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


                                    FORM 10-Q


(Mark One)

 [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934 FOR QUARTER ENDED MARCH
                31, 2003

                                       OR

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

                         Commission File Number: 0-20117

                         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 by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).

Yes  [X]    No  [ ]

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

                  Class                         Outstanding at May 6, 2003
                  -----                         --------------------------

      common stock, $0.005 par value                    44,280,125

<PAGE>

                         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 March 31, 2003 and December 31, 2002                    1

           Consolidated Statements of Operations and Comprehensive Loss for the
           three months ended March 31, 2003 and 2002                                                2

           Consolidated Statements of Cash Flows for the three months ended
           March 31, 2003 and 2002                                                                   3

           Notes to Consolidated Financial Statements                                                4

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

           ITEM 3:   QUANTITATIVE AND QUALITATIVE DISCLOSURES
                     ABOUT MARKET RISK                                                              26

           ITEM 4:   CONTROLS AND PROCEDURES                                                        26


PART II.   OTHER INFORMATION

           ITEM 1:  Legal Proceedings                                                               27

           ITEM 2:  Changes in Securities and Use of Proceeds                                       27

           ITEM 3:  Defaults Upon Senior Securities                                                 27

           ITEM 4:  Submission of Matters to a Vote of Security Holders                             27

           ITEM 5:  Other Information                                                               27

           ITEM 6:  Exhibits and Reports on Form 8-K                                                27

SIGNATURES                                                                                          28

CERTIFICATIONS                                                                                      29
</TABLE>

<PAGE>

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

<TABLE>
<CAPTION>
                                                                                     MARCH 31,        DECEMBER 31,
                                                                                       2003               2002
                                                                                    -----------       -----------
<S>                                                                                 <C>               <C>
ASSETS
Current assets:
       Cash and cash equivalents                                                    $     27,030       $     21,228
       Short-term investments                                                             19,713             26,533
       Accounts receivable                                                                 1,139              1,098
       Other current receivables                                                             131                473
       Receivable from related party under collaborative arrangement                       1,248                393
       Prepaids                                                                            2,235              1,482
                                                                                    ------------       ------------
           Total current assets                                                           51,496             51,207

Long-term investments                                                                     13,105             20,244
Equipment and leasehold improvements, net                                                  5,454              5,579
Other assets                                                                                 736                762
                                                                                    ------------       ------------
           Total assets                                                             $     70,791       $     77,792
                                                                                    ============       ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
       Accounts payable                                                        $             812 $              950
       Accrued expenses                                                                    2,335              3,774
       Deferred revenue from related party                                                   591                591
       Deferred revenue from unrelated parties                                               927                927
       Payable to related party                                                            2,375              2,664
                                                                                    ------------       ------------
           Total current liabilities                                                       7,040              8,906

Deferred revenue from related party                                                        1,046              1,181
Deferred revenue from unrelated parties                                                    2,787              3,019
Minority interest in Revotar                                                               2,418              2,608

Commitments and contingencies

Stockholders' equity:
       Preferred stock, par value $.005 per share.  At March 31, 2003,
           and December 31, 2002, 5,000,000 shares authorized;
           none outstanding.                                                                  --                 --
       Common stock, par value $.005 per share.  At March 31, 2003
           75,000,000 shares authorized; 44,458,644 shares issued.
           At December 31, 2002, 75,000,000 shares authorized;
           44,015,364 shares issued.                                                         222                220
       Additional paid-in capital                                                        212,282            211,847
       Deferred compensation expense                                                        (319)              (223)
       Treasury stock, 213,000 shares at March 31, 2003, and
           December 31, 2002                                                              (1,602)            (1,602)
       Accumulated other comprehensive income                                                 62                  1
       Accumulated deficit                                                              (153,145)          (148,165)
                                                                                    ------------       ------------
           Total stockholders' equity                                                     57,500             62,078
           Total liabilities and stockholders' equity                          $          70,791 $           77,792
                                                                                    ============       ============
</TABLE>

           See accompanying notes to consolidated financial statements


                                       1

<PAGE>

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

<TABLE>
<CAPTION>
                                                              THREE MONTHS ENDED MARCH 31,
                                                                 2003               2002
                                                              -----------         -----------
<S>                                                           <C>                 <C>
Revenues:
      Research agreements                                     $       742         $       913
      Collaborative research and development from
          ICOS-TBC, L.P.                                              664                 240
      Royalty income, net                                           1,148                 965
      License fees, milestones and grants                             662                 475
                                                              -----------         -----------
Total revenues                                                      3,216               2,593
                                                              ===========         ===========
Expenses:
      Research and development                                      4,219               5,190
      Equity in loss of ICOS-TBC, L.P.                              2,386               2,510
      General and administrative                                    2,154               2,667
                                                              -----------         -----------
          Total expenses                                            8,759              10,367
                                                              ===========         ===========
          Operating loss                                           (5,543)             (7,774)

Investment income, net                                                373                 767
                                                              -----------         -----------
          Loss before minority interest                            (5,170)             (7,007)

Minority interest in loss of Revotar                                  190                 257
                                                              -----------         -----------

      Net loss                                                     (4,980)             (6,750)

Other comprehensive gain (loss):
      Unrealized gain (loss) on foreign currency translation           61                 (61)
                                                              -----------         -----------
          Comprehensive loss                                  $    (4,919)        $    (6,811)
                                                              ===========         ===========
Net loss per common share-
      basic and diluted                                       $     (0.11)        $     (0.15)
                                                              ===========         ===========
Weighted average common shares used to compute
      basic and diluted net loss per share                     43,945,274          43,613,146
                                                              ===========         ===========
</TABLE>


           See accompanying notes to consolidated financial statements


                                       2

<PAGE>

                TEXAS BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                     ($ in thousands, except per share data)
                                   (unaudited)

<TABLE>
<CAPTION>
                                                                                           THREE MONTHS ENDED MARCH 31,
                                                                                        2003                     2002
                                                                                     -----------              -----------
<S>                                                                                  <C>                      <C>
Cash flows from operating activities:
   Net loss                                                                          $    (4,980)             $    (6,750)
   Adjustments to reconcile net loss to net cash
    used in operating activities:
          Depreciation and amortization                                                      263                      270
          Equity in loss of ICOS-TBC, L.P.                                                 2,386                    2,510
          Minority interest in loss of Revotar                                              (190)                    (257)
          Expenses paid with stock                                                           325                      230
          Compensation expense related to stock options                                       16                      182
         Amortization of premium/discount on investments                                      32                       66
    Change in operating assets and liabilities:
         Decrease in interest receivable included in short-term
            and long-term investments                                                        186                      278
         Increase in accounts receivable                                                     (40)                    (288)
         Increase in prepaids                                                               (753)                    (872)
         Decrease in other current receivables                                               384                      284
         (Increase ) decrease in receivable from related party under
            collaborative arrangement                                                       (861)                     479
         Decrease in current liabilities                                                  (1,601)                  (1,011)
         Decrease in liability to related party                                           (2,675)                  (2,172)
         Decrease in deferred revenue from unrelated parties                                (232)                    (187)
         Decrease in deferred revenue from related party                                    (136)                    (288)
                                                                                     -----------              -----------
    Net cash used in operating activities                                                 (7,876)                  (7,526)
                                                                                     -----------              -----------

CASH FLOWS FROM INVESTING ACTIVITIES:
   Purchases of equipment and leasehold improvements                                         (56)                  (1,245)
   Purchases of investments                                                               (8,307)                 (32,888)
   Maturity of investments                                                                22,048                   57,769
                                                                                     -----------              -----------
    Net cash provided by investing activities                                             13,685                   23,636
                                                                                     -----------              -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
   Proceeds from sale of common stock and option and
    warrant exercises, net                                                                     -                      157
                                                                                     -----------              -----------
    Net cash provided by financing activities                                                  -                      157

Effect of exchange rate changes on cash                                                       (7)                     (45)
                                                                                     -----------              -----------
    Net increase in cash and cash equivalents                                              5,802                   16,222

Cash and cash equivalents at beginning of period                                          21,228                   10,086
                                                                                     -----------              -----------
Cash and cash equivalents at end of period                                           $    27,030              $    26,308
                                                                                     ===========              ===========
Supplemental schedule of noncash financing activities:
   deferred compensation expense                                                     $       162              $       300
                                                                                     ===========              ===========
   issuance of Common Stock for expenses                                             $       325              $       230
                                                                                     ===========              ===========

</TABLE>

           See accompanying notes to consolidated financial statements


                                       3

<PAGE>

                TEXAS BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           MARCH 31, 2003 (UNAUDITED)

(1)    BASIS OF PRESENTATION

       The accompanying unaudited consolidated financial statements of Texas
Biotechnology Corporation, a Delaware corporation, and its subsidiaries
(collectively referred to as the "Company" or "TBC") have been prepared in
accordance with accounting principles generally accepted in the United States of
America ("USA") for interim financial information and with the instructions to
Form 10-Q and Rule 10-01 of Regulation S-X. They do not include all information
and notes required by accounting principles generally accepted in the USA for
complete financial statements. It is recommended that these interim condensed
consolidated financial statements be read in conjunction with the consolidated
financial statements and notes thereto included in the Company's Annual Report
on Form 10-K for the year ended December 31, 2002. Except as disclosed herein,
there has been no material change in the information disclosed in the notes to
the consolidated financial statements included in the Company's Annual Report on
Form 10-K. In the opinion of management, all adjustments (consisting only of
normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three-month period ended March 31, 2003
are not necessarily indicative of the results that may be expected for any other
interim period, or for the year ending December 31, 2003.

