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


                                    FORM 10-Q


(Mark One)

       [X]   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
             EXCHANGE ACT OF 1934 FOR QUARTER ENDED JUNE 30, 1998

                                       OR

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

Commission File Number:  1-12574

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

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

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

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

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

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

Yes X    No
   ---      --- 

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

         Class                                    Outstanding at July 31, 1998
         -----                                    ----------------------------

Common Stock, $0.005 par value                              34,053,998


<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 June 30, 1998 and December 31, 1997                     1

           Consolidated Statements of Operations for the three months ended
           June 30, 1998 and 1997 and the six months ended June 30, 1998 and 1997                    2

           Consolidated Statements of Cash Flows the six months ended
           June 30, 1998 and 1997                                                                    3

           Notes to Consolidated Financial Statements                                                4

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

           ITEM 3:   QUANTITATIVE AND QUALITATIVE DISCLOSURES
                     ABOUT MARKET RISK                                                              13

PART II.   OTHER INFORMATION

           ITEM 1:  Legal Proceedings                                                               14

           ITEM 2:  Changes in Securities                                                           14

           ITEM 3:  Defaults Upon Senior Securities                                                 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                                                                                          17


INDEX TO EXHIBITS                                                                                   18
</TABLE>

<PAGE>   3

                 TEXAS BIOTECHNOLOGY CORPORATION AND SUBSIDIARY

                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                                             JUNE 30,          DECEMBER 31,
                                               ASSETS                                         1998                 1997
                                                                                         ---------------      ---------------
                                                                                           (Unaudited)
<S>                                                                                      <C>                  <C>       
 Current assets:
        Cash and cash equivalents                                                        $    13,836,229           14,323,573
        Short term investments                                                                23,921,328           29,383,791
        Other current receivables                                                              1,418,665            1,175,280
        Prepaids                                                                                 867,343              553,585
        Other current assets                                                                      12,900               10,400
                                                                                         ---------------      ---------------
              Total current assets                                                            40,056,465           45,446,629

 Equipment and leasehold improvements, at cost less
        accumulated depreciation and amortization (note 4)                                     3,275,909            3,292,062

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

             Total assets                                                                $    43,391,965           48,798,282
                                                                                         ===============      ===============

                                 LIABILITIES AND STOCKHOLDERS' EQUITY

 Current liabilities:
        Accounts payable                                                                 $       895,129            1,006,145
        Accrued expenses                                                                       2,374,064            1,625,071
                                                                                         ---------------      ---------------
             Total current liabilities                                                         3,269,193            2,631,216

 Commitments and contingencies (notes 6 and 7)                                                        --                   --

 Stockholders' equity (note 2):
        Preferred stock, par value $.005 per share. At June 30, 1998, 5,000,000
             shares authorized; none outstanding. At December 31, 1997, 5,000,000
             shares authorized, 300 shares issued and
             outstanding                                                                              --                    2
        Common stock, par value $.005 per share.  At June 30, 1998,
             75,000,000 shares authorized; 33,980,577 shares issued and
             outstanding.  At December 31, 1997, 75,000,000 shares
             authorized; 33,585,919 shares issued and outstanding                                169,905              167,929
        Additional paid-in capital                                                           117,219,382          116,085,172
        Accumulated deficit                                                                  (77,266,515)         (70,086,037)
                                                                                         ---------------      ---------------
             Total stockholders' equity                                                       40,122,772           46,167,066
                                                                                         ---------------      ---------------

             Total liabilities and stockholders' equity                                  $    43,391,965           48,798,282
                                                                                         ===============      ===============
 </TABLE>


          See accompanying notes to consolidated financial statements

FORM 10-Q                                                               Page 1
<PAGE>   4

                 TEXAS BIOTECHNOLOGY CORPORATION AND SUBSIDIARY

                      CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                            THREE MONTHS ENDED                         SIX MONTHS ENDED
                                                                 JUNE 30,                                  JUNE 30,
                                                         1998                1997                 1998                 1997
                                                    ---------------     ---------------      ---------------     ---------------
                                                      (unaudited)        (unaudited)            (unaudited)         (unaudited)
<S>                                                 <C>                 <C>                  <C>                 <C>
 Revenues:
     Research agreements                            $       621,788             687,501            1,243,388           1,485,002
     Other income                                                --               2,499                   --               4,998
                                                    ---------------     ---------------      ---------------     ---------------
         Total revenues                                     621,788             690,000            1,243,388           1,490,000
                                                    ---------------     ---------------      ---------------     ---------------

 Expenses:
     Research and development                             3,798,763           4,545,311            7,209,147           8,830,365
     General and administrative                           1,114,437           1,987,010            2,328,746           3,071,308
                                                    ---------------     ---------------      ---------------     ---------------
         Total expenses                                   4,913,200           6,532,321            9,537,893          11,901,673
                                                    ---------------     ---------------      ---------------     ---------------

         Operating loss                                   4,291,412           5,842,321            8,294,505          10,411,673
                                                    ---------------     ---------------      ---------------     ---------------

 Other income (expense):
     Interest income                                        535,168             166,088            1,115,717             323,476
     Other                                                       --             (15,458)                  --              (5,840)
                                                    ---------------     ---------------      ---------------     ---------------
         Total other income (expense)                       535,168             150,630            1,115,717             317,636

