office equipment                                       $ 5,941,394           $ 5,760,113
       Leasehold improvements                                                  3,974,942             3,974,942
                                                                             -----------           -----------
                                                                               9,916,336             9,735,055
       Less accumulated depreciation and amortization                         (7,319,577)           (6,736,624)
                                                                             -----------           -----------
                                                                             $ 2,596,759           $ 2,998,431
                                                                             ===========           ===========
</TABLE>

(6)    COMMON STOCK RESERVED

       The Company has reserved Common Stock for issuance as of September 30,
       2000 as follows:

<TABLE>
<S>                                                                            <C>
              Stock option plans                                               4,303,768
              Publicly traded warrants outstanding                             3,866,509
              Other warrants outstanding                                         627,105
                                                                               ---------
                   Total shares reserved                                       8,797,382
                                                                               =========
</TABLE>

(7)    REGULATORY FILING

       On June 30, 2000, the Company received final approval from the FDA for
       Argatroban as an anticoagulant for prevention or treatment of thrombosis
       in patients with heparin-induced thrombocytopenia ("HIT").

(8)    LICENSE AGREEMENTS

       Pursuant to the terms of the limited partnership agreement for ICOS-TBC,
       TBC and ICOS will equally fund the cost of research and development of
       sitaxsentan and second-generation endothelin antagonist compounds,
       commercialize resulting products, and share equally in the profits from
       this worldwide collaboration. ICOS made an upfront payment and will make
       milestone payments to TBC that together could be as much as $55.5 million
       for the development and commercialization of products resulting from the
       collaboration. The immediate focus of ICOS-TBC will be to initiate a
       Phase IIb/III pulmonary hypertension clinical trial for sitaxsentan,
       continue clinical development for sitaxsentan in chronic heart failure,
       and explore applications for second-generation endothelin antagonists
       including TBC3711.

       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 to ICOS-TBC had
       no basis for financial reporting purposes and, accordingly, the Company
       has recorded the transfer of this technology to ICOS-TBC at zero. The
       Company received a license fee from ICOS-TBC upon transfer of this
       technology and conducts research and development activities on behalf of
       ICOS-TBC and is paid for such services based upon costs incurred. The
       Company has deferred full recognition of the license fee and has recorded
       approximately $1,955,000 of expenses representing its proportionate share
       of ICOS-TBC's net losses. Also, the Company recorded approximately $2.8
       million for cost reimbursements for the nine months ended September 30,
       2000 related to the research and development activities provided to
       ICOS-TBC of which approximately $701,000 was recognized as revenue. The
       license fee and any future milestones paid to the Company will be
       amortized over the anticipated development period. Pursuant to the
       partnership agreement, TBC assigned one-half of the remaining payments
       under the agreement with LG Chemical to the partnership.

       On June 30, 2000, TBC and Schering-Plough Corporation ("Schering-Plough")
       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-Plough 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-Plough will support
       research at TBC and will be responsible for all costs associated with the
       worldwide




FORM 10-Q                                                                Page 8
<PAGE>   11

       product development program and commercialization of the compound. In
       addition to reimbursing research costs, Schering-Plough paid an upfront
       license fee and will pay development milestones and royalties on product
       sales resulting from the agreement. Total payments to TBC for both
       programs, excluding royalties, could reach $87.0 million.

       On June 30, 2000, TBC issued 71,429 shares of Common Stock to the former
       licensor of Argatroban in conjunction with the approval of the NDA for
       Argatroban in patients with HIT. The Company recorded a $965,970 non-cash
       charge to in-process research and development during the second quarter
       of 2000 related to the issuance. This transaction represents the final
       amount to be paid in exchange for the license to the Argatroban
       technology from the former licensee.

(9)    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 and has
       consolidated the financial results of Revotar into TBC's consolidated
       financial statements.

(10)   COMMITMENTS AND CONTINGENCIES

       Lease Agreements

       On June 30, 2000, the Company extended the lease agreement for its
       facilities in Houston, Texas for a period of five years beginning January
       1, 2001. The lease extension contains terms substantially similar to
       those contained in the original lease agreement.



FORM 10-Q                                                                Page 9
<PAGE>   12



ITEM 2.
                TEXAS BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES

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

              SEPTEMBER 30, 2000 (UNAUDITED) AND DECEMBER 31, 1999

                                    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 Form
10-K for the year 1999 and our consolidated financial statements and the related
notes to the financial statements included in this Form 10-Q.

       Since our inception in 1989, we have primarily devoted our resources to
funding drug discovery research and development. 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
$100.8 million from the date of our inception through September 30, 2000. We
have primarily financed our operations to date through private and public
offerings of our common and preferred stock.