(2)    ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

       (a) Organization

           The Company is a biopharmaceutical company focused on the discovery,
       development and commercialization of novel synthetic small molecule
       compounds for the treatment of a variety of cardiovascular, vascular and
       related inflammatory diseases. Since its formation in 1989, the Company
       has been engaged principally in research and drug discovery programs and
       clinical development of certain drug compounds. On July 25, 1994, the
       Company acquired all of the outstanding common stock of
       ImmunoPharmaceutics, Inc. ("IPI") in exchange for common stock, par value
       $.005 per share (the "Common Stock"), of the Company. On June 6, 2000,
       TBC, through its wholly owned subsidiary, TBC-ET, Inc., a Delaware
       Corporation, and ICOS Corporation, a Delaware Corporation, ("ICOS")
       entered into an agreement and formed ICOS-Texas Biotechnology L.P., a
       Delaware limited partnership ("ICOS-TBC"), to develop and globally
       commercialize endothelin-A receptor antagonists. TBC and ICOS were both
       50% owners in ICOS-TBC until April 22, 2003, at which time the Company
       purchased ICOS's share of ICOS-TBC and changed the name of ICOS-TBC to
       Encysive, L.P. ("Encysive"). The acquisition of ICOS's ownership interest
       in ICOS-TBC is referred to herein as the "Acquisition". See Note 14.
       During the third quarter of 2000, TBC formed Revotar Biopharmaceuticals
       AG ("Revotar"), a German corporation, to conduct research and development
       for novel small molecule compounds and to develop and commercialize TBC's
       selectin antagonists. The Company retained an approximately 55% interest
       in Revotar. The Company is presently working on a number of long-term
       development projects that involve experimental and unproven technology,
       which may require many years and substantial expenditures to complete,
       and which may be unsuccessful. Sales of the Company's first product for
       which it receives royalty income, Argatroban, began during November 2000.

       (b) Basis of Consolidation

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


                                       4

<PAGE>

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

           Cash equivalents are considered to be those securities or instruments
       with original maturities, when purchased, of three months or less.
       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. 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.

<TABLE>
<CAPTION>
                                               March 31, 2003         December 31, 2002
                                               --------------         -----------------
<S>                                            <C>                        <C>
Cash and cash equivalents:
   Demand and money market accounts            $        5,145           $          609
   Corporate commercial paper                          21,885                   20,619
                                               --------------           --------------
Total cash and cash equivalents                $       27,030                   21,228
                                               ==============           ==============
Short-term investments:
   U.S. Government agency securities           $        5,000           $        3,999
   Corporate commercial paper and
  loan participations                                  14,569                   22,333
   Accrued interest on above                              144                      201
                                               --------------           --------------
Total short-term investments                   $       19,713           $       26,533
                                               ==============           ==============
Long-term investments:
   U.S. Government agency securities           $        5,000           $       12,000
   Corporate commercial paper and
  loan participations                                   8,013                    7,990
   Accrued interest on above                               92                      254
                                               --------------           --------------
Total long-term investments                    $       13,105           $       20,244
                                               ==============           ==============
</TABLE>

       (d) Equipment and Leasehold Improvements

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

(e)      Investment in ICOS - TBC  (Encysive)

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

           ICOS-TBC paid a license fee and a milestone payment to the Company in
       2000 and 2001, respectively. Because the Company has continuing
       obligations to ICOS-TBC, the Company deferred these amounts and is
       amortizing them into revenue over the estimated developmental period of
       the underlying technology. Approximately $1,637,000 in remaining deferred
       license fee and milestone income received from ICOS-TBC at the date of
       the Acquisition will be recognized as an offset to the purchase price
       paid to ICOS. Subsequent to the Acquisition, the Company's consolidated
       financial statements will include the accounts of ICOS-TBC. See Note 14.


                                       5

<PAGE>

       (f) Research and Development Costs

           All research and development costs are expensed as incurred and
       include salaries of research and development employees, certain rent and
       related building services, research supplies and services, clinical trial
       expenses and other associated costs. Salaries and benefits charged to
       research and development in the three-month periods ended March 31, 2003
       and 2002 were approximately $2,586,000 and $2,373,000, respectively.
       Payments related to the acquisition of in-process research and
       development, if any, are expensed as incurred.

       (g) Net Loss Per Common Share

           Basic net loss per common share is calculated by dividing the net
       loss applicable to common shares by the weighted average number of common
       and common equivalent shares outstanding during the period. For the
       three-month periods ended March 31, 2003 and 2002, the weighted average
       common shares used to compute basic and diluted net loss per common share
       totaled 43,945,274 and 43,613,146 shares, respectively. Securities
       convertible into Common Stock, comprised of stock options and warrants
       totaling 5,637,230 and 5,485,252 shares at March 31, 2003 and 2002,
       respectively, were not used in the calculation of diluted net loss per
       common share because the effect would have been antidilutive.

       (h) Revenue Recognition

           Revenue from service contracts is recognized as services are
       performed. Royalty revenue is recognized as products are sold by a
       licensee and the Company has received sufficient information to record a
       receivable. The Company defers the recognition of milestone payments
       related to contractual agreements which are still in the development
       stage and for which the Company continues to have obligations under the
       agreement. Such deferred revenues are amortized into income over the
       estimated remaining development period. Milestone payments received under
       contractual agreements which have completed the development stage are
       evaluated, and either recognized into income when earned, or amortized
       over a future period, depending upon whether or not the Company continues
       to have obligations under the terms of the arrangement. License fees
       received under the terms of licensing agreements for the Company's
       intellectual property are similarly deferred, and amortized into income
       over the estimated development period of the licensed item or items. The
       Company periodically evaluates its estimates of remaining development
       periods, and adjusts the recognition of remaining deferred revenues over
       the adjusted development period remaining. Revenue from grants is
       recognized as earned under the terms of the related grant agreements,
       typically as expenses are incurred. Amounts received in advance of
       services being performed under contracts are recorded as deferred
       revenue, and recognized as services are performed.

       (i) Patent Application Costs

           Costs incurred in filing for, defending and maintaining patents are
expensed as incurred.

       (j) Use of Estimates

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

       (k) Intangible Assets

           Intangible assets, included in other assets, consisting of amounts
       paid for products approved by the United States Food and Drug
       Administration ("FDA"), are amortized on a straight-line basis over their
       estimated useful lives. The Company periodically reviews the useful lives
       of its intangible


                                       6

<PAGE>


       and long-lived assets, which may result in future adjustments to the
       amortization periods. Related amortization expense for each of the
       three-month periods ended March 31, 2003 and 2002 was $27,000.
       Amortization of intangible assets is included in general and
       administrative expense in the consolidated statements of operations and
       comprehensive loss.

       (l) Treasury Stock

           Treasury stock is recorded at cost. On May 3, 2001, the Company
       announced a stock repurchase program to buy up to 3 million shares, or
       approximately seven percent, of the Company's outstanding Common Stock
       over an 18 month period. Pursuant to the stock repurchase program, the
       Company had repurchased 213,000 shares for $1,602,000 during the year
       ended December 31, 2001. No shares were repurchased in the three-month
       periods ended March 31, 2003 and 2002.

       (m) Stock Based Compensation

           At March 31, 2003, the Company has six stock-based compensation plans
       for employees and non-employee directors, which are described more fully
       in Note 4. The Company accounts for those plans under the recognition and
       measurement principles of Accounting Principles Board Opinion No. 25,
       Accounting for Stock Issued to Employees, and related interpretations.
       Net loss in the three- months ended March 31, 2003 and 2002 included
       stock-based compensation expense as a result of modifications made to
       certain options previously issued to retiring employees, and resulting
       from the grant of shares of restricted stock to certain employees. No
       other stock-based employee compensation expenses is reflected in net
       loss, however, as all options granted under those plans had an exercise
       price equal to the market price of the underlying Common Stock on the
       date of grant. The following table illustrates the effect on net loss and
       loss per share if the Company had applied the fair value recognition
       provisions of FASB Statement of Financial Accounting Standards No. 123,
       "Accounting for Stock-Based Compensation" to stock-based employee
       compensation ($ in thousands, except for per share data).