         Net loss                                         3,756,244           5,691,691            7,178,788          10,094,037
         Preferred dividend requirement                          --             450,442                1,690             847,394

         Net loss applicable to common shares       $     3,756,244           6,142,133            7,180,478          10,941,431

 Net loss per common share, basic and diluted:      $          0.11                0.24                 0.21                0.43
                                                    ===============     ===============      ===============     ===============

 Weighted average common shares used to
     compute net loss per common share, basic
     and diluted:                                        33,909,344          25,775,955           33,782,048          25,647,058
                                                    ===============     ===============      ===============     ===============
</TABLE>


          See accompanying notes to consolidated financial statements

FORM 10-Q                                                               Page 2
<PAGE>   5

                 TEXAS BIOTECHNOLOGY CORPORATION AND SUBSIDIARY

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                                              SIX MONTHS ENDED
                                                                                                   JUNE 30,
                                                                                           1998                  1997
                                                                                      ---------------      ---------------
<S>                                                                                   <C>                  <C>
 CASH FLOWS FROM OPERATING ACTIVITIES:
    Net loss                                                                          $    (7,178,788)         (10,094,037)
    Adjustments to reconcile net loss to net cash
     used in operating activities:
     Depreciation and amortization                                                            399,942              373,107
     Expenses paid with stock (note 2)                                                          9,682                5,472
     Compensation expense related to stock options (note 2)                                        --            1,303,094
     Loss on disposition of fixed assets                                                        7,895                   --
     (Increase) decrease in preferred dividend payable not included in net loss                11,912              (68,497)
    Change in operating assets and liabilities, net of
       effect of acquisition:
     (Increase) decrease in prepaids                                                         (313,758)             159,682
     (Increase) in receivables                                                               (243,385)                  --
     (Increase) in other current assets                                                        (2,500)            (659,704)
     (Increase) in inventories                                                                     --             (167,560)
     Increase (decrease) in current liabilities                                               637,977             (834,412)
     (Decrease) in deferred revenue                                                                --             (375,000)
                                                                                      ---------------      ---------------
           Net cash used in operating activities                                           (6,671,023)         (10,357,855)
                                                                                      ---------------      ---------------

 CASH FLOWS FROM INVESTING ACTIVITIES:
    Purchases of equipment and leasehold improvements                                        (394,684)            (293,901)
    Proceeds from disposition of fixed assets                                                   3,000                   --
    Purchase of short term investments                                                    (27,653,176)          (7,919,487)
    Maturity of short term investments                                                     33,087,858           11,262,292
    Decrease in interest receivable included in short term investments                         27,781                   --
                                                                                      ---------------      ---------------
          Net cash provided by investing activities                                         5,070,779            3,048,904
                                                                                      ---------------      ---------------

 CASH FLOWS FROM FINANCING ACTIVITIES:
    Proceeds from sale of common stock and options and
     warrant exercises, net                                                                 1,112,900              630,527
    Proceeds from sale of preferred stock, net                                                     --            5,925,269
                                                                                      ---------------      ---------------
           Net cash provided by financing activities                                        1,112,900            6,555,796
                                                                                      ---------------      ---------------

     Net (decrease) in cash and cash equivalents                                             (487,344)            (753,155)

 Cash and cash equivalents at beginning of period                                          14,323,573            2,127,999
                                                                                      ---------------      ---------------

 Cash and cash equivalents at end of period                                           $    13,836,229            1,374,844
                                                                                      ===============      ===============

 Supplemental schedule of noncash financing activities (note 2)                       $         9,682                5,472
                                                                                      ===============      ===============
 </TABLE>


          See accompanying notes to consolidated financial statements

FORM 10-Q                                                               Page 3
<PAGE>   6

                 TEXAS BIOTECHNOLOGY CORPORATION AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                 JUNE 30, 1998 (UNAUDITED) AND DECEMBER 31, 1997

(1)    ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

       (a)    Organization

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

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

       (b)    Basis of Consolidation

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

       (c)    Cash, Cash Equivalents and Short Term Investments

              Cash equivalents are considered to be those securities or
              instruments with original maturities, when purchased, of three
              months or less. At June 30, 1998, approximately $234,000 was
              invested in demand and money market accounts. Short term
              investments are those investments which have an original maturity
              of less than one year and greater than three months. At June 30,
              1998, the Company's short term investments consisted of
              approximately $1,500,000 in Government Agency Notes and
              $22,421,000 in Corporate Commercial Paper. Cash equivalents and
              short term investments are stated at cost plus accrued interest,
              which approximates market value. Interest income is accrued as
              earned. In connection with the adoption of Financial Accounting
              Standards Statement 115, the Company classified all short 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.



FORM 10-Q                                                               Page 4
<PAGE>   7

       (e)    Intangible Assets

              Intangible assets are amortized on a straight line basis over ten
              years.