       During October 1996, we signed a research and common stock purchase
agreement with LG Chemical. LG Chemical purchased 1,250,000 shares of our common
stock for $5.0 million and committed to pay us up to $10.7 million over a
five-year period to develop two compounds in clinical development. Of this
amount, $7.1 million has been paid. Furthermore, $1.0 million will be paid on
December 31, 2000, and $1.3 million will be paid on June 30 and December 31,
2001. In June 2000, we assigned one-half of the remaining payments under the LG
Chemical agreement, or approximately $1.9 million, to ICOS-TBC.

       In August 1997, we entered into an agreement with SmithKline Beecham plc,
commonly known as SmithKline, whereby we granted SmithKline the exclusive right
to work with us in the development and commercialization of Argatroban in the
U.S. and Canada for specified indications. Under this agreement, SmithKline has
paid an aggregate of $21.0 million in the form of license fees and milestone
payments for Argatroban. Future milestone payments for the acute myocardial
infarction indication are subject to SmithKline's agreement to market Argatroban
for the acute myocardial infarction indication. At this time, SmithKline has no
plans to conduct development work for the acute myocardial infarction and stroke
indications. We are evaluating the feasibility of developing Argatroban for
ischemic stroke and possibly other indications. In connection with the
agreement, SmithKline purchased 176,922 shares of our common stock for $1.0
million and an additional 400,000 shares of our common stock for $2.0 million in
conjunction with our public offering, which closed during October 1997.

       On June 6, 2000, we and ICOS entered into the ICOS-TBC limited
partnership agreement. The partnership will seek to develop and globally
commercialize endothelin-A receptor antagonists. ICOS-TBC will make upfront and
milestone payments to us that could be as much as $55.5 million for the
development and commercialization of products resulting from the collaboration.
See footnote 8 to the Consolidated Financial Statements for a discussion of this
transaction.

       On June 30, 2000, we and Schering-Plough Corporation entered into a
worldwide research collaboration and license agreement to discover, develop and
commercialize VLA-4 antagonists. In addition to research costs, Schering-Plough
will pay an upfront license fee, development milestones and royalties on product
sales resulting from the agreement. Total payments to us for both programs,
excluding royalties, could reach $87.0 million. See footnote 8 to the
Consolidated Financial Statements for a discussion of this transaction.

       During September 2000, we founded Revotar Biopharmaceuticals, AG and
transferred to Revotar certain development and commercialization rights to our
selectin antagonist program as well as rights to other proprietary technology.
See footnote 9 to the Consolidated Financial Statements for a discussion of this
transaction. During the third quarter, the primary focus of Revotar has been on
the design and initiation of a Phase I trial for TBC1269 using the inhaled
formulation of the drug, which is scheduled to begin in the first half of 2001.
Also during the third quarter, Dr. Gunter Roskamp, formerly with the
Industrial Investment Council of Germany and Schering AG, joined Revotar as
Chief Operating Officer.



FORM 10-Q                                                               Page 10
<PAGE>   13

       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.

                              RESULTS OF OPERATIONS

              THREE MONTH PERIODS ENDED SEPTEMBER 30, 2000 AND 1999

       Revenues were $516,262 and $1,649,573 during the three months ended
September 30, 1999 and 2000, respectively. Revenues were composed of amounts
recognized under license agreements and research and development agreements and
increased 220% due to amortization of the license fee received in connection
with the formation of ICOS-TBC, reimbursement from ICOS-TBC for labor costs
incurred on behalf of ICOS-TBC and the research collaboration payments from
Schering-Plough, all of which occurred during 2000. Interest income for the
three months ended September 30, 1999 was 426% lower than the same period of
2000 due primarily to higher investment balances in 2000.

       Research and development expenses decreased 27% from $3,259,081 during
the three months ended September 30, 1999 to $2,391,299 for the same period of
2000. The decrease was due primarily to expenses of the endothelin development
program which are now the responsibility of ICOS-TBC offset partially by
increased costs to the program. However, we expect ICOS-TBC research and
development expenditures to increase in the future as clinical trials for the
endothelin program progress.

       During the third quarter of 2000, we recognized approximately $1.4
million of losses related to our 50% equity interest in ICOS-TBC which commenced
in June 2000.

       General and administrative expenses decreased 3% from $1,438,100 during
the three months ended September 30, 1999 to $1,393,672 during the same period
of 2000. The decrease was due primarily to decreased patent legal fees related
to the sitaxsentan program which are now the responsibility of ICOS-TBC.

       We incurred net losses of $3,898,236 and $1,908,730 for the three months
ended September 30, 1999 and 2000, respectively.