<TABLE>
<CAPTION>
                                                                       Three Months Ended March 31,
                                                                  ---------------------------------------
                                                                     2003                       2002
                                                                  ------------              -------------
<S>                                                               <C>                     <C>
           Net loss, as reported                                  $     (4,980)             $      (6,750)
           Add: Stock-based employee
                  compensation expense
                  included in reported
                  net loss                                                  66                        181
           Deduct: Total stock-based employee
                  compensation expense determined
                  under fair value method for all
                  awards                                                (1,162)                      (866)
                                                                  ------------              -------------
           Pro forma net loss                                     $     (6,076)             $      (7,435)
                                                                  ============              =============
           Loss per share:
                 As reported: basic and diluted                   $      (0.11)             $       (0.15)
                 Pro forma: basic and diluted                     $      (0.14)             $       (0.17)
</TABLE>


                                       7

<PAGE>

           The per-share weighted average fair value of stock options granted
       during the three-month periods ended March 31, 2003 and 2002 was $0.52
       and $3.53, respectively, on the grant date using the Black-Scholes option
       pricing model with the following assumptions:

                                              Three Months Ended March 31,
                                              -----------------------------
                                                  2003             2002
                                              ------------     ------------
           Expected dividend yield                0.0%             0.0%
           Risk-free interest rate                2.5%             2.8%
           Expected volatility                   71.9%            74.3%
           Expected life in years                 4.24             4.53

       (n) 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.

       (o) Impairment of Long-lived Assets

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

       (p) New Accounting Pronouncements

            In April 2002, the FASB issued Statement of Financial Accounting
       Standards No. 145, "Rescission of FASB Statements No. 4, 44 and 64,
       Amendment of FASB Statements No. 13 and Technical Corrections,"
       (SFAS145). SFAS145 provides guidance for income statement classification
       of gains and losses on extinguishments of debt and accounting for certain
       lease modifications that have economic effects that are similar to
       sale-leaseback transactions. SFAS145 was effective for the Company in
       January 2003. The Company's adoption of SFAS145 did not have a
       significant impact on its financial condition or results of operations.

            In July 2002, the FASB issued Statement of Financial Accounting
       Standards No. 146, "Accounting for Costs Associated With Exit or Disposal
       Activities," (SFAS146) which addresses significant issues regarding the
       recognition, measurement and reporting of costs that are associated with
       exit and disposal activities, including restructuring activities that are
       currently accounted for pursuant to the guidance set forth in EITF Issue
       No. 94-3, "Liability Recognition of Certain Employee Termination Benefits
       and Other Costs to Exit an Activity." SFAS146 was effective for the
       Company in January 2003. The Company's adoption of SFAS146 did not have a
       significant impact on its financial condition or results of operations.

            In January 2003, the FASB issued FASB Interpretation (FIN) No. 46,
       "Consolidation of Variable Interest Entities." FIN No. 46 requires a
       company to consolidate a variable interest entity if it is designated as
       the primary beneficiary of that entity even if the company does not have
       a majority of voting interests. A variable interest entity is generally
       defined as an entity where its equity is unable to finance its activities
       or where the owners of the entity lack the risk and rewards of


                                       8

<PAGE>


       ownership. The provisions of this statement apply at inception for any
       entity created after January 31, 2003. For an entity created before
       February 1, 2003, the provisions of this Interpretation must be applied
       at the beginning of the first interim or annual period beginning after
       June 15, 2003. When the Company adopts the provisions of FIN No. 46 in
       the third quarter of 2003 for existing entities its investment in
       Encysive, L.P. will be consolidated.


            In April 2003, the FASB issued Statement of Financial Accounting
       Standards (SFAS) No. 149, "Amendment of Statement 133 on Derivative
       Instruments and Hedging Activities." SFAS No. 149 amends and clarifies
       financial accounting and reporting for derivative instruments. This
       statement is effective for contracts entered into or modified after June
       30, 2003. The Company will adopt this statement in the third quarter of
       2003 and is currently evaluating the provisions of this statement to
       determine its impact on the financial statements.

       (q) Reclassifications

           Certain reclassifications have been made to prior period financial
       statements to conform to the March 31, 2003 presentation with no effect
       on net loss or stockholders' equity previously reported.

(3)    CAPITAL STOCK

       The Company has reserved Common Stock for issuance as of March 31, 2003
as follows:

            Stock option plans.......................              7,321,346
            Warrants outstanding.....................                246,586
                                                                 -----------
                 Total shares reserved...............              7,567,932
                                                                 ===========

     The Company's only warrants outstanding at March 31, 2003 include 142,858
warrants issued to Genentech in 1997, and 103,728 warrants granted in 1999 in
connection with non-employee services.

       Shareholders' Rights Plan

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

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


                                       9

<PAGE>

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

(4)    STOCK OPTIONS

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

<TABLE>
<CAPTION>
       A summary of stock options as of March 31, 2003, follows:

                               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         88,348     197,367        88,348          ---
1992 Plan.................     $ 1.41-$21.59     1,700,000        683,140   1,016,860       680,307          ---
Director Plan.............     $3.50-$  4.54        71,429         28,527      42,902        28,527          ---
1995 Plan.................     $ 0.93-$21.59     2,000,000      1,595,461     395,133     1,485,265        9,406
1995 Director Plan (1)....     $ 1.38-$11.31       800,000        386,596      65,033       324,096      348,371
1999 Plan  (2)............     $ 0.93-$20.13     4,750,000      2,608,572     568,504     1,137,013    1,572,924
                                                ----------      ---------    --------     ---------   ----------
       TOTALS.............                       9,607,144      5,390,644   2,285,799     3,743,556    1,930,701
                                                ==========    ===========   =========     =========   ==========
</TABLE>
(1)      Includes 300,000 authorized shares which are subject to approval of
         stockholders at the 2003 Annual Meeting, to be held May 16, 2003.
(2)      Includes 1,750,000 authorized shares and 132,752 outstanding but
         not exercisable options which were issued subject to approval of
         stockholders at the 2003 Annual Meeting, to be held May 16, 2003.

         Pursuant to provisions contained within his employment agreement, in
March 2002 the Company's new chief executive officer purchased 5,000 shares at
market price and was awarded 50,000 shares of the Company's Common Stock out of
the 1999 Plan. The awarded shares will vest after completion of three years'
service to the Company. The Company recorded deferred compensation expense of
$309,000, which is being recognized over the vesting period. General and
administrative expenses in the three-month periods ended March 31, 2003 and 2002
included $26,000 and $9,000, respectively, related to this grant.

         In January 2003, the Company issued 105,250 shares of restricted Common
Stock to non-officer employees remaining after the restructuring. The shares
will vest after completion of one year of service to the Company. The Company
recorded deferred compensation expense of $162,000, which will be recognized
over the vesting period. Research and Development expenses and General and
Administrative expenses during the three months ended March 31, 2003 included
$35,000 and $5,000, respectively related to these grants.

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


                                       10

<PAGE>

(5)      INCOME TAXES

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

       The reconciliation of income taxes at the statutory rate of 35% applied
to loss before taxes for the three months ended March 31, 2003 and 2002 is as
follows ($ in thousands):

<TABLE>
<CAPTION>
                                                                2003               2002
                                                                ----               ----
<S>                                                         <C>                 <C>
    Computed "expected" tax benefit                         $    (1,743)        $    (2,362)
    Effect of:
         Permanent differences                                       34                 178
         Increase in valuation allowance                          1,709               2,184
                                                            -----------         -----------
    Tax benefit                                             $        --         $        --
                                                            ===========         ===========
</TABLE>


       The tax effects of the temporary differences that give rise to
significant portions of the deferred tax assets as of March 31, 2003 and
December 31, 2002 are as follows ($ in thousands):

<TABLE>
<CAPTION>
                                                           MARCH 31, 2003     DECEMBER 31, 2002
                                                           --------------     -----------------
<S>                                                         <C>                 <C>
         Loss carryforwards                                 $    44,475         $     41,946
         Start-up costs                                           7,315                8,001
         Property, plant and equipment                              (87)                 (71)
         Deferred revenue                                         1,920                2,053
         Other                                                    1,062                1,047
                                                            -----------         ------------
              Gross deferred tax assets                          54,685               52,976
              Valuation allowance                               (54,685)             (52,976)
                                                            -----------         ------------
              Net deferred tax assets                       $        --         $         --
                                                            ===========         ============
</TABLE>


       The Company has established a valuation allowance for the full amount of
these deferred tax assets, as management believes that it is more likely than
not that the Company will not recover these assets. Utilization of the Company's
net operating loss carryforwards is subject to certain limitations due to
specific stock ownership changes which have occurred or may occur. To the extent
not utilized, the carryforwards will expire during the years beginning 2005
through 2023.

