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


                                    FORM 10-Q


(Mark One)

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

                                       OR

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

Commission File Number:  1-12574

                         TEXAS BIOTECHNOLOGY CORPORATION

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

          Delaware                                     13-3532643

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

              7000 Fannin, Suite 1920, Houston, Texas       77030

--------------------------------------------------------------------------------
            (Address of principal executive office)        (Zip code)

                                 (713) 796-8822

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

                                 Not Applicable

--------------------------------------------------------------------------------
         (Former name, former address and former fiscal year, if changed
                               since last report)

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

Yes  [X]    No  [ ]

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

        Class                                   Outstanding at October 31, 1998
        -----                                   -------------------------------

Common Stock, $0.005 par value                           34,088,017


<PAGE>   2


                         TEXAS BIOTECHNOLOGY CORPORATION

                                TABLE OF CONTENTS




<TABLE>
<CAPTION>
                                                                                                 PAGE NO.
                                                                                                 --------
<S>                                                                                              <C>
PART I.    FINANCIAL INFORMATION

           ITEM 1:   FINANCIAL STATEMENTS

           Consolidated Balance Sheets as of  September 30, 1998 and December 31, 1997               1

           Consolidated Statements of Operations for the three months ended
           September 30, 1998 and 1997 and the nine months ended September 30, 1998 and 1997         2

           Consolidated Statements of Cash Flows the nine months ended
           September 30, 1998 and 1997                                                               3

           Notes to Consolidated Financial Statements                                                4

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

           ITEM 3:   QUANTITATIVE AND QUALITATIVE DISCLOSURES
                     ABOUT MARKET RISK                                                              13


PART II.   OTHER INFORMATION

           ITEM 1:  Legal Proceedings                                                               14

           ITEM 2:  Changes in Securities                                                           14

           ITEM 3:  Defaults Upon Senior Securities                                                 15

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

           ITEM 5:  Other Information                                                               15

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


SIGNATURES                                                                                          16


INDEX TO EXHIBITS                                                                                   17
</TABLE>



<PAGE>   3

                 TEXAS BIOTECHNOLOGY CORPORATION AND SUBSIDIARY

                           CONSOLIDATED BALANCE SHEETS


<TABLE>
<CAPTION>
                                                                                    SEPTEMBER 30,       DECEMBER 31,
                                   ASSETS                                              1998                 1997
                                                                                    -------------      -------------
                                                                                    (Unaudited)
<S>                                                                                 <C>                <C>          
Current assets:
       Cash and cash equivalents                                                    $   5,310,547      $  14,323,573
       Short term investments                                                          28,660,489         29,383,791
       Long term investments                                                            1,011,385                 --
       Other current receivables                                                        1,035,067          1,175,280
       Prepaids                                                                           759,552            553,585
       Other current assets                                                                11,100             10,400
                                                                                    -------------      -------------
            Total current assets                                                       36,788,140         45,446,629

Equipment and leasehold improvements, at cost less
       accumulated depreciation and amortization (note 4)                               3,140,818          3,292,062

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

           Total assets                                                             $  39,988,549      $  48,798,282
                                                                                    =============      =============

                    LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
       Accounts payable                                                             $     986,087      $   1,006,145
       Accrued expenses                                                                 1,870,989          1,625,071
                                                                                    -------------      -------------
           Total current liabilities                                                    2,857,076          2,631,216

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

Stockholders' equity (note 2):
       Preferred stock, par value $.005 per share. At September 30, 1998,
           5,000,000 shares authorized; none outstanding. At December 31, 
           1997, 5,000,000 shares authorized, 300 shares issued and
           outstanding.                                                                        --                  2
       Common stock, par value $.005 per share.  At September 30, 1998,
           75,000,000 shares authorized; 34,086,498 shares issued and
           outstanding.  At December 31, 1997, 75,000,000 shares
           authorized; 33,585,919 shares issued and outstanding.                          170,435            167,929
       Additional paid-in capital                                                     117,528,208        116,085,172
       Accumulated deficit.                                                           (80,567,170)       (70,086,037)
                                                                                    -------------      -------------
           Total stockholders' equity                                                  37,131,473         46,167,066
                                                                                    -------------      -------------