                              RESULTS OF OPERATIONS

              NINE MONTH PERIODS ENDED SEPTEMBER 30, 2000 AND 1999

       Revenues were $1,546,317 and $13,421,328 during the nine months ended
September 30, 1999 and 2000, respectively. Revenues were composed of amounts
recognized under license agreements and research and development agreements and
increased 768% due to an increase in license fees received in connection with
the formation of ICOS-TBC and the research collaboration and license agreement
with Schering-Plough and a $7.5 million milestone payment related to final
approval of Argatroban due under the license agreement with SmithKline. Interest
income for the nine months ended September 30, 1999 was 191% lower than the same
period of 2000 due primarily to higher investment balances in 2000.

       Research and development expenses increased 1% from $9,473,841 during the
nine months ended September 30, 1999 to $9,581,698 for the same period of 2000.
The increase was due primarily to the decrease in expenses of the endothelin
development program which are now the responsibility of ICOS-TBC and the
increase in preclinical costs related to the endothelin development program
incurred prior to initiation of ICOS-TBC.

       General and administrative expenses increased 9% from $4,374,632 during
the nine months ended September 30, 1999 to $4,762,411 during the same period of
2000. The increase was due primarily to increases in premarketing and consulting
costs related to Argatroban. We have recently added additional staff in the
marketing and clinical departments and expect to add additional senior staff in
the research and administrative areas in 2001. Accordingly, we expect general
and administrative expenses to increase as a result of these staff increases. We
had 86 employees at September 30, 1999 and 88 employees at September 30, 2000.

       We incurred net losses of $11,332,699 and 898,059 for the nine months
ended September 30, 1999 and 2000, respectively.



FORM 10-Q                                                               Page 11

<PAGE>   14

       We expect that revenue for the fourth quarter of 2000 will be in the
range of $1.5 to $2.0 million, which will include revenues from the
collaboration agreements with Schering-Plough, LG Chemical and ICOS-TBC.
Additionally, royalties associated with the sale of Argatroban are expected to
commence during this quarter. We may be required to adjust revenues based on
implementation of SEC Staff Accounting Bulletin 101 which concerns recognition
of revenue. Expenses for the fourth quarter are expected to range from $5.0 to
$6.5 million including operating expenses and our share of ICOS-TBC losses.

       At this time, management expects that expenses in 2001 will increase over
the year 2000 due to the initiation of additional clinical trials for Argatroban
and the ICOS-TBC endothelin antagonist compounds and the operating expenses of
Revotar. Revenues for 2001 will include revenues and potential milestones from
the agreements with Schering-Plough, LG Chemical, ICOS-TBC and a full year of
Argatroban royalties.

                         LIQUIDITY AND CAPITAL RESOURCES

       We have financed our research and development activities to date
principally through:

o      private and public offerings of our common and preferred stock;

o      issuances of common stock in conjunction with acquisitions, research and
       collaboration agreements and upon exercises of stock options and
       warrants;

o      milestone and research payments received in conjunction with research and
       collaborative agreements; and

o      investment income, net of interest expense.

       In April 2000, we raised approximately $65.2 million from an underwritten
public offering of our common stock. At September 30, 2000 we had cash, cash
equivalents, short-term and long-term investments of approximately $91.9 million
which includes approximately $4.5 million from Revotar, our majority owned
subsidiary.

       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 during 2000 and subsequent years because:

o      We will incur significant clinical trial costs for sitaxsentan and
       TBC1269 compounds and expect to begin to incur costs for clinical trials
       related to additional compounds and indications. These costs include:

       o      hiring personnel to direct and carry out all operations related to
              clinical trials;

       o      hospital and procedural costs;

       o      services of a contract research organization; and

       o      purchasing and formulating large quantities of the compound to be
              used in such trials.

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.

       Furthermore, we anticipate that the administrative costs associated with
our efforts will be significant. The amount and timing of expenditures will
depend, among other things, on our progress in ongoing research, clinical
development and commercialization efforts. On June 30, 2000 we received final
approval from the FDA for Argatroban as an anticoagulant for prevention or
treatment of thrombosis in patients with HIT. As a result, we expect to begin to
accrue royalty revenues from sales of Argatroban by SmithKline by year-end.
Therefore, we expect royalty revenues to begin during the fourth quarter.
However, increases in revenue, if any, may be partially, if not fully, offset by
increases in expenses related to ICOS-TBC's development of sitaxsentan and
continued research and development of our other programs.