(6)    EQUIPMENT AND LEASEHOLD IMPROVEMENTS

       Equipment and leasehold improvements consist of the following ($ in
thousands):

<TABLE>
<CAPTION>
                                                           MARCH 31, 2003     DECEMBER 31, 2002
                                                           --------------     -----------------
<S>                                                         <C>                 <C>
       Laboratory and office equipment                      $    10,803         $     10,667
       Leasehold improvements                                     4,311                4,311
                                                            -----------         ------------
                                                                 15,114               14,978
       Less accumulated depreciation and amortization             9,660                9,399
                                                            -----------         ------------
                                                            $     5,454         $      5,579
                                                            ===========         ============
</TABLE>


                                       11

<PAGE>

(7)    ENTITY-WIDE GEOGRAPHIC DATA

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


                                   MARCH 31, 2003         DECEMBER 31, 2002
                                   --------------         -----------------
Long-lived assets:
   United States                     $    4,749              $     4,884
   Germany                                1,441                    1,457
                                     ----------              -----------
      Total                          $    6,190              $     6,341
                                     ==========              ===========



                                             THREE MONTHS ENDED
                                   MARCH 31, 2003         DECEMBER 31, 2002
                                   --------------         -----------------
Revenues:
   United States                     $    2,933              $     2,593
   Germany                                  283                       --
                                     ----------              -----------
      Total                          $    3,216              $     2,593
                                     ==========              ===========

(8)    RESEARCH AGREEMENTS

       Under the terms of the Company's agreement with ICOS-TBC, prior to the
Acquisition, the Company provided, and was reimbursed for, research and
development activities conducted on behalf of ICOS-TBC. See Note 9, License
Agreements, and Note 14, Subsequent Event.

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

(9)    LICENSE AGREEMENTS

       Mitsubishi Pharma Agreement

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


                                       12

<PAGE>
       revenues in the three-month periods ended March 31, 2003 and 2002 include
       approximately $95,000 related to such milestone payment. In light of a
       lack of a positive overall efficacy trend and the high risk and high
       costs associated with stroke trials, it is unlikely that we will proceed
       independently with a full Phase III program.

           In exchange for the license from Genentech, Inc, (the "Former
       Licensor") of its Argatroban technology, TBC issued the Former Licensor
       285,714 shares of Common Stock during 1993 and issued an additional
       214,286 shares of Common Stock on October 9, 1997, after acceptance of
       the filing of the first New Drug Application ("NDA") with the FDA for
       Argatroban. On June 30, 2000, the Company issued an additional 71,429
       shares of Common Stock to Genentech in conjunction with the approval of
       the NDA for Argatroban in patients with heparin-induced thrombocytopenia
       ("HIT"). The value of $965,970 was recorded as an intangible asset and is
       being amortized over the estimated useful life of the asset. Amortization
       expense recorded in the three-month periods ended March 31, 2003 and 2002
       was approximately $26,000. Additionally, on October 9, 1997, upon
       acceptance of the filing of the first NDA for Argatroban with the FDA,
       the Company granted the Former Licensor a warrant to purchase an
       additional 142,858 shares of Common Stock at an exercise price of $14.00
       per share, subject to adjustment, which expires on October 9, 2004. TBC
       has also granted the Former Licensor demand and piggyback registration
       rights with regard to shares of Common Stock issued to the Former
       Licensor.

       ICOS Corporation Partnership

           On June 6, 2000, ICOS and the Company entered into the ICOS-TBC
       limited partnership agreement. The partnership seeks to develop and
       globally commercialize ET(A) receptor antagonists. As a result of the
       Company's contribution of technology, ICOS-TBC paid a license fee to the
       Company in June 2000. The license fee is being amortized over the
       estimated development period of the licensed technology, and the Company
       recognized approximately $62,000 and $121,000 of it as revenue during the
       three-month periods ended March 31, 2003 and 2002, respectively.

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

           In July 2001, the Company earned a milestone as a result of the
       achievement of an objective defined in the partnership agreement. The
       Company is recognizing the revenue associated with the milestone over the
       expected development period, and revenues included approximately $86,000
       and $167,000 in the three-month periods ended March 31, 2003 and 2002,
       respectively.

           During the three-month periods ended March 31, 2003 and 2002, the
       Company recognized a loss of approximately $2,386,000 and $2,510,000,
       respectively, representing the Company's proportionate share of the
       losses of ICOS-TBC.

           Approximately $1,637,000 in remaining deferred license fee and
       milestone income received from ICOS at the date of the Acquisition will
       be recognized as an offset to the purchase price paid to ICOS. See Note
       14. Subsequent to the Acquisition, the Company's consolidated financial
       statements will include the accounts of ICOS-TBC.

       Schering-Plough Research Collaboration and License Agreement

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


                                       13

<PAGE>

           Under the terms of the agreement, Schering obtains the exclusive
       worldwide rights to develop, manufacture and market all compounds from
       TBC's library of VLA-4 antagonists, as well as the rights to a second
       integrin antagonist. TBC will be responsible for optimizing a lead
       compound and additional follow-on compounds. Schering is supporting
       research at TBC and will be responsible for all costs associated with the
       worldwide product development program and commercialization of the
       compound. In addition to reimbursing research costs, Schering paid an
       upfront license fee and will pay development milestones and royalties on
       product sales resulting from the agreement. This upfront license fee is
       being amortized into revenue over the expected development period.
       License fees, milestones and grants in the three-month periods ended
       March 31, 2003 and 2002 included approximately $92,000, related to this
       upfront license fee.

           In June 2002, the Company achieved a milestone under the agreement
       with Schering as a result of the nomination of an initial candidate for
       Schering's further development. This milestone payment will be recognized
       into revenue over the expected development period. License fees,
       milestones and grants for the three-month period ended March 31, 2003
       included approximately $45,000 related to this milestone payment. Total
       payments to TBC under the terms of the agreement, excluding royalties,
       could reach $87.0 million. Additionally, in June 2002, Schering and the
       Company agreed to extend Schering's support of the research collaboration
       to a third year, through June 30, 2003.

(10)   FOREIGN SUBSIDIARY

       During the third quarter 2000, TBC formed Revotar to conduct research and
development of novel small molecule compounds and to develop and commercialize
selectin antagonists. Upon formation, Revotar received certain development and
commercialization rights to the Company's selectin antagonist compounds as well
as rights to certain other TBC research technology. Revotar also received
approximately $5 million in funding from three German venture capital funds. The
Company retained ownership of approximately 55% of the outstanding common stock
of Revotar and has consolidated the financial results of Revotar into TBC's
consolidated financial statements. Since the development and commercialization
rights contributed by the Company to Revotar had no basis for financial
reporting purposes, the Company assigned no value to its contribution of
intellectual property rights. The minority interest in Revotar at March 31, 2003
and December 31, 2002, was $2,418,000 and $2,608,000, respectively. The
Company's consolidated net loss for the three-month periods ended March 31, 2003
and 2002 was reduced by $190,000 and $257,000, respectively, for the Revotar
minority shareholders' interest in Revotar's losses.

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

       The Company and the other stockholders of Revotar have executed an
agreement to provide approximately $4.5 million in unsecured loans, of which the
Company's commitment will be approximately $3.4 million. The terms of the loans
require quarterly interest payments and repayment of all principal on or before
April 1, 2007. The interest rate for the first two years will be seven percent,
after which the interest rate will be reset to the U.S. prime rate plus 2.5 % if
such rate is higher than seven percent. Pursuant to such agreement, the Company
has advanced approximately $2,237,000 to Revotar as of March 31, 2003. Revotar's
management has informed the Company that they anticipate that Revotar will
borrow the remaining commitment of approximately $1.1 million from the Company
in the fourth quarter of 2003. The loan is denominated in U.S. dollars. To
mitigate the risk of fluctuations in foreign currency exchange rates, Revotar
entered into a forward contract with a bank to fix the exchange rate at which it
will borrow the remaining loan commitment.

       As part of the agreement to form Revotar, the Company and the other
initial investors agreed to issue rights to purchase common stock of Revotar
held by them to Aqua Partners LLC ("Aqua"), which assisted in the formation of
Revotar. The shareholders have signed an agreement that provides Aqua with the


                                       14


<PAGE>

option to acquire up to 3.26% of the shares owned by each shareholder for a
total amount of approximately $540,000, payable to the shareholders.