           Total liabilities and stockholders' equity                               $  39,988,549      $  48,798,282
                                                                                    =============      =============
</TABLE>


           See accompanying notes to consolidate financial statements


                                                                          Page 1
<PAGE>   4


                 TEXAS BIOTECHNOLOGY CORPORATION AND SUBSIDIARY

                      CONSOLIDATED STATEMENTS OF OPERATIONS



<TABLE>
<CAPTION>
                                                              THREE MONTHS ENDED              NINE MONTHS ENDED
                                                                 SEPTEMBER 30,                   SEPTEMBER 30,
                                                            1998              1997             1998              1997
                                                        ------------      ------------     ------------      ------------
                                                         (Unaudited)      (Unaudited)       (Unaudited)       (Unaudited)
<S>                                                     <C>                  <C>              <C>               <C>      
Revenues:
    Research agreements                                 $    616,402         1,187,500        1,859,790         2,672,502
    License fee income                                            --         8,500,000               --         8,500,000
    Other income                                                  --             2,502               --             7,500
                                                        ------------      ------------     ------------      ------------
      Total revenues                                         616,402         9,690,002        1,859,790        11,180,002
                                                        ------------      ------------     ------------      ------------

Expenses:
    Research and development                               3,482,683         4,287,056       10,691,830        13,117,421
    General and administrative                               953,506         1,177,642        3,282,252         4,248,950
                                                        ------------      ------------     ------------      ------------
      Total expenses                                       4,436,189         5,464,698       13,974,082        17,366,371
                                                        ------------      ------------     ------------      ------------
      Operating income (loss)                             (3,819,787)        4,225,304      (12,114,292)       (6,186,369)
                                                        ------------      ------------     ------------      ------------

Other income:
    Interest income                                          519,132           183,494        1,634,849           506,970
    Other                                                         --             8,093               --             2,253
                                                        ------------      ------------     ------------      ------------
      Total other income (expense)                           519,132           191,587        1,634,849           509,223

      Net income (loss)                                   (3,300,655)        4,416,891      (10,479,443)       (5,677,146)
      Preferred dividend requirement                              --           297,229            1,690         1,144,623

      Net income (loss) applicable to common shares     $ (3,300,655)        4,119,662      (10,481,133)       (6,821,769)

Net income (loss) per common share:
    Basic                                               $      (0.10)             0.15            (0.31)            (0.26)
    Diluted                                             $         --              0.15               --                --

Weighted average common shares used to
    compute net income (loss) per common share:
    Basic                                                 34,086,498        27,305,955       33,872,875        25,853,961
    Diluted                                                       --        28,762,873               --                --
</TABLE>


           See accompanying notes to consolidate financial statements


                                                                          Page 2
<PAGE>   5

                 TEXAS BIOTECHNOLOGY CORPORATION AND SUBSIDIARY

                      CONSOLIDATED STATEMENTS OF CASH FLOWS


<TABLE>
<CAPTION>
                                                                                         NINE MONTHS ENDED
                                                                                            SEPTEMBER 30,
                                                                                      1998               1997
                                                                                   -------------      -------------
                                                                                    (Unaudited)        (Unaudited)
<S>                                                                                <C>                   <C>        
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net loss                                                                        $ (10,479,443)        (5,677,146)
   Adjustments to reconcile net loss to net cash
    used in operating activities:
    Depreciation and amortization                                                        599,718            561,095
    Expenses paid with stock (note 2)                                                     16,297              9,967
    Compensation expense related to stock options                                             --          1,303,094
    Loss on disposition of fixed assets                                                    7,895                 --
    (Increase) decrease in preferred dividend payable not included in net loss            11,912            (98,965)
   Change in operating assets and liabilities, net of 
    effect of acquisition:
    (Increase) decrease in prepaids                                                     (205,967)           255,088
    (Increase) decrease in receivables                                                   140,213           (671,880)
    (Increase) in other current assets                                                      (700)          (343,168)
    Increase (decrease) in current liabilities                                           225,860         (1,146,951)
    (Decrease) in deferred revenue                                                            --           (562,500)
                                                                                   -------------      -------------
          Net cash used in operating activities                                       (9,684,215)        (6,371,366)
                                                                                   -------------      -------------