       (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. With
              respect to research and development, salaries and benefits for the
              three month period ended June 30, 1998 and 1997, totaled
              approximately $1,501,000 and $2,613,000, respectively, of which
              approximately $1,122,000 and $1,462,000, respectively, was charged
              to research and development. For the six month period ended June
              30, 1998 and 1997, salaries and benefits totaled approximately
              $3,174,000 and $4,200,000, respectively, of which approximately
              $2,359,000 and $2,600,000, 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 based upon the net loss
              applicable to common shares after preferred dividend requirements
              and upon the weighted average of common shares outstanding during
              the period. Preferred dividend requirements for the six month
              period ended June 30, 1998 included $1,690 of accrued dividends.
              For the three months ended June 30, 1998 and 1997, the weighted
              average common shares used to compute basic net loss per common
              share totaled 33,909,344 and 25,775,955, respectively. For the six
              months ended June 30, 1998 and 1997, the weighted average common
              shares used to compute net loss per common share totaled
              33,782,048 and 25,647,058, respectively. The conversion of
              securities convertible into Common Stock and the exercise of stock
              options and warrants were 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 June 30, 1998 presentation with no
              effect on net loss reported.

       (i)    Revenue Recognition

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

       (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 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)    Development Stage Enterprise

              In certain prior periods, the Company reported as a development
              stage enterprise. With the signing of a commercialization
              agreement for NOVASTAN(R)(argatroban), the Company began 
              reporting as an operating company during the third quarter of 
              1997.

 (2)   STOCK OPTIONS AND WARRANTS

       The Company has in effect three stock option plans allowing for the
       issuance of incentive and non-qualified options to employees, directors,
       officers, non-employee independent contractors and non-employee
       directors, and two stock option plans allowing for the issuance of
       non-qualified options to non-employee members of the Board of Directors
       of the Company based on a formula. No current issuances are being made
       under the Director Plan. This plan allows for directors to request stock
       in lieu of cash payment of director fees, which amounted to $9,682 and
       $5,472, respectively, for the six month periods ended June 30, 1998 and
       1997.

       A summary of stock options as of June 30, 1998, follows:

<TABLE>
<CAPTION>
                             Exercise Price                                     Exercised/                    Available
       Stock Option Plans      Per Share        Authorized       Outstanding      Other        Exercisable    for Grant
       ------------------    --------------    -----------       -----------    ----------     -----------    ---------
       <S>                   <C>               <C>               <C>            <C>            <C>            <C>   
       1990 Plan             $1.38 - $5.59        285,715          184,001          66,318       167,856        35,396

       1992 Plan             $1.41 - $5.36      1,700,000        1,233,511         236,660     1,194,522       229,829

       1995 Plan             $1.31 - $8.13      2,000,000        1,706,800          11,851       670,329       281,349

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

       1995 Director Plan    $1.38 - $5.69        300,000          189,005          10,909       104,185       100,086
                                                ---------        ---------         -------     ---------       -------
                    TOTALS                      4,357,144        3,347,559         362,925     2,171,134       646,660
                                                =========        =========         =======     =========       =======
</TABLE>

 (3)   INCOME TAXES

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

       At June 30, 1998, the net deferred tax asset totaled approximately
       $25,027,000, and was fully reserved. The Company did not incur any tax
       expense in any period due to operating losses.




FORM 10-Q                                                               Page 6
<PAGE>   9

(4)    EQUIPMENT AND LEASEHOLD IMPROVEMENTS

       Equipment and leasehold improvements consist of the following:

<TABLE>
<CAPTION>
                                                                       June 30,1998         December 31, 1997
                                                                       ------------         -----------------
<S>                                                                  <C>                     <C>            
        Laboratory and office equipment                              $     5,040,633         $     4,665,174
        Leasehold improvements                                             3,701,772               3,701,772
                                                                     ---------------         ---------------
                                                                           8,742,405               8,366,946
        Less accumulated depreciation and amortization                    (5,466,496)             (5,074,884)
                                                                     ---------------         ---------------
                                                                     $     3,275,909         $     3,292,062
                                                                     ===============         ===============
 </TABLE>

(5)    COMMON STOCK RESERVED

       The Company has reserved Common Stock for issuance as of June 30, 1998 as
       follows:

<TABLE>
<S>                                                                          <C>      
              Stock option plans                                               3,994,219
              Common Stock issuable under licensing agreement                     71,429
              Publicly Traded Warrants Outstanding                             4,082,500
              Other Warrants Outstanding                                         732,583
              Underwriters purchase options and related warrants                 710,000
                                                                             -----------
                   Total shares reserved                                       9,590,731
                                                                             ===========
</TABLE>

(6)    REGULATORY FILING

       During August 1997, the Company filed a new drug application ("NDA") with
       the United States Food and Drug Administration (the "FDA") for its' lead
       product candidate, NOVASTAN(R) for use as an anticoagulant in patients
       with heparin-induced thrombocytopenia ("HIT") and heparin-induced
       thrombocytopenia with thrombosis syndrome ("HITTS"). During September
       1997, the FDA granted priority review status to the new drug application
       for NOVASTAN(R). During October, 1997, the Company was notified by the
       FDA that the filed NDA for NOVASTAN(R) was accepted. The FDA extended the
       priority review period by 90 days during January 1998. On May 11, 1998,
       the Company announced that it had received a non-approvable letter from
       the FDA for NOVASTAN(R). The Company met with the FDA to confirm the
       exact requirements for the resubmission of the NOVASTAN(R) new drug
       application. Based on the meeting, the resubmission will include an
       expanded historical control group that reflects the FDA's requirement for
       one that more closely resembles the medical conditions and outcomes seen
       in the literature and other patient registries. The Company remains
       committed to satisfying the FDA's requirements and is moving forward with
       the plan to resubmit the NDA as quickly as possible.