(11)   COMMERCIALIZATION AGREEMENT

       In connection with TBC's development and commercialization of Argatroban,
in August 1997, TBC entered into a Product Development, License and CoPromotion
Agreement with GSK (the "GSK Agreement") whereby GSK was granted exclusive
rights to work with TBC in the development and commercialization of Argatroban
in the U.S. and Canada for specified indications. GSK paid $8.5 million in
upfront license fees during August 1997, a $5 million milestone payment in
October 1997, and a $7.5 million milestone payment in June 2000. Additional
milestone payments may be earned upon the clinical development and FDA approval
for the acute myocardial infarction indication. Future milestone payments for
the acute myocardial infarction indication are subject to GSK's agreement to
market Argatroban for such indication. The parties have also formed a joint
development committee to analyze the development of additional Argatroban
indications to be funded 60% by GSK except for certain Phase IV trials which
shall be funded entirely by GSK. At this time, GSK has no plans to conduct
development work for the acute myocardial infarction and stroke indications. TBC
began a Phase II clinical trial in March 2001 to evaluate the use of Argatroban
for ischemic stroke, and announced preliminary results in October 2002. GSK has
the exclusive right to commercialize all products arising out of the
collaboration, subject to the obligation to pay royalties on net sales to TBC
and to the rights of TBC to co-promote these products through its own sales
force in certain circumstances. TBC will retain the rights to any indications
which GSK determines it does not wish to pursue (such as ischemic stroke),
subject to the requirement that TBC must use its own sales force to
commercialize any such indications. Any indications which TBC elects not to
pursue will be returned to Mitsubishi. In conjunction with the GSK Agreement, a
consulting firm involved in negotiations related to the agreement will receive a
percentage of all consideration received by TBC as a result of the agreement.

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

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

(12)   401(K) PLAN

       The Company has a 401(k) plan under which all employees with three months
of service are eligible to participate and may contribute up to 60 % of their
compensation, with a maximum contribution of $12,000 per employee in 2003. Under
the terms of the Economic Growth and Tax Relief Reconciliation Act, employees
aged 50 or older may contribute an additional $2,000 to the 401(k) Plan in 2003,
such additional contribution would be eligible for employer matching. The
Company provides a matching contribution of $0.50 on the dollar of employee
contributions up to 6% of salaries. Charges to operating expense for employer
match during the three-month periods ended March 31, 2003 and 2002 were
approximately $46,000 and $50,000, respectively.


                                       15

<PAGE>

(13)   COMMITMENTS AND CONTINGENCIES

       (a) Foreign Currency Exchange Risk

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

           The Company has a majority-owned subsidiary in Germany and
       consolidates the results of operations into its consolidated financial
       results. Although not significant to date, the Company's reported assets,
       liabilities, expenses and cash flows from this subsidiary are exposed to
       changing exchange rates. The Company, accordingly, included an unrealized
       gain of $60,000 and unrealized loss of $61,000, respectively, in its
       comprehensive loss for the three-month periods ended March 31, 2003 and
       2002. The Company had an intercompany receivable from its German
       subsidiary at March 31, 2003 and December 31, 2002; however, this amount
       is denominated in U.S. dollars and is not exposed to exchange risk.
       Revotar's management has informed the Company that they anticipate that
       Revotar will borrow the remaining commitment of approximately $1.1
       million from the Company in the fourth quarter of 2003. The loan is
       denominated in U.S. dollars. To mitigate the risk of fluctuations in
       foreign currency exchange rates, Revotar entered into a forward contract
       with a bank to fix the exchange rate at which it will borrow the
       remaining loan commitment. The Company contracts with entities in other
       areas outside the U.S. and these transactions are denominated in a
       foreign currency. To date, the currencies of these other countries have
       not fluctuated materially.

       (b) Other Contingencies

           Like other biopharmaceutical companies, the Company is subject to
       other contingencies, including legal proceedings and claims arising out
       of its business that cover a wide range of matters, including, among
       others, environmental matters, contract and employment claims, and
       product liability. The Company may be involved in legal actions from time
       to time. The Company has used various substances in its research and
       development which have been or may be deemed to be hazardous or
       dangerous, and the extent of its potential liability, if any, under
       environmental, product liability and workers' compensation statutes,
       rules, regulations and case law is unclear. The Company is presently
       involved in several legal actions, none of which are expected to have a
       material adverse effect upon the results of operations or financial
       condition of the Company when considered either individually or in the
       aggregate.

(14)   SUBSEQUENT EVENT

         On April 22, 2003, the Company and ICOS executed a purchase and sale
agreement (the "Agreement") pursuant to which the Company purchased the
partnership interest of ICOS and its subsidiaries in ICOS-TBC. Under the
Agreement, the Company agreed to pay to ICOS a purchase price of $10,000,000, of
which $4,000,000 was paid on April 22, 2003. The remaining $6,000,000 is subject
to a secured promissory note (the "Note") which requires a payment of $4,000,000
on April 22, 2004, and a payment of $2,000,000 on October 22, 2004. The
outstanding principal balance of the Note shall accrue interest at a rate which
approximates the three-month London interbank offering rate for U.S. Dollars
(LIBOR) plus 1.5%. The interest rate was established on April 22, 2003 at
approximately 2.82% and will be adjusted on the first business day of each
April, July, October and January thereafter (the LIBOR Adjustment Dates).
Interest is payable on or before the tenth day after each LIBOR Adjustment Date.
The Company's obligations under the Note are secured with an irrevocable standby
letter of credit, for which the Company has pledged marketable securities with a
value of approximately $7,000,000.

         Approximately $1,637,000 in remaining deferred license fee and
milestone income received from ICOS at the date of the Acquisition will be
recorded as a reduction in the acquisition cost recorded by the Company,
resulting in a charge to operating expenses of approximately $8,363,000 in the
second quarter of 2003.

         Following the Acquisition, the Company has changed the name of ICOS-TBC
to Encysive, L.P. The Company's consolidated financial statements will include
the accounts of Encysive, L.P..

                                       16

<PAGE>
 ITEM 2.

                TEXAS BIOTECHNOLOGY CORPORATION AND SUBSIDIARIES

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

              THREE MONTHS ENDED MARCH 31, 2003 AND MARCH 31, 2002


                                    OVERVIEW

       The following discussion of our financial condition and results of
operations should be read in conjunction with our consolidated financial
statements and the related notes to the financial statements included in our
Annual Report on Form 10-K for the year ended December 31, 2002, and our
condensed consolidated financial statements and the related notes to the
financial statements included in this Quarterly Report on Form 10-Q.

       Since our inception in 1989, we have primarily devoted our resources to
funding drug discovery, research and development. We are a biopharmaceutical
company focused on the discovery, development and commercialization of novel,
synthetic, small molecule compounds for the treatment of a variety of
cardiovascular, vascular and related inflammatory diseases. We believe that
synthetic, small molecule therapeutics have several advantages over protein and
peptide based large molecules. Small molecules generally are not immunogenic,
can typically be protected with composition-of-matter patents and can be
produced by conventional lower cost pharmaceutical manufacturing methods. Our
research and development programs are focused on inhibitors (also referred to as
antagonists or blockers) that can interrupt certain disease processes. Our
programs seek to address unmet medical needs in cardiovascular diseases,
thrombocytopenia, pulmonary arterial hypertension, heart failure and
inflammatory diseases such as asthma.

     In the biopharmaceutical industry, a substantial percentage of the profits
generated from successful drug development are typically retained by the entity
directly involved in the sales and marketing of the drug. Licensing our drug
candidates to a third party who will complete development and provide sales and
marketing resources in exchange for upfront payments, milestone payments and a
royalty on sales may reduce some of our risks, particularly for diseases outside
our strategic interest or in territories outside of the United States and
Canada.

       In June 2000, we established ICOS-TBC, a 50/50-owned limited partnership
with ICOS Corporation ("ICOS"), to develop and commercialize endothelin receptor
antagonists, including sitaxsentan and TBC3711. In January 2003, ICOS announced
that they had reached a conclusion that joint development of the endothelin
receptor antagonist program should not continue, and in April 2003, we purchased
the partnership interest of ICOS in ICOS-TBC for a purchase price of $10
million. Following the Acquisition, as discussed below, we intend to continue
the development of the endothelin receptor antagonist program. Our strategy for
managing our capital requirements includes seeking to license rights to
sitaxsentan for select markets, while preferably retaining North American
rights.

                       APPROVED DRUGS IN COMMERCIAL MARKET

ARGATROBAN

       Argatroban was approved by the FDA in 2000, is indicated for prophylaxis
or treatment of thrombosis in patients with heparin-induced thrombocytopenia
("HIT") and for use in HIT patients undergoing percutaneous coronary
intervention ("PCI".) Argatroban was approved in Canada in 2002 for use as
anticoagulant therapy in patients with heparin-induced thrombocytopenia
syndrome. During 2002, we completed initial studies to evaluate the use of
Argatroban in hemodialysis patients and in PCI. The drug is being marketed in
the U.S. and Canada by GlaxoSmithKline, plc ("GSK") and has been on the


                                       17


<PAGE>

market in the U.S. and Canada since November 2000 and June 2002, respectively.
GSK is our development, manufacturing and marketing partner for Argatroban.