CASH FLOWS FROM INVESTING ACTIVITIES:
   Purchases of equipment and leasehold improvements                                    (459,367)          (369,003)
   Proceeds from disposition of fixed assets                                               3,000                 --
   Purchase of long-term investments                                                  (1,011,385)                --
   Purchase of short-term investments                                                (43,707,919)       (18,987,527)
   Maturity of short-term investments                                                 44,400,161         16,757,893
   Decrease in interest receivable included in short term investments                     31,061                 --
                                                                                   -------------      -------------
         Net cash used by investing activities                                          (744,449)        (2,598,637)
                                                                                   -------------      -------------

CASH FLOWS FROM FINANCING ACTIVITIES:
   Proceeds from sale of common stock and options and
    warrant exercises, net                                                             1,415,639          1,733,350
   Proceeds from sale of preferred stock, net                                                 --          5,925,269
                                                                                   -------------      -------------
          Net cash provided by financing activities                                    1,415,639          7,658,619
                                                                                   -------------      -------------

    Net (decrease) in cash and cash equivalents                                       (9,013,025)        (1,311,384)

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

Cash and cash equivalents at end of period                                         $   5,310,548            816,615
                                                                                   =============      =============

Supplemental schedule of noncash financing activities (note 2)                     $      16,297             34,853
                                                                                   =============      =============
</TABLE>



           See accompanying notes to consolidate financial statements

                                                                          Page 3
<PAGE>   6

                 TEXAS BIOTECHNOLOGY CORPORATION AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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



(1)    ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

       (a)    Organization

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

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

       (b)    Basis of Consolidation

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

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

              Cash equivalents are considered to be those securities or
              instruments with original maturities, when purchased, of three
              months or less. At September 30, 1998, approximately $5,311,000
              was invested in demand and money market accounts. Short-term
              investments are those investments which have an original maturity
              of less than one year and greater than three months. At September
              30, 1998, the Company's short term investments consisted of
              approximately $6,499,000 in Government Agency Notes and Bonds and
              $22,161,000 in Corporate Commercial Paper. Long-term investments
              consist of one Government Agency Bond with an original maturity of
              two years. Cash equivalents, short-term investments and long-term
              investments are stated at cost plus accrued interest, which
              approximates market value. Interest income is accrued as earned.
              In connection with the adoption of Financial Accounting Standards
              Statement 115, the Company classified all short-term and long-term
              investments as held to maturity.

       (d)    Equipment and Leasehold Improvements

              Equipment and leasehold improvements are stated at cost less
              accumulated depreciation and amortization. Depreciation of
              furniture and equipment is provided on the straight-line method
              over the estimated useful 




                                                                          Page 4
<PAGE>   7

              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)    Intangible Assets

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

       (f)    Research and Development Costs

              All research and development costs are expensed as incurred and
              include salaries of research and development employees, certain
              rent and related building services, research supplies and
              services, clinical trial expenses and other associated costs. With
              respect to research and development, salaries and benefits for the
              three month period ended September 30, 1998 and 1997, totaled
              approximately $1,541,000 and $1,445,000, respectively, of which
              approximately $1,167,000 and $1,136,000, respectively, was charged
              to research and development. For the nine month period ended
              September 30, 1998 and 1997, salaries and benefits totaled
              approximately $4,715,000 and $4,257,000, respectively, of which
              approximately $3,526,000 and $3,335,000, respectively, was charged
              to research and development. Payments related to the acquisition
              of in-process research and development are expensed as incurred.