 (7)   COMMITMENTS AND CONTINGENCIES

       a)     Legal Proceedings

              On November 21, 1994, a class action shareholders' suit was filed
              in the United States District Court for the Southern District of
              Texas, Houston Division seeking damages in the amount of $16
              million. Plaintiffs are two individuals who purchased shares of
              the Company on December 16, 1993 following the Company's initial
              public offering ("IPO"). In their complaint, plaintiffs have sued
              the Company, certain members of the board of directors and certain
              officers alleging violations of Sections 11, 12 and 15 of the
              Securities Act of 1933, as amended (the "Act"). Plaintiffs have
              also named David Blech, D. Blech & Co. and Isaac Blech as
              defendants. On January 23, 1995, the Company and the members of
              the board of directors filed a motion to dismiss the plaintiffs'
              complaint pursuant to Rule 9(b) and Rule 12b(6) of the Federal
              Rules of Civil Procedure. In addition, defendant John Pietruski,
              Chairman of the Board of Directors, filed a motion to dismiss the
              plaintiffs' complaint pursuant to Rule 12(b)(2) of the Federal
              Rules of Civil Procedure. On February 7, 1995, the plaintiffs
              filed a motion for class certification. The Court denied the
              motion by the Company and by John Pietruski.



FORM 10-Q                                                               Page 7
<PAGE>   10

              On March 28, 1995, a second class action shareholders' suit was
              filed in the United States District Court for the Southern
              District of New York seeking unspecified damages. Plaintiffs are
              eight individuals who purchased shares in various companies for
              which D. Blech & Co. acted as an underwriter (or co-underwriter)
              or marketmaker. In their complaint, the plaintiffs have sued the
              Company alleging violations of Section 10(b) of the Securities
              Exchange Act of 1934, as Amended (the "Exchange Act") and Rule
              10b-5 promulgated thereunder by the Securities and Exchange
              Commission (the "Commission"). Plaintiffs have named a number of
              defendants, including David Blech and D. Blech & Co., four
              individuals, two brokerage firms, one investment management
              company and ten other companies for which D. Blech & Co. acted as
              underwriter or marketmaker.

              On August 14, 1995, the Judicial Panel on The Multi-District
              Litigation ordered that the action filed in the United States
              District Court for the Southern District of Texas, Houston
              Division be transferred to the United States District Court for
              the Southern District of New York for coordinated or consolidated
              pretrial proceedings with the action pending there. In light of
              the transfer and consolidation of the Texas case with similar
              cases against other companies for which D. Blech & Co. acted as
              underwriter, the Company requested that the Court in New York
              reconsider the Texas Court's denial of its motion to dismiss as a
              part of the Court's consideration of similar motions to dismiss
              filed by those companies. All of these motions were presented to
              the Court on February 6, 1996. On June 6, 1996, the New York
              District Court entered two memorandum opinions in the consolidated
              cases. In one of its opinions, the Court dismissed all of the
              Exchange Act and common law fraud claims filed against the Company
              and its officers and directors but afforded those plaintiffs the
              right to attempt to preserve those claims by repleading them. The
              Court ordered that those claims be repleaded no later than July
              26, 1996. Plaintiffs did not replead those claims by the deadline,
              resulting in the dismissal of all claims against the Company in
              that litigation. In its opinion in the first case, i.e., the case
              filed on November 21, 1994, the Court granted the Company's and
              its officers' and directors' motion for reconsideration, but
              together with all other similar pending motions, denied the
              requested relief. Pursuant to the court's order, the Company
              therefore filed an answer in that case. The Company also filed a
              Motion seeking leave of court to prosecute an immediate appeal of
              the Court's denial of the Company's Motion to Dismiss. The Court
              heard argument on that Motion on October 10, 1996. The motion was
              denied on January 16, 1997. Limited discovery has taken place in
              the case, however, given its early stage, the Company is unable to
              evaluate its potential outcome at this time. The Company disputes
              these claims and intends to contest them vigorously. There can be
              no assurance, however that the final disposition of this case will
              be favorable to the Company. This is the only remaining litigation
              against the Company.


FORM 10-Q                                                               Page 8
<PAGE>   11

       ITEM 2.

                 TEXAS BIOTECHNOLOGY CORPORATION AND SUBSIDIARY

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

                 JUNE 30, 1998 (UNAUDITED) AND DECEMBER 31, 1997



                                    OVERVIEW

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

       Since its inception in 1989, the Company has primarily devoted its
       resources to fund research, drug discovery and development. The Company
       has been unprofitable to date and expects to incur substantial losses for
       the next several years as the Company invests in product research and
       development, preclinical and clinical testing and regulatory compliance.
       The Company has sustained net losses of approximately $77.3 million from
       inception to June 30, 1998. The Company has primarily financed its
       operations to date through certain private placements of Common Stock and
       shareholder loans (none of which are outstanding), which have raised an
       aggregate of $21.3 million in net proceeds, the Initial Public Offering
       which raised an aggregate of $24.2 million in net proceeds including the
       over-allotment sold in January 1994, a private placement of Common Stock
       on February 13, 1996, which raised $13.0 million in net proceeds, a
       private placement of the 5% Preferred on March 14, 1997, which raised
       approximately $6.0 million in net proceeds, and a secondary public
       offering in October 1997 which raised approximately $26.7 million in net
       proceeds.