         GSK currently markets Argatroban and enjoys market exclusivity pursuant
to the Waxman/Hatch Act that provides protection from competition until June 30,
2005. We recently received a formal Written Request from FDA to conduct a study
with Argatroban in pediatric patients. Upon completion of this study, we will be
eligible for an additional 6 months of market exclusivity. Argatroban is
currently marketed in a formulation that is covered under a formulation patent
that expires in 2010. We will also be submitting a process patent, that would
expire in 2019, to the FDA for inclusion in the FDA Orange Book of Approved Drug
Products. Following expiration of Waxman/Hatch protection, it is possible that
generic manufacturers may be able to produce Argatroban without violating the
formulation or process patents. The composition of matter patent on Argatroban
has expired. The Company has access to other patents held by Mitsubishi,
however, these are not being utilized currently.

                        RESEARCH AND DEVELOPMENT PROGRAMS

       Presently, we have four major product development programs.

Endothelin Antagonist Program. We are developing sitaxsentan, an endothelin(A)
receptor antagonist, or ET(A), for the treatment of pulmonary arterial
hypertension. During June 2000, we formed a partnership, ICOS-TBC, with ICOS
Corporation to develop and commercialize ET(A) receptor antagonists. During
2002, ICOS-TBC successfully completed a Phase IIb/III pivotal clinical trial in
pulmonary arterial hypertension with sitaxsentan. TBC3711, a second generation
ET(A), has previously completed Phase I clinical trials and may be developed for
cardiovascular or other diseases. Following the Acquisition, discussed above, we
intend to initiate a final pivotal study in PAH during the second quarter of
2003, to include 50 and 100 mg oral doses of sitaxsentan, placebo and bosentan.

Thrombosis. During 2002, we completed a Phase II human clinical trial for
Argatroban as a mono-therapy treatment for acute ischemic stroke. The clinical
trial met the primary endpoint based on safety and showed positive results in
the secondary safety endpoint. In light of a lack of a positive overall efficacy
trend and the high risk and high costs associated with stroke trials, it is
unlikely that we will proceed independently with a full Phase II program.
Currently, Argatroban is being evaluated in a clinical trial in combination with
recombinant tissue Plasminogen Activator (rt-PA) as a new approach to the
treatment of acute ischemic stroke by an investigator at the University of Texas
Medical School at Houston.

Vascular Inflammation Program. Revotar, our majority owned German affiliate
located in Berlin is developing a selectin antagonist, bimosiamose, for the
treatment of asthma and psoriasis. The intravenous form of the drug demonstrated
positive anti-inflammatory effects in Phase II clinical trials. Revotar was
formed during 2000, to further the development of this program. Revotar
completed Phase I clinical trials for asthma utilizing an inhaled form of
bimosiamose. A Phase IIa clinical trial is currently being conducted with an
inhaled form of bimosiamose and a Phase IIa clinical trial in psoriasis is
planned to commence during the first half of 2003, using a topical formulation.
A Phase IIa proof-of-concept clinical trial in psoriasis, completed during 2002
with an injectable form of bimosiamose, demonstrated efficacy. We are also
conducting research with respect to other cell adhesion molecules including
vascular cell adhesion molecule, or VCAM, junctional adhesion molecules, or JAM
2/3 and several integrins including very late antigen 4, or VLA-4,
(alpha)4(beta)7 and others to develop antagonists for the treatment of asthma,
rheumatoid arthritis, multiple sclerosis, restenosis and inflammatory bowel
disease. We have signed a collaboration and license agreement for the VLA-4
program with Schering-Plough and have received a milestone payment from
Schering-Plough for nominating a compound as a clinical candidate. Additionally,
we are conducting research on backup VLA-4 antagonists for Schering-Plough under
this agreement.

Vascular Disease. Many disease processes involve changes in blood vessels and
heart tissue. There are numerous mediators, like endothelin, which may
contribute to the development of these diseases. Several of these act though
G-protein coupled receptors, GPCRs, to carry out their action. We are conducting
research on urotensin and other GPCRs to identify inhibitors which could be
useful in treating diseases including congestive heart failure, CHF, ischemic
stroke and acute myocardial infarction.


                                       18


<PAGE>

                              RESULTS OF OPERATIONS

CRITICAL ACCOUNTING POLICIES

Revenue Recognition

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

         o   Royalty revenue is recognized as products are sold by a licensee
             and we have received sufficient information to record a receivable.
             Our royalty revenue is based on net sales of product, that is,
             sales net of discounts, returns and allowances. We have estimated a
             percentage of gross sales, based on recent experience, as an
             allowance for future returns, however there can be no assurance
             that our estimate will be accurate.

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

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

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

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

       Amounts received in advance of services being performed under contracts
are recorded as deferred revenue, and recognized as services are performed. We
periodically evaluate our estimates of remaining development periods, and adjust
the recognition of remaining deferred revenues over the adjusted development
period remaining.

Partnership Accounting

       From its inception in June 2000 through December 31, 2002, we and ICOS
shared equally in the costs of ICOS-TBC. In January 2003, however, ICOS informed
us that they had reached the conclusion that joint development of the endothelin
receptor antagonist program through ICOS-TBC should not continue. As a result,
since January 2003 we have agreed to be responsible for 100% of the costs of
ICOS-TBC. Following the Acquisition, we have increased our ownership and
potential commercial benefit of the endothelin receptor antagonist program from
50% to 100%.

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

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


                                       19


<PAGE>

       Remaining deferred revenue, comprised of the portion of the license fee
and milestone payment received from ICOS that has not been recognized as revenue
totaled $1,637,000 at March 31, 2003. The recognition of this amount upon the
Acquisition will offset the effect of the $10,000,000 purchase price paid to
ICOS and result in a net charge of approximately $8,363,000 in the second
quarter of 2003.

Stock Options

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

Use of Estimates

       The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires us to
make estimates and assumptions that affect the reported amounts of assets,
liabilities, disclosures of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period.

GENERAL

       Our operating results have fluctuated significantly during each quarter,
and we anticipate that such fluctuations, which are largely attributable to
varying research and development commitments and expenditures, will continue for
the next several years.

       We have been unprofitable to date and expect to incur substantial
operating losses for the next several years as we invest in product research and
development, preclinical and clinical testing and regulatory compliance. We may
initiate certain commercial activities in the future, which could contribute to
future operating losses. We have sustained net losses of approximately $153.1
million from the date of our inception to March 31, 2003. We have primarily
financed our operations to date through a series of private placement and public
offerings of our Common Stock and several collaborative agreements with third
parties to jointly pursue product research and development. See discussion of
"Liquidity and Capital Resources" below. See also "Additional Risk Factors" in
Item 1 "Business" of our Annual Report on Form 10-K for the year ended December
31, 2002.

                THREE MONTH PERIODS ENDED MARCH 31, 2003 AND 2002

         Revenues increased $623,000, or approximately 24.0% in the three months
ended March 31, 2003, compared with the three months ended March 31, 2002. The
increase was comprised of increased collaborative research and development
revenues from ICOS-TBC, increased royalty income and increased license fees,
milestones and grants. Research agreement revenues, however, declined $177,000
or approximately 19%. During the prior year quarter, we, along with GSK, were
conducting clinical trials for additional uses of Argatroban and those trials
completed during 2002.

          Collaborative research and development from ICOS-TBC, L.P. in the
quarter ended March 31, 2003 increased $424,000, or approximately 177% compared
with the quarter ended March 31, 2002. Beginning January 1, 2003, a
significantly higher percentage of the development activity was performed by our
employees than in previous periods.


                                       20



<PAGE>

         Royalty income from the sales of Argatroban increased $183,000, or
approximately 19% as a result of increased sales by GSK. During 2002, GSK
created a hospital based sales force and initiated programs to increase its
sales efforts on Argatroban in the U.S. and Canada that we believe could have a
positive effect on our royalties from GSK.

         License fees, milestones and grants increased $187,000, or
approximately 39%, primarily due to the receipt of German government grants by
Revotar during the quarter ended March 31, 2003.

         Research and development expense decreased $971,000, or approximately
19% in the three months ended March 31, 2003, compared with the three months
ended March 31, 2002. The decrease is primarily due to a reduction in clinical
trials expenses of $1,092,000 as we were conducting several trials, primarily
ARGIS-I for Argatroban in stroke, during the prior year quarter. During the
quarter ended March 31, 2003, research and development expense includes a
restructuring charge, primarily comprised of severance benefits paid to
terminated employees, of $503,000. In January 2003, we announced a reduction of
headcount, primarily in the areas of basic exploratory biology, early stage
target identification and support functions. As a result of the headcount
reduction, our ongoing employee costs for research and development declined
$392,000 in the three months ended March 31, 2003, compared with the three
months ended March 31, 2002.

         Equity in loss of ICOS-TBC, L.P. declined $124,000, or approximately
5%, in the three months ended March 31, 2003, compared with the three months
ended March 31, 2002. Our equity in loss for the three months ended March 31,
2002 is comprised of 50% of the loss of ICOS-TBC, which totaled $5,020,000. Our
equity in loss for the three months ended March 31, 2003 is comprised of 100% of
the loss of ICOS-TBC. The expenses of ICOS-TBC declined in the current year
primarily in clinical trial costs, as the STRIDE trial was in progress during
the prior year period.