       (g)    Net Loss Per Common Share

              Basic net loss per common share is based upon the net loss
              applicable to common shares after preferred dividend requirements
              and upon the weighted average of common shares outstanding during
              the period. Preferred dividend requirements for the nine month
              period ended September 30, 1998 included $1,690 of accrued
              dividends. For the three months ended September 30, 1998 and 1997,
              the weighted average common shares used to compute basic net loss
              per common share totaled 34,086,498 and 27,305,955, respectively.
              For the nine months ended September 30, 1998 and 1997, the
              weighted average common shares used to compute net loss per common
              share totaled 33,872,875 and 25,853,961, respectively. The
              conversion of securities convertible into Common Stock and the
              exercise of stock options and warrants were not assumed in the
              calculation of diluted net loss per common share because the
              effect would have been antidilutive.

              Diluted net income per common share is based upon the net
              income applicable to common shares before the preferred dividend
              requirement. For the three months ended September 30, 1997, the
              weighted average shares used to compute diluted net income
              per share totaled 28,762,873 and included the conversion of
              securities convertible into Common Stock and the exercise of
              dilutive stock options and warrants. Shares held in escrow through
              September 30, 1995, pending satisfaction of certain future
              conditions, and shares related to contingent stock issue rights
              related to the IPI acquisition have been excluded from the 
              diluted net income per share calculation until such shares were 
              released or issued.

       (h)    Reclassifications

              Certain reclassifications have been made to prior period financial
              statements to conform with the September 30, 1998 presentation
              with no effect on net loss reported.

       (i)    Revenue Recognition

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



                                                                          Page 5
<PAGE>   8




       (j)    Patent Application Costs

              Costs incurred in filing for patents are expensed as incurred.

       (k)    Use of Estimates

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

       (l)    Development Stage Enterprise

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

 (2)   STOCK OPTIONS AND WARRANTS

       The Company has in effect three stock option plans allowing for the
       issuance of incentive and non-qualified options to employees, directors,
       officers, non-employee independent contractors and non-employee
       directors, and two stock option plans allowing for the issuance of
       non-qualified options to non-employee members of the Board of Directors
       of the Company based on a formula. No current issuances are being made
       under the Director Plan. This plan allows for directors to request stock
       in lieu of cash payment of director fees, which amounted to $16,297 and
       $9,967, respectively, for the nine month periods ended September 30, 1998
       and 1997.

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

<TABLE>
<CAPTION>
                             Exercise Price                                      Exercised/                   Available
       Stock Option Plans      Per Share        Authorized       Outstanding        Other    Exercisable      for Grant
       ------------------    --------------     ----------       -----------     ----------  -----------      ---------
<S>    <C>                   <C>              <C>              <C>              <C>          <C>            <C>   
       1990 Plan             $1.38 - $5.59        285,715          177,882          66,318       165,070        41,515

       1992 Plan             $1.41 - $5.36      1,700,000        1,188,011         272,493     1,158,188       239,496

       1995 Plan             $1.31 - $8.13      2,000,000        1,773,800          21,851       657,828       204,349

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

       1995 Director Plan    $1.38 - $5.69        300,000          189,005          10,909       104,185       100,086

                                               ----------       ----------        --------    ----------     ---------
                    TOTALS                      4,357,144        3,362,940         408,758     2,119,513       585,446
                                               ==========       ==========        ========    ==========     =========
</TABLE>

 (3)   INCOME TAXES

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





                                                                          Page 6
<PAGE>   9

       or settled. The effect on deferred tax assets and liabilities of a change
       in tax rates is recognized in income in the period that includes the
       enactment date.

       At September 30, 1998, the net deferred tax asset totaled approximately
       $30,348,153, and was fully reserved. The Company did not incur any tax
       expense in any period due to operating losses.