       On July 25, 1994, the Company acquired all of the outstanding stock of
       ImmunoPharmaceutics, Inc. ("IPI") in exchange for 1,599,958 shares of
       Common Stock, 999,956 shares of escrowed Common Stock which were released
       upon satisfaction of certain research milestones, and contingent stock
       issue rights to acquire 1,400,000 shares of which 399,961 shares were
       issued upon satisfaction of certain research milestones. IPI's financial
       results have been included in the Company's financial statements
       beginning August 1, 1994. In March 1996, IPI's remaining operations in
       California were consolidated with the Company's Houston operations.

       The Company signed a collaborative agreement with Synthelabo S.A., the
       pharmaceutical division of L'Oreal S.A. ("Synthelabo") on October 11,
       1994 (the "Synthelabo Agreement"). Upon consummation of the transaction,
       Synthelabo purchased 1,428,571 shares of Common Stock for a total of $5.0
       million and paid a licensing fee of $3 million. In addition, Synthelabo
       has paid $6,750,000 in research payments over a three year period. During
       1996, TBC signed agreements with Synthelabo to provide copies of certain
       clinical data. Over the life of the agreements TBC may receive as much as
       $2.92 million, of which $2.88 million has been received as of June 30,
       1998.

       During October 1996, the Company executed a research and Common Stock
       purchase agreement with LG Chem. LG Chem purchased 1,250,000 shares of
       Common Stock for $5.0 million and committed to pay up to $10.7 million
       over a five year period to develop two compounds in clinical development.
       Of this amount, $3.1 million has been paid (of which $1.0 million was a
       receivable at June 30, 1998), $1.0 million will be paid on December 31,
       1998 and on each of June 30 and December 31 of 1999 and 2000, and $1.3
       million will be paid on June 30 and December 31, 2001.

       In August 1997, the Company entered into an agreement with SmithKline
       Beecham plc., ("SmithKline") whereby SmithKline was granted exclusive
       rights to work with TBC in the development and commercialization of
       NOVASTAN(R) in the U.S. and Canada for specified indications (the
       "SmithKline Agreement"). Upon execution of the agreement, SmithKline paid
       an $8.5 million license fee and during October 1997, paid a $5 million
       milestone payment to TBC and has committed to pay up to $15.0 million in
       additional milestone payments based on the 


FORM 10-Q                                                               Page 9
<PAGE>   12

       clinical development and FDA approval of NOVASTAN(R) for the indications
       of HIT, HITTS and AMI. In connection with the SmithKline Agreement,
       SmithKline purchased 176,922 shares of Common Stock for $1.0 million and
       an additional 400,000 shares of Common Stock for $2.0 million in
       conjunction with the Company's public offering in October 1997.

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

                              RESULTS OF OPERATIONS

                THREE MONTH PERIODS ENDED JUNE 30, 1998 AND 1997


       Revenues decreased from $690,000 in the three month period ended June 30,
       1997 to $621,788 in the same period of 1998, a decrease of 10%. Revenues
       were primarily composed of earned revenues under research and development
       agreements. Revenue from research agreements decreased primarily due to
       the completion of the payment schedule included in the Synthelabo
       Agreement.

       Total operating expenses decreased 25% from $6,532,321 in the three month
       period ended June 30, 1997 to $4,913,200 in the same period of 1998 due
       primarily to the decrease in research and development expenses and a
       noncash charge during 1997 to general and administrative expenses.
       Research and development expenses decreased 16% from $4,545,311 in the
       three month period ended June 30, 1997 to $3,798,763 in the same period
       of 1998. This decrease was primarily attributable to continued decreases
       in research and development activity related to the completion of
       enrollment in certain clinical trials for the compound NOVASTAN(R).
       General and administrative expenses decreased 44% from $1,987,010 in the
       three month period ended June 30, 1997 to $1,114,437 in the same period
       of 1998 due primarily to a noncash charge of $828,716 incurred during
       1997 related to the extension of the exercise period for certain stock
       options. The Company had 76 employees at June 30, 1998 and 80 employees
       at June 30, 1997.

       Other income and expense is composed of investment income on invested
       funds, interest expense and foreign currency exchange losses. The
       increase is due to a 222% increase in investment income from $166,088 in
       the three month period ended June 30, 1997 to $535,168 in the same period
       of 1998, attributed primarily to higher investment balances resulting
       from funds received in conjunction with the SmithKline Agreement and a
       public offering of Common Stock completed in the last six months of 1997.

                 SIX MONTH PERIODS ENDED JUNE 30, 1998 AND 1997

       Revenues decreased from $1,490,000 in the six month period ended June 30,
       1997 to $1,243,388 in the same period of 1998, a decrease of 17%.
       Revenues were primarily composed of earned revenues under research and
       development agreements. Such revenue decreased primarily due to the
       completion of the payment schedule included in the Synthelabo Agreement.
       In addition, no data payments from Synthelabo were received in 1998.

       Total operating expenses decreased 20% from $11,901,673 in the six month
       period ended June 30, 1997 to $9,537,893 in the same period of 1998 due
       primarily to the decrease in research and development expenses. Research
       and development expenses decreased 18% from $8,830,365 in the six month
       period ended June 30, 1997 to $7,209,147 in the same period of 1998. This
       decrease was primarily attributable to continued decreases in research
       and development activity related to the completion of enrollment in
       certain clinical trials for the compound NOVASTAN(R). General and
       administrative expenses decreased 24% from $3,071,308 in the six month
       period ended June 30, 1997 to $2,328,746 in the same period of 1998
       primarily because of a $952,919 noncash charge related to the extension
       of the exercise period for certain stock options.