         General and administrative expenses declined $513,000, or approximately
19% in the three months ended March 31, 2003, compared with the three months
ended March 31, 2002. The prior year period included stock compensation expenses
of $182,000, primarily resulting from modifications to stock options issued to
our retiring CEO. General and administrative expenses in 2003 include $53,000 in
costs related to the January 2003 restructuring. The remaining decrease in
general and administrative expenses is primarily due to reduced travel and other
employee related costs. In 2003 we intend to continue with strict cost control
measures to minimize cash spent on administrative activities.

         Total operating expenses declined $1,608,000, or approximately 16% in
the three months ended March 31, 2003, compared with the three months ended
March 31, 2002. Operating expenses in the three months ended March 31, 2003
include a charge of $556,000 resulting from the restructuring of our research
activities in January 2003. Operating expenses in the three months ended March
31, 2002 include stock compensation expenses of $182,000, primarily resulting
from modifications to stock options issued to our retiring CEO. After taking
these charges into consideration, other operating expenses declined $1,958,000,
or approximately 19% in the current quarter, compared to the comparable prior
year quarter. As discussed above, the decline is primarily due to reduced
clinical trials costs and reduced headcount during the current year quarter.

         Operating loss declined $2,231,000, or approximately 29%, in the three
months ended March 31, 2003, compared with the three months ended March 31,
2002, due to higher revenues and reduced operating expenses in the current year
period.

         Investment income declined $394,000, or approximately 51% in the three
months ended March 31, 2003, compared with the three months ended March 31, 2002
due to lower levels of funds available for investment in the current quarter.

         The minority interest in the loss of Revotar in the three months ended
March 31, 2003 declined $67,000, or approximately 26% compared to the three
months ended March 31, 2002, reflecting reduced expenses, primarily clinical
trials costs, at Revotar in the current year quarter.


                                       21


<PAGE>

         Net loss in the three months ended March 31, 2003 declined $1,770,000,
or approximately 26% compared with the three months ended March 31, 2002. The
decreased net loss in the current quarter is due to higher revenues and lower
operating expenses in the current quarter, partially offset by reduced
investment income in the current quarter, all as discussed above.

                         LIQUIDITY AND CAPITAL RESOURCES

         We have financed our research and development activities and other
operations primarily through public and private offerings of our Common Stock
and from funds received through our collaborations, research agreements and
partnerships. We also have received royalty revenue from sales of Argatroban. We
have not conducted any offerings in 2003, and have relied on our cash balances
from prior offerings and our revenues to fund operations, with the result that
our cash balance has decreased in 2003.

       Cash, cash equivalents and investments in marketable securities,
including accrued interest thereon, was $59,848,000 at March 31, 2003, compared
with $68,005,000 at December 31, 2002. We used $7,876,000 in cash in operating
activities during the three months ended March 31, 2003, compared to cash used
in operating activities of $7,526,000 during the three months ended March 31,
2002. The increased use of cash in the current year period is primarily due to
the effect of changing our relationship with ICOS in January 2003, after which
we became responsible for 100% of the costs of Encysive, L.P. As a result of the
Acquisition, as discussed in Note 14 to the Financial Statements included
herein, we have made a payment to ICOS of $4 million on April 22, 2003 and
agreed to pay $4 million in April 2004 and $2 million in October 2004. The Note
is secured with an irrevocable standby letter of credit for which we have
pledged marketable securities with a value of approximately $7,000,000. Pledged
securities will be returned to us by the bank as payments are made on the Note.

       Investing activities generated $13,685,000 during the three months ended
March 31, 2003, compared to $23,636,000 in the three months ended March 31,
2002. Purchases of equipment and leasehold improvements declined $1,189,000 in
the current quarter, as a result of programs implemented by management to
conserve cash. Other than expenditures for purchases of equipment and leasehold
improvements, investing activities consist of purchases of, and maturities of
investments. During the quarter ended March 31, 2002, the net cash provided from
investing activities was primarily used to fund an increase of cash and cash
equivalents in that quarter of $16,222,000. In the current quarter, cash and
cash equivalents increased $5,802,000, which was primarily funded from investing
activities.

       Cash flows from financing activities in the quarter ended March 31, 2002
of $157,000 reflected proceeds from the sale of Common Stock and option
exercises. There was no financing activity in the quarter ended March 31, 2003.

Material Commitments

       As a result of the Acquisition, as discussed in Note 14 to the Financial
Statements included herein, we have made a payment to ICOS of $4 million on
April 22, 2003 and agreed to pay $4 million in April 2004 and $2 million in
October 2004. The Note is secured with an irrevocable standby letter of credit
for which we have pledged marketable securities with a value of approximately
$7,000,000. Pledged securities will be returned to us by the bank as payments
are made on the Note.

       Our only other material contractual commitments are comprised of a loan
commitment to Revotar and office and laboratory facility leases. We and the
minority shareholders of Revotar have committed to lend Revotar, on an unsecured
basis, approximately $4.5 million, of which our commitment is approximately $3.4
million. The terms of the loans require quarterly interest payments and
repayment of all principal on or before April 1, 2007. Our portion of the loan
is denominated in U.S. dollars at an interest rate of seven percent fixed for
the first two years and resets to the greater of seven percent or U.S. prime
plus two and one-half percent on April 1, 2004. As of March 31, 2003, we have
advanced $2,237,000 to Revotar under our loan commitment. Revotar will need to
seek additional funding through collaborative arrangements and/or through public
or private financings in the future. If they are not


                                       22


<PAGE>

successful, Revotar will be unable to repay our loans. A likely result of
additional financings would be to reduce our ownership percentage in Revotar.

       The Company had long-term obligations under our office and laboratory
leases as follows (in thousands):

<TABLE>
<CAPTION>
                                              Less than       1-3       4-5     After 5
           Contractual Obligations  Total      1 year        years     years     years
           -----------------------  ------     ------        -----     -----     -----
<S>                                <C>        <C>          <C>        <C>        <C>
           Operating Leases        $ 4,873    $ 1,616      $ 3,126    $  131        --
</TABLE>

Outlook for 2003

     In connection with the Acquisition, we have announced new guidance for 2003
as follows:

     Net sales of Argatroban by GSK..................$30.0 to $35.0 million
     Revenues........................................$10.0 to $11.5 million
     Expenses (1)....................................$50.0 to $53.0 million
     Investment income...............................$0.8 to $1.0 million
     Estimated net loss..............................$39.0 to $42.0 million
     Cash and Investments at Year-End 2003...........$30.0 to $32 million

     (1).Expenses net of minority interest in Revotar and include a charge of
$8.4 million related to the Acquisition.

       For a number of reasons discussed elsewhere in this Form 10-Q, we cannot
estimate, with a reasonable degree of certainty, total completion costs or dates
of completion of our ongoing research and development projects. See "Additional
Risk Factors" in Item 1, "Business" of our annual report on Form 10-K for the
year ended December 31, 2002, and "Longer-Term Outlook", below.

Longer-Term Outlook

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

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

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

             -   hospital and procedural costs;

             -   services of contract research organizations; and

             -   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.

       We have been unprofitable to date and expect to incur operating losses
for the next several years as we invest in product research and development,
preclinical and clinical testing and regulatory compliance. We will require
substantial additional funding to complete the research and development of our
product candidates, to establish commercial scale manufacturing facilities, if
necessary, to fund the $6 million


                                       23


<PAGE>

required future payments to ICOS and to market our products. Estimates of our
future capital requirements will depend on many factors, including:

         o   market acceptance and commercial success of Argatroban;

         o   expenses and risks associated with clinical trials to expand the
             use of Argatroban;

         o   possible emergence of generic competition;

         o   continued scientific progress in our drug discovery programs;

         o   the magnitude of these programs;

         o   progress with preclinical testing and clinical trials;

         o   the time and costs involved in obtaining regulatory approvals;

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

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

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

         o   effective commercialization activities and arrangements.

       Subject to these factors, we anticipate that our existing capital
resources and other revenue sources, should be sufficient to fund our cash
requirements through the end of the third quarter of 2004. We anticipate that we
may need to secure additional funds to continue the required levels of research
and development to reach our current long-term goals. We intend to seek such
additional funding through collaborative arrangements and/or through public or
private financings, if required. Our strategy for managing our capital
requirements includes seeking to license rights to sitaxsentan for select
markets, while preferably retaining North American rights. There can be no
assurances that such funding or licensing arrangements will be available on
acceptable terms. As we review our research and development programs, we may
also consider various measures to reduce our costs in order to effectively
utilize our capital resources.

Off-Balance Sheet Arrangements

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

                  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.