(4)    EQUIPMENT AND LEASEHOLD IMPROVEMENTS

       Equipment and leasehold improvements consist of the following:

<TABLE>
<CAPTION>
                                                         September 30,1998     December 31, 1997
                                                         -----------------     -----------------
<S>                                                       <C>                   <C>             
       Laboratory and office equipment                    $      5,105,317      $      4,665,174
       Leasehold improvements                                    3,701,772             3,701,772
                                                          ----------------      ----------------
                                                                 8,807,089             8,366,946
       Less accumulated depreciation and amortization           (5,666,271)           (5,074,884)
                                                          ----------------      ----------------
                                                          $      3,140,818      $      3,292,062
                                                          ================      ================
</TABLE>

(5)    COMMON STOCK RESERVED

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

<TABLE>
<S>                                                                            <C>      
              Stock option plans                                               3,948,386
              Common Stock issuable under licensing agreement                     71,429
              Publicly Traded Warrants Outstanding                             4,082,500
              Other Warrants Outstanding                                         645,918
              Underwriters purchase options and related warrants                 710,000
                                                                               ---------
                   Total shares reserved                                       9,458,233
                                                                               =========
</TABLE>

(6)    REGULATORY FILING

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

 (7)   COMMITMENTS AND CONTINGENCIES

       a)     Legal Proceedings

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






                                                                          Page 7
<PAGE>   10
              dismiss the plaintiffs' complaint pursuant to Rule 12(b)(2) of the
              Federal Rules of Civil Procedure. On February 7, 1995, the
              plaintiffs filed a Motion for class certification. The Court
              denied the Motion by the Company and by John Pietruski.

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

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




                                                                          Page 8
<PAGE>   11



ITEM 2.

                 TEXAS BIOTECHNOLOGY CORPORATION AND SUBSIDIARY

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

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



                                    OVERVIEW

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

       Since its inception in 1989, the Company has primarily devoted its
       resources to fund research, drug discovery and development. The Company
       has been unprofitable to date and expects to incur substantial losses for
       the next several years as the Company invests in product research and
       development, preclinical and clinical testing and regulatory compliance.
       The Company has sustained net losses of approximately $80.6 million from
       inception to September 30, 1998. The Company has primarily financed its
       operations to date through certain private placements of Common Stock and
       shareholder loans (none of which are outstanding), which have raised an
       aggregate of $21.3 million in net proceeds, the Initial Public Offering
       which raised an aggregate of $24.2 million in net proceeds including the
       over-allotment sold in January 1994, a private placement of Common Stock
       on February 13, 1996, which raised $13.0 million in net proceeds, a
       private placement of the 5% Preferred on March 14, 1997, which raised
       approximately $6.0 million in net proceeds, and a secondary public
       offering in October 1997 which raised approximately $26.7 million in net
       proceeds.

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

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

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

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





                                                                          Page 9
<PAGE>   12

       Infarction ("AMI"). In connection with the SmithKline Agreement,
       SmithKline purchased 176,922 shares of Common Stock for $1.0 million and
       an additional 400,000 shares of Common Stock for $2.0 million in
       conjunction with the Company's public offering in October 1997.

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

                              RESULTS OF OPERATIONS

              THREE MONTH PERIODS ENDED SEPTEMBER 30, 1998 AND 1997


       Revenues decreased from $9,690,002 in the three month period ended
       September 30, 1997 to $616,402 in the same period of 1998, a decrease of
       94%. Revenues were primarily composed of earned revenues under research
       and development agreements and the license agreement. Revenues decreased
       primarily due to a one-time license fee of $8,500,000 received from
       SmithKline during the third quarter of 1997.