       Other income and expense is composed of investment income on invested
       funds, interest expense and foreign currency exchange losses. The
       increase is caused by a 245% increase in investment income from $323,476
       in the 


FORM 10-Q                                                               Page 10
<PAGE>   13

       six month period ended June 30, 1997 to $1,115,717 in the same period of
       1998, attributed primarily to higher investment balances resulting from
       funds received in connection with the SmithKline Agreement and a public
       offering of Common Stock completed in the last six months of 1997.

                         LIQUIDITY AND CAPITAL RESOURCES

       The Company has financed its research and development activities to date
       principally through (i) public offerings and private placements of its
       equity securities, (ii) issuances of Common Stock in conjunction with
       acquisitions and research and collaboration agreements and exercises of
       stock options and warrants, (iii) milestone and research payments
       received in conjunction with research and collaborative agreements, and
       (iv) investment income, net of interest expense. During the first six
       months of 1998, the Company utilized net cash in operating activities of
       $6,671,023. The use of cash in operations was caused primarily by the
       Company's net loss before preferred dividend requirements of $7,178,788.
       Investing and financing activities primarily reflect the net effect of
       purchases and redemptions of short term investments during the first six
       months of 1998. At June 30, 1998, the Company had cash, cash equivalents
       and short-term investments of $37,757,557.

       The Company expects to incur substantial research and development
       expenditures as it designs and develops small molecule drugs for vascular
       diseases. The Company anticipates that operating expenses may continue to
       increase during 1998 and subsequent years. The Company began to incur
       costs to develop NOVASTAN(R) during the third quarter of 1993. These
       costs will continue during 1998 because of ongoing NOVASTAN(R) trials and
       will continue to be significant through the FDA approval process and for
       clinical trial work should additional clinical indications be pursued.
       The Company has received a non-approvable letter from the FDA regarding
       its NDA for NOVASTAN(R) as a treatment for HIT/HITTS. The Company met
       with the FDA to confirm the exact requirements for the resubmission of
       the NOVASTAN(R) new drug application. Based on the meeting, the
       resubmission will include an expanded historical control group that
       reflects the FDA's requirement for one that more closely resembles the
       medical conditions and outcomes seen in the literature and other patient
       registries. The Company remains committed to satisfying the FDA's
       requirements and is moving forward with the plan to resubmit the NDA as
       quickly as possible.

       In order to resubmit the NDA, the Company may incur significant,
       unanticipated costs, all of which are presently not known. In addition,
       at this time the Company cannot predict when a resubmission of the NDA
       might be filed or the timing of the FDA's review and decision regarding
       the use and marketing of NOVASTAN(R). Based upon its meetings with the
       FDA and with SmithKline, the Company's partner in the commercialization
       of NOVASTAN(R), the Company expects to be able to develop an estimated
       budget and time line regarding the NDA resubmission. The failure to
       receive NDA approval from the FDA will have a material adverse effect on
       the commercialization of NOVASTAN(R) for HIT/HITTS, as well as
       potentially adversely impacting commercialization of other indications.

       The Company also began incurring clinical trial costs in 1997 for the
       compounds TBC 11251 and TBC 1269 and these costs are continuing during
       1998. In 1998, the Company expects to begin to incur costs for clinical
       trials related to additional compounds. These costs include, among other
       things, hiring personnel to direct and carry out all operations related
       to the clinical trials, hospital and procedural costs, services of a
       contract research organization and purchasing and formulating large
       quantities of the compound to be used in such trials. In addition, the
       Company anticipates that the administrative costs associated with this
       effort will be significant. The amounts and timing of expenditures will
       depend on the progress of the Company's ongoing research, clinical
       development and commercialization efforts.

       The Company anticipates that its existing capital resources and its other
       revenue sources should be sufficient to fund its cash requirements
       through the first quarter of 2000. This date is contingent upon various
       factors, including the rates of patient enrollment and spending
       associated with the clinical trials of NOVASTAN(R) and the compounds TBC
       11251 and TBC 1269, the costs necessary to meet requirements for further
       consideration of NOVASTAN(R) by the FDA and the level of research and
       development expenditures for other compounds. The Company's existing
       capital resources may not be sufficient to fund the Company's operations
       through commercialization of its first product, NOVASTAN(R). Moreover,
       TBC's agreement with Synthelabo requires the Company to maintain a "net
       worth", as defined in the agreement, of at least $5.0 million during the
       term of the agreement. If the Company fails to maintain 


FORM 10-Q                                                               Page 11
<PAGE>   14

       at least $5.0 million of "net worth", Synthelabo may require that the
       technology be transferred to, and the development program be conducted
       by, a joint venture owned by TBC and Synthelabo. The outcome of certain
       lawsuits that have been filed against the Company could also have an
       impact on liquidity. See Part II, Item 1. Legal Proceedings.

       The Company anticipates that it 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. The Company expects 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. There can be no assurance that the Company 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 financing is
       not obtained, the Company's drug discovery or development programs may be
       delayed, scaled back or eliminated. The Company may also be required in
       this event to obtain funds through arrangements with collaborative
       partners or others that may require the Company to relinquish rights to
       certain of its technologies, product candidates or products that it would
       not otherwise relinquish.