                                       24



<PAGE>

                     IMPACT OF INFLATION AND CHANGING PRICES

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

              CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

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

         o   market acceptance and commercial success of Argatroban;

         o   expenses and risks associated with clinical trials to expand the
             use of Argatroban;

         o   effect of any current or future competitive products;

         o   the possible emergence of generic competition;

         o   continued scientific progress in our drug discovery programs;

         o   the magnitude of these programs;

         o   progress with preclinical testing and clinical trials;

         o   the time and costs involved in obtaining regulatory approvals;

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

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

         o   our ability to maintain and establish additional collaborative
             arrangements;

         o   retention of key personnel;

         o   capital market conditions; and

         o   effective commercialization activities and arrangements.

       When used in this Form 10-Q, the words "expect," "anticipate," "intend,"
"plan," "believe," "seek," "estimate" and similar expressions are intended to
identify forward-looking statements, although not all forward-looking statements
contain these identifying words. Because these forward-looking statements


                                       25


<PAGE>

involve risks and uncertainties, actual results could differ materially from
those expressed or implied by these forward-looking statements for a number of
important reasons, including those discussed under "Management's Discussion and
Analysis of Financial Condition and Results of Operations - Liquidity and
Capital Resources."

       You should read these statements carefully because they discuss our
expectations about our future performance, contain projections of our future
operating results or our future financial condition, or state other
"forward-looking" information. Before you invest in our Common Stock, you should
be aware that the occurrence of any of the contingent factors described herein
under "Management's Discussion and Analysis of Financial Condition and Results
of Operations - Liquidity and Capital Resources" and described under "Additional
Risk Factors" in our Annual Report on Form 10-K for the year ended December 31,
2002 could substantially harm our business, results of operations and financial
condition. Upon the occurrence of any of these events, the trading price of our
Common Stock could decline, and you could lose all or part of your investment.

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

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

FOREIGN CURRENCY EXCHANGE RISK

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

     We have a majority-owned subsidiary in Germany and consolidate the results
of operations into our consolidated financial results. Although not significant
to date, our reported assets, liabilities, expenses and cash flows from this
subsidiary are exposed to changing exchange rates. We, accordingly, included an
unrealized gain of $61,000 and an unrealized loss of $61,000, respectively, in
our comprehensive loss for the three-month periods ended March 31, 2003 and
2002. We had an intercompany receivable from its German subsidiary at March 31,
2003 and December 31, 2002; however, this amount is denominated in U.S. dollars
and is not exposed to exchange risk. The Company contracts with entities in
other areas outside the U.S. and these transactions are denominated in a foreign
currency. To date, the currencies of these other countries have not fluctuated
materially. At this time, management has not deemed it cost effective to engage
in a program of hedging the effect of foreign currency fluctuations on the
Company's operating results using derivative financial instruments.

       The Company and the other stockholders of Revotar have executed an
agreement to provide approximately $4.5 million in unsecured loans, of which the
Company's commitment will be approximately $3.4 million. The terms of the loans
require quarterly interest payments and repayment of all principal on or before
April 1, 2007. The interest rate for the first two years will be seven percent,
after which the interest rate could then be reset to the U.S. prime rate plus
2.5 % if such rate is higher than seven percent. Pursuant to such agreement, the
Company has advanced approximately $2,237,000 to Revotar as of March 31, 2003.
Revotar's management has informed the Company that they anticipate that Revotar
will borrow the remaining commitment of approximately $1.1 million from the
Company in the fourth quarter of 2003. The loan is denominated in U.S. dollars.
To mitigate the risk of fluctuations in foreign currency exchange rates, Revotar
entered into a forward contract with a bank to fix the exchange rate at which it
will borrow the remaining loan commitment

ITEM 4.  CONTROLS AND PROCEDURES

         Within 90 days prior to the filing date of this report, we carried out
an evaluation, under the supervision and with the participation of management,
including our President and Chief Executive Officer, and our Vice President of
Finance and Administration, of the effectiveness of the design and operation of


                                       26


<PAGE>

our disclosure controls and procedures. Based upon that evaluation, our
President and Chief Executive Officer and our Vice President of Finance and
Administration concluded that our disclosure controls and procedures are
effective, providing management with material information relating to the
Company that is required to be included in our reports filed or submitted under
the Exchange Act on a timely basis. There have been no significant changes in
our internal controls or in other factors that could significantly affect
internal controls subsequent to the date we carried out our evaluation,
including any corrective actions with regard to significant deficiencies and
material weaknesses.

PART II OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS
         None

ITEM 2.  CHANGES IN SECURITIES
         None.

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

         Five reports on Form 8-K were filed during the quarter ended March 31,
     2003. A report on Form 8-K dated January 7, 2003 was filed regarding the
     Company's restructuring plan. A report on Form 8-K dated January 30, 2003
     was filed announcing the Company's negotiations regarding the reacquisition
     of full development and marketing rights to Sitaxsentan. A report on Form
     8-K dated February 6, 2003 was filed regarding the amending of the license
     and research and development agreement the Company has with Revotar
     Biopharmaceuticals AG. A report on Form 8-K dated February 26, 2003 was
     filed regarding updated guidance for 2002 and initial estimates for 2003. A
     report on Form 8-K dated March 6, 2003 and amended on April 2, 2003 was
     filed regarding the Company's full year 2002 results.

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

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

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


                                       27


<PAGE>

                        TEXAS BIOTECHNOLOGY CORPORATION

                                  MAY 14, 2003

                                   SIGNATURES




Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized, on the 14th day of May, 2003.




                              TEXAS BIOTECHNOLOGY CORPORATION


                              By:  /s/  Bruce D. Given, M.D.
                                   ---------------------------------------
                                   Bruce D. Given, M.D.
                                   President and Chief Executive Officer




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


                                       28

<PAGE>

                                 CERTIFICATIONS

I, Bruce D. Given, M.D., certify that:

         1.   I have reviewed this quarterly report on Form 10-Q of Texas
Biotechnology Corporation;

         2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this
quarterly report;

         3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

         4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

              a)  designed such disclosure controls and procedures to ensure
                  that material information relating to the registrant,
                  including its consolidated subsidiaries, is made known to us
                  by others within those entities, particularly during the
                  period in which this quarterly report is being prepared;

              b)  evaluated the effectiveness of the registrant's disclosure
                  controls and procedures as of a date within 90 days prior to
                  the filing date of this quarterly report ("Evaluation Date");
                  and

              c)  presented in this quarterly report our conclusions about the
                  effectiveness of the disclosure controls and procedures based
                  on our evaluation as of the Evaluation Date;

         5. The registrant's other certifying officer and I have disclosed,
based on our most recent evaluation, to the registrant's auditors and the audit
committee of the registrant's board of directors [or persons performing the
equivalent function]:

              a)  all significant deficiencies in the design or operation of
                  internal controls which could adversely affect the
                  registrant's ability to record, process, summarize and report
                  financial data and have identified for the registrant's
                  auditors any material weaknesses in internal controls; and

              b)  any fraud, whether or not material, that involves management
                  or other employees who have a significant role in the
                  registrant's internal controls; and

         6. The registrant's other certifying officer and I have indicated in
this quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.

Date:  May 14, 2003                By   /s/  Bruce D. Given, M.D.
                                        ---------------------------------------
                                        Bruce D. Given, M.D.
                                        President and Chief Executive Officer


                                       29

<PAGE>

                                 CERTIFICATIONS

I, Stephen L. Mueller, certify that:

         1.   I have reviewed this quarterly report on Form 10-Q of Texas
Biotechnology Corporation;

         2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this
quarterly report;

         3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

         4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

              a)  designed such disclosure controls and procedures to ensure
                  that material information relating to the registrant,
                  including its consolidated subsidiaries, is made known to us
                  by others within those entities, particularly during the
                  period in which this quarterly report is being prepared;

              b)  evaluated the effectiveness of the registrant's disclosure
                  controls and procedures as of a date within 90 days prior to
                  the filing date of this quarterly report ("Evaluation Date");
                  and

              c)  presented in this quarterly report our conclusions about the
                  effectiveness of the disclosure controls and procedures based
                  on our evaluation as of the Evaluation Date;

         5. The registrant's other certifying officer and I have disclosed,
based on our most recent evaluation, to the registrant's auditors and the audit
committee of the registrant's board of directors [or persons performing the
equivalent function]:

              a)  all significant deficiencies in the design or operation of
                  internal controls which could adversely affect the
                  registrant's ability to record, process, summarize and report
                  financial data and have identified for the registrant's
                  auditors any material weaknesses in internal controls; and

              b)  any fraud, whether or not material, that involves management
                  or other employees who have a significant role in the
                  registrant's internal controls; and

         6. The registrant's other certifying officer and I have indicated in
this quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.

Date:  May 14, 2003                 By   /s/  Stephen L. Mueller
                                         --------------------------------------
                                         Stephen L. Mueller
                                         President and Chief Executive Officer


                                       30
<PAGE>

                                INDEX TO EXHIBITS


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

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

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