       Total operating expenses decreased 19% from $5,464,698 in the three month
       period ended September 30, 1997 to $4,436,189 in the same period of 1998
       due primarily to the decrease in research and development expenses.
       Research and development expenses decreased 19% from $4,287,056 in the
       three month period ended September 30, 1997 to $3,482,683 in the same
       period of 1998. This decrease was primarily attributable to continued
       decreases in research and development activity related to the completion
       in certain clinical trials for the compound NOVASTAN(R). General and
       administrative expenses decreased 19% from $1,177,642 in the three month
       period ended September 30, 1997 to $953,506 in the same period of 1998
       due primarily to cost associated with the SmithKline Agreement in 1997,
       which were not incurred in 1998, offset by the addition of an investor
       relations department in 1998. The Company had 81 employees at September
       30, 1998 and 78 employees at September 30, 1997.

       Other income and expense is composed of investment income on invested
       funds, interest expense and foreign currency exchange gains. The increase
       is due to a 183% increase in investment income from $183,494 in the three
       month period ended September 30, 1997 to $519,132 in the same period of
       1998, attributed primarily to higher investment balances resulting from
       funds received in conjunction with the SmithKline Agreement and a public
       offering of Common Stock completed in the last six months of 1997.

              NINE MONTH PERIODS ENDED SEPTEMBER 30, 1998 AND 1997

       Revenues decreased from $11,180,002 in the nine month period ended
       September 30, 1997 to $1,859,790 in the same period of 1998, a decrease
       of 83%. Revenues were primarily composed of earned revenues under
       research and development agreements and the license agreement. Revenues
       decreased primarily due to a one-time license fee of $8,500,000 received
       from SmithKline during the third quarter of 1997.

       Total operating expenses decreased 20% from $17,366,371 in the nine month
       period ended September 30, 1997 to $13,974,082 in the same period of 1998
       due primarily to the decrease in research and development expenses.
       Research and development expenses decreased 18% from $13,117,421 in the
       nine month period ended September 30, 1997 to $10,691,830 in the same
       period of 1998. This decrease was primarily attributable to continued
       decreases in research and development activity related to the completion
       of enrollment in certain clinical trials for the compound NOVASTAN(R).
       General and administrative expenses decreased 23% from $4,248,850 in the
       nine month period ended September 30, 1997 to $3,282,252 in the same
       period of 1998 primarily because of a $952,919 noncash charge related to
       the extension of the exercise period for certain stock options.

       Other income and expense is composed of investment income on invested
       funds, interest expense and foreign currency exchange losses. The
       increase is caused by a 222% increase in investment income from $506,970
       in the nine month period ended September 30, 1997 to $1,634,849 in the
       same period of 1998, attributed primarily to 




                                                                         Page 10
<PAGE>   13

       higher investment balances resulting from funds received in connection
       with the SmithKline Agreement and a public offering of Common Stock
       completed in the last six months of 1997.

                         LIQUIDITY AND CAPITAL RESOURCES

       The Company has financed its research and development activities to date
       principally through (i) public offerings and private placements of its
       equity securities, (ii) issuances of Common Stock in conjunction with
       acquisitions and research and collaboration agreements and exercises of
       stock options and warrants, (iii) milestone and research payments
       received in conjunction with research and collaborative agreements, and
       (iv) investment income, net of interest expense. During the first nine
       months of 1998, the Company utilized net cash in operating activities of
       $9,684,216. The use of cash in operations was caused primarily by the
       Company's net loss before preferred dividend requirements of $10,479,443.
       Investing and financing activities primarily reflect the net effect of
       purchases and redemptions of short term investments during the first nine
       months of 1998. At September 30, 1998, the Company had cash, cash
       equivalents and short-term and long-term investments of $34,982,421.