                               PENDING LITIGATION

       As of June 30, 1998, one class action shareholder lawsuit remains pending
       against the Company and includes certain directors and officers as
       defendants. The Company disputes all claims set forth in this lawsuit and
       intends to contest it vigorously. However, the Company is unable to
       evaluate the potential outcome at this time.

                  HAZARDOUS MATERIALS AND ENVIRONMENTAL MATTERS

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

                     IMPACT OF INFLATION AND CHANGING PRICES

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

                                 YEAR 2000 ISSUE

       The Company is in the process of conducting a review of its scientific
       equipment, computer systems and related software to identify systems that
       could be affected by the "Year 2000" issue. In this respect, teams from
       various disciplines within the Company have been formed to evaluate the
       appropriate courses of corrective action should such issues arise. The
       total cost is not expected to have a material effect on the Company's
       financial position or results of operations.

                 DISCLOSURE REGARDING FORWARD LOOKING STATEMENTS

       This Report includes "forward looking statements" within the meaning of
       Section 27A of the Securities Act of 1933, as amended, and Section 21E of
       the Securities Exchange Act of 1934, as amended. All statements other
       than statements of historical fact included in this Report are forward
       looking statements. Such forward looking statements include, without
       limitation, statements under (a) Statements regarding Texas Biotechnology



FORM 10-Q                                                               Page 12
<PAGE>   15

       Corporation's expectations for future drug discovery and development and
       related expenditures and (b) "Management's Discussion and Analysis of
       Financial Condition and Results of Operations - Liquidity and Capital
       Resources" - regarding TBC's estimate of sufficiency of existing capital
       resources and its ability to raise additional capital to fund cash
       requirements for future operations. Although TBC believes that the
       expectations reflected in such forward looking statements are reasonable,
       it can give no assurance that such expectations reflected in such forward
       looking statements will prove to have been correct. The ability to
       achieve TBC's expectations is contingent upon a number of factors which
       include (i) ongoing cost of research and development activities, (ii)
       cost of clinical development of product candidates, (iii) attainment of
       research and clinical goals of product candidates, (iv) timely approval
       of TBC's product candidates by appropriate governmental and regulatory
       agencies, (v) effect of any current or future competitive products, (vi)
       ability to manufacture and market products commercially, (vii) retention
       of key personnel and (viii) capital market conditions. This Form 10-Q may
       contain trademarks and service marks of other companies.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

       Not Applicable




FORM 10-Q                                                               Page 13
<PAGE>   16

PART II OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

       On November 21, 1994, a class action shareholders' suit was filed in the
       United States District Court for the Southern District of Texas, Houston
       Division seeking damages in the amount of $16 million. Plaintiffs are two
       individuals who purchased shares of the Company on December 16, 1993
       following the Company's initial public offering("IPO"). In their
       complaint, plaintiffs have sued the Company, certain members of the board
       of directors and certain officers alleging violations of Sections 11, 12
       and 15 of the Securities Act of 1933, as amended (the "Act"). Plaintiffs
       have also named David Blech, D. Blech & Co. and Isaac Blech as
       defendants. On January 23, 1995, the Company and the members of the board
       of directors filed a motion to dismiss the plaintiffs' complaint pursuant
       to Rule 9(b) and Rule 12b(6) of the Federal Rules of Civil Procedure. In
       addition, defendant John Pietruski, Chairman of the Board of Directors,
       filed a motion to dismiss the plaintiffs' complaint pursuant to Rule
       12(b)(2) of the Federal Rules of Civil Procedure. On February 7, 1995,
       the plaintiffs filed a motion for class ocertification. The Court denied
       the motion by the Company and by John Pietruski.

       On March 28, 1995, a second class action shareholders' suit was filed in
       the United States District Court for the Southern District of New York
       seeking unspecified damages. Plaintiffs are eight individuals who
       purchased shares in various companies for which D. Blech & Co. acted as
       an underwriter (or co-underwriter) or marketmaker. In their complaint,
       the plaintiffs have sued the Company alleging violations of Section 10(b)
       of the Securities Exchange Act of 1934, as Amended (the "Exchange Act")
       and Rule 10b-5 promulgated thereunder by the Securities and Exchange
       Commission (the "Commission"). Plaintiffs have named a number of
       defendants, including David Blech and D. Blech & Co., four individuals,
       two brokerage firms, one investment management company and ten other
       companies for which D. Blech & Co. acted as underwriter or marketmaker.