FORM 10-Q                                                               Page 12
<PAGE>   15

       We anticipate that our existing capital resources and our other revenue
sources, should be sufficient to fund our cash requirements for the foreseeable
future which is contingent upon various factors, including royalty revenues from
Argatroban, the rates of patient enrollment and spending associated with
clinical trials for Argatroban and TBC1269, the level of expenditures of
ICOS-TBC and the level of research and development expenditures for our other
compounds. Our publicly traded warrants are scheduled to expire on December 31,
2000. As of September 30, 2000, there were approximately 3.8 million warrants
outstanding. The exercise price of the warrants is $8.44. We believe that some
warrant holders will exercise their warrants before the expiration date. There
can be no assurance given as to the number or timing of warrant exercises, or
the amount of additional funds, if any, generated from warrant exercises.

       We anticipate that we may need to raise substantial funds for future
operations, which may be raised through collaborative arrangements, public or
private issuance of debt and equity, or other arrangements. We expect that
additional expenditures will be required if additional product candidates enter
clinical trials, which may require additional expenditures for laboratory space,
scientific and administrative personnel, and services of contract research
organizations. We cannot assure you that we will be able to obtain such
additional financings on acceptable terms or in time to fund any necessary or
desirable expenditures. In the event such financings are not obtained, our drug
discovery or development programs may be delayed, scaled back or eliminated; or
we may be required to obtain funds through arrangements with collaborative
partners or others that may require that we relinquish rights to certain of our
technologies, product candidates or products that would not otherwise be
relinquished. Our ability to raise additional funding is contingent upon a
number of factors which include:

o      the market acceptance and commercial success of Argatroban;

o      the ongoing cost of research and development activities;

o      the attainment of research and clinical goals of product candidates;

o      the continuance of research agreements with collaboration partners;

o      the timely approval of our product candidates by appropriate governmental
       and regulatory agencies;

o      the presence and effect of competitive products;

o      our ability to manufacture and market products commercially;

o      the retention of key personnel; and

o      conditions in the capital markets.

                  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 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.



FORM 10-Q                                                               Page 13

<PAGE>   16

                     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 our 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 this Form 10-Q are forward-looking statements. 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. 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. 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. Important factors that could cause actual
results to differ materially from our expectations include those discussed under
"Management's Discussion and Analysis of Financial Condition and Results of
Operations - Liquidity and Capital Resources" and without limitation:

o      market acceptance and commercial success of Argatroban;

o      ongoing cost of research and development activities;

o      cost of clinical development of product candidates;

o      attainment of research and clinical goals of product candidates;

o      timely approval of our product candidates by appropriate governmental and
       regulatory agencies;

o      effect of any current or future competitive products;

o      ability to manufacture and market products commercially;

o      retention of key personnel; and

o      capital market conditions.

       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

       We do not have any debt instruments with variable, or floating, interest
rates. Accordingly, to date, interest rate risk has not had a material impact on
the results of our operations.



FORM 10-Q                                                               Page 14

<PAGE>   17


PART II OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

       None

ITEM 2.  CHANGES IN SECURITIES

       During the third quarter 2000, we issued an aggregate of 38,400 shares of
our common stock to certain institutions and individuals, pursuant to the
exercise of outstanding warrants for an aggregate purchase price of $25,062
including 31,442 shares issued pursuant to a cashless exercise of privately held
warrants. The issuance of common stock was exempt from registration under
Section 4 (2) of the Securities Act of 1933, as amended. The warrants and the
common stock underlying the warrants may not be sold in the United States absent
registration or an applicable exemption from registration requirements.

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

       Three reports on Form 8-K (Item 5) were filed during the quarter ended
September 30, 2000. The first report was filed with the SEC on July 5, 2000
regarding the FDA's approval of the anticoagulant Argatroban for the prevention
or treatment of thrombosis associated with heparin-induced thrombocytopenia. The
second report was filed with the SEC on July 12, 2000 regarding the signing with
Schering-Plough Corporation of a worldwide research collaboration and license
agreement to discover, develop and commercialize VLA-4 antagonists. The third
report was filed with the SEC on August 7, 2000 regarding the formation of
Revotar Biopharmaceuticals, AG.

     EXHIBIT NO.             DESCRIPTION

       27.1                  Financial Data Schedule




FORM 10-Q                                                               Page 15

<PAGE>   18

                         TEXAS BIOTECHNOLOGY CORPORATION

                               SEPTEMBER 30, 2000

                                   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 November, 2000.




                              TEXAS BIOTECHNOLOGY CORPORATION


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






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




FORM 10-Q                                                               Page 16


<PAGE>   19


                                INDEX TO EXHIBITS


<TABLE>
<CAPTION>
    EXHIBIT
    NUMBER                                DESCRIPTION
    -------                               -----------

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






Form 10-Q                                                                Page 17