       The Company expects to incur substantial research and development
       expenditures as it designs and develops small molecule drugs for vascular
       diseases. The Company anticipates that operating expenses may continue to
       fluctuate during 1998 and subsequent years. The Company began to incur
       costs to develop NOVASTAN(R) during the third quarter of 1993. These
       costs will continue during 1998 because of ongoing NOVASTAN(R) trials and
       will continue to be significant through the FDA approval process and for
       clinical trial work should additional clinical indications be pursued.
       The Company has received a non-approvable letter from the FDA regarding
       its NDA for NOVASTAN(R) as a treatment for HIT/HITTS. The Company met
       with the FDA to confirm the exact requirements for the resubmission of
       the NOVASTAN(R) new drug application. Based on the meeting, the
       resubmission will include an expanded historical control group that
       reflects the FDA's requirement for one that more closely resembles the
       medical conditions and outcomes seen in the literature and other patient
       registries. The Company remains committed to satisfying the FDA's
       requirements and is moving forward with the plan to resubmit the NDA by
       the end of 1998. In order to resubmit the NDA, the Company may incur
       significant, unanticipated costs, all of which are presently not known.
       The failure to receive NDA approval from the FDA will have a material
       adverse effect on the commercialization of NOVASTAN(R) for HIT/HITTS, as
       well as potentially adversely impacting commercialization of other
       indications.

       The Company also began incurring clinical trial costs in 1997 for the
       compounds TBC 11251 and TBC 1269 and these costs are continuing during
       1998. During 1999, the Company expects to begin to incur costs for
       clinical trials related to additional compounds. These costs include,
       among other things, hiring personnel to direct and carry out all
       operations related to the clinical trials, hospital and procedural costs,
       services of a contract research organization and purchasing and
       formulating large quantities of the compound to be used in such trials.
       In addition, the Company anticipates that the administrative costs
       associated with this effort will be significant. The amounts and timing
       of expenditures will depend on the progress of the Company's ongoing
       research, clinical development and commercialization efforts.

       The Company anticipates that its existing capital resources and its other
       revenue sources should be sufficient to fund its cash requirements
       through the second quarter of 2000. This date is contingent upon various
       factors, including the rates of patient enrollment and spending
       associated with the clinical trials of NOVASTAN(R) and the compounds TBC
       11251 and TBC 1269, the costs necessary to meet requirements for further
       consideration of NOVASTAN(R) by the FDA and the level of research and
       development expenditures for other compounds. The Company's existing
       capital resources may not be sufficient to fund the Company's operations
       through commercialization of its first product, NOVASTAN(R). Moreover,
       TBC's agreement with Synthelabo requires the Company to maintain a "net
       worth", as defined in the agreement, of at least $5.0 million during the
       term of the agreement. If the Company fails to maintain at least $5.0
       million of "net worth", Synthelabo may require that the technology be
       transferred to, and the development program be conducted by, a joint
       venture owned by TBC and Synthelabo. The outcome of certain lawsuits that
       have been filed against the Company could also have an impact on
       liquidity. See Part II, Item 1. Legal Proceedings.




                                                                         Page 11
<PAGE>   14

       The Company anticipates that it may need to raise substantial funds for
       future operations, which may be raised through collaborative
       arrangements, public or private issuance of debt and equity, or other
       arrangements. The Company expects that additional expenditures will be
       required if additional product candidates enter clinical trials which may
       require additional expenditures for laboratory space, scientific and
       administrative personnel, and services of contract research
       organizations. There can be no assurance that the Company will be able to
       obtain such additional financings on acceptable terms or in time to fund
       any necessary or desirable expenditures. In the event such financing is
       not obtained, the Company's drug discovery or development programs may be
       delayed, scaled back or eliminated. The Company may also be required in
       this event to obtain funds through arrangements with collaborative
       partners or others that may require the Company to relinquish rights to
       certain of its technologies, product candidates or products that it would
       not otherwise relinquish.

                               PENDING LITIGATION

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

                  HAZARDOUS MATERIALS AND ENVIRONMENTAL MATTERS

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

                     IMPACT OF INFLATION AND CHANGING PRICES

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

                                 YEAR 2000 ISSUE

       The Year 2000 ("Y2K") issue is the result of computer programs being
       written using two digits rather than four to define the applicable year.
       Computer equipment, software and other devices with imbedded technology
       that are time-sensitive, such as computer systems, related software,
       research equipment, alarm systems and telephone systems may recognize a
       date using "00" as the year 1900 rather than the year 2000. This could
       result in a system failure or miscalculations causing disruptions of
       operations, including, among other things, temporary inability to process
       data, and may materially impact its financial condition.