       On August 14, 1995, the Judicial Panel on The Multi-District Litigation
       ordered that the action filed in the United States District Court for the
       Southern District of Texas, Houston Division be transferred to the United
       States District Court for the Southern District of New York for
       coordinated or consolidated pretrial proceedings with the action pending
       there. In light of the transfer and consolidation of the Texas case with
       similar cases against other companies for which D. Blech & Co. acted as
       underwriter, the Company requested that the Court in New York reconsider
       the Texas Court's denial of its motion to dismiss as a part of the
       Court's consideration of similar motions to dismiss filed by those
       companies. All of these motions were presented to the Court on February
       6, 1996. On June 6, 1996, the New York District Court entered two
       memorandum opinions in the consolidated cases. In one of its opinions,
       the Court dismissed all of the Exchange Act and common law fraud claims
       filed against the Company and its officers and directors, but afforded
       those plaintiffs the right to attempt to preserve those claims by
       repleading them. The Court ordered that those claims be repleaded no
       later than July 26, 1996. Plaintiffs did not replead those claims by the
       deadline, resulting in the dismissal of all claims against the Company in
       that litigation. In its opinion in the first case, i.e., the case filed
       on November 21, 1994, the Court granted the Company's and its officers'
       and directors' motion for reconsideration, but together with all other
       similar pending motions, denied the requested relief. Pursuant to the
       court's order, the Company therefore filed an answer in that case. The
       Company also filed a Motion seeking leave of court to prosecute an
       immediate appeal of the Court's denial of the Company's Motion to
       Dismiss. The Court heard argument on that Motion on October 10, 1996. The
       motion was denied on January 16, 1997. Limited discovery has taken place
       in the case, however, given its early stage, the Company is unable to
       evaluate its potential outcome at this time. The Company disputes these
       claims and intends to contest them vigorously. There can be no assurance,
       however that the final disposition of this case will be favorable to the
       Company. This is the only remaining litigation against the Company.

ITEM 2.  CHANGES IN SECURITIES

       Common Stock Transactions

       On April 9, April 22, April 24, April 29, May 7, May 14 and May 22, 1998,
       the Company issued an aggregate of 214,488 shares of its Common Stock to
       certain institutions and individuals, pursuant to the exercise of
       outstanding warrants for an aggregate purchase price of $776,592. The
       issuance of the Common Stock was exempt from registration under Section 4
       (2) of the Securities Act of 1933, as amended. The warrants and the
       Common Stock 


FORM 10-Q                                                               Page 14
<PAGE>   17

       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

       On June 9, 1998, an annual meeting of the stockholders of the Company was
       held. The holders of 26,899,577 shares of Common Stock were present in
       person or represented by proxy at the meeting. At the meeting, the
       stockholders took the following actions:

       (a)    Election of Directors

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

<TABLE>
<CAPTION>
                                    NUMBER OF                 NUMBER OF
               NAME                 VOTES FOR             VOTES ABSTAINING
               ----                 ---------             ----------------
<S>                                 <C>                        <C>    
         Ron J. Anderson            26,666,703                 232,874

         Frank C. Carlucci          26,653,453                 246,124

         Rita R. Colwell            26,673,853                 225,724

         Robert J. Cruikshank       26,671,238                 228,339

         Richard A.F. Dixon         26,675,742                 223,835

         David B. McWilliams        26,674,753                 224,824

         John M. Pietruski          26,664,603                 234,974

         James A. Thomson           26,673,678                 225,899

         James T. Willerson         26,638,773                 260,804
</TABLE>

ITEM 5.  OTHER INFORMATION

       During July 1998, Texas Biotechnology Corporation announced positive
       preliminary data for the second half of a double-blind,
       placebo-controlled Phase IIA congestive heart failure ("CHF") trial
       evaluating the Company's endothelin A (ETA) receptor antagonist, TBC
       11251. The first half of the trial, reported in February 1998, was
       terminated early due to statistically significant interim results. The
       protocol was subsequently amended to allow further evaluation of TBC11251
       at a higher dose. In both segments of the Phase IIA trial, the patients
       treated with TBC11251 demonstrated a statistically significant
       improvement versus placebo in the primary endpoint of improving central
       hemodynamics, particularly pulmonary vascular resistance. Positive trends
       were also observed in several other important cardiovascular measures.

       Both segments of the study were conducted in patients with moderate to
       severe congestive heart failure (New York Heart Association class III/IV
       heart failure patients). The study involved a total of 48 patients. In
       the study, patients received either a single intravenous bolus dose of
       TBC11251 or placebo. No significant adverse events were observed in any
       of the patient groups.

       On July 17, 1998, Philip Jochelson, M.D. was appointed to the position of
       Vice President, Clinical Development and Regulatory Affairs.


FORM 10-Q                                                               Page 15
<PAGE>   18

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

<TABLE>
<CAPTION>
     EXHIBIT NO.             DESCRIPTION
     -----------             -----------
<S>                          <C>
        4.9                  Amended Certificate of Designation of 5% Cumulative Convertible Preferred Stock of Texas
                             Biotechnology Corporation

       10.64                 Agreement between Texas Biotechnology Corporation and Dr. Philip Jochelson dated June 23,
                             1998

       27.1                  Financial Data Schedule
</TABLE>

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




FORM 10-Q                                                               Page 16
<PAGE>   19

                         TEXAS BIOTECHNOLOGY CORPORATION

                                  JUNE 30, 1998

                                   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 13th day of August, 1998.




                               TEXAS BIOTECHNOLOGY CORPORATION


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






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





FORM 10-Q                                                               Page 17
<PAGE>   20

                                INDEX TO EXHIBITS

<TABLE>
<CAPTION>
     Exhibit No.                                 Description of Exhibit
     -----------                                 ----------------------
<S>                          <C>
        4.9                  Amended Certificate of Designation of 5% Cumulative Convertible Preferred Stock of Texas
                             Biotechnology Corporation

       10.64                 Agreement between Texas Biotechnology Corporation and Dr. Philip Jochelson dated June 23,
                             1998

       27.1                  Financial Data Schedule
</TABLE>

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



FORM 10-Q                                                               Page 18