       The Company has undertaken various initiatives intended to ensure that it
       is prepared for the Y2K issue. The Company is in the process of accessing
       its state of readiness. Presently, the Company is reviewing its
       scientific equipment, computer systems and related software to identify
       systems which may exhibit Y2K issues. This review is being performed by
       internal teams from various disciplines within the Company. These teams
       are currently evaluating the Company's Y2K issues, and , if necessary,
       developing remediation plans. As a part of this review the Company will
       determine the known risks related to the consequences of a failure to
       correct any Y2K deficiencies. The Company has initiated formal
       communications with material third parties to determine the extent to
       which the Company may be vulnerable to those third parties' failure to
       remediate their Y2K problems. The Company and its licensee, SmithKline
       are dependent upon Mitsubishi Chemical Corporation ("Mitsubishi") for
       supply of bulk NOVASTAN(R) for clinical trial material and for its
       inventory needs should the FDA approve the compound for 





                                                                         Page 12
<PAGE>   15

       marketing. The Company will contact Mitsubishi to ascertain their state
       of Y2K readiness and any potential effect upon the Company. Any Y2K
       issues which would result in significant interruptions of delivery
       schedules by our suppliers or service providers could have a material
       effect on the Company's operations. However, the Company is presently not
       aware of any Y2K issues that have been encountered by any third party,
       which could materially affect the Company's operations.

       If necessary, during 1999, the Company will develop a contingency plan to
       address potential Y2K issues. This contingency plan will likely address
       problems that the Company identifies during the course of its remediation
       efforts and reasonably foreseeable problems that may arise as a result of
       Y2K, including, but not limited to computer hardware and software and
       research equipment. The contingency plan will be continually refined as
       additional information becomes available. However, it is unlikely that
       any contingency plan can fully address all events that may arise.

       The Company estimates that the costs associated with the Y2K issue will
       not be material, and as such will not have a significant impact on the
       Company's financial position or operating results. There can be no
       assurance that the Company will not experience difficulties as a result
       of Y2K issues either arising out of internal operations or caused by
       third parties. The failure to discover or correct a material Y2K problem
       could result in an interruption in the Company's normal business
       activities or operations. Such failure could materially and adversely
       affect the Company's results of operation, liquidity and financial
       condition.

                 DISCLOSURE REGARDING FORWARD LOOKING STATEMENTS

       This Report includes "forward looking statements" within the meaning of
       Section 27A of the Securities Act of 1933, as amended, and Section 21E of
       the Securities Exchange Act of 1934, as amended. All statements other
       than statements of historical fact included in this Report are forward
       looking statements. Such forward looking statements include, without
       limitation, statements under (a) Statements regarding Texas Biotechnology
       Corporation's expectations for future drug discovery and development and
       related expenditures and (b) "Management's Discussion and Analysis of
       Financial Condition and Results of Operations - Liquidity and Capital
       Resources" - regarding TBC's estimate of sufficiency of existing capital
       resources and its ability to raise additional capital to fund cash
       requirements for future operations. Although TBC believes that the
       expectations reflected in such forward looking statements are reasonable,
       it can give no assurance that such expectations reflected in such forward
       looking statements will prove to have been correct. The ability to
       achieve TBC's expectations is contingent upon a number of factors which
       include (i) ongoing cost of research and development activities, (ii)
       cost of clinical development of product candidates, (iii) attainment of
       research and clinical goals of product candidates, (iv) timely approval
       of TBC's product candidates by appropriate governmental and regulatory
       agencies, (v) effect of any current or future competitive products, (vi)
       ability to manufacture and market products commercially, (vii) retention
       of key personnel and (viii) capital market conditions. This Form 10-Q may
       contain trademarks and service marks of other companies.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

       Not Applicable



                                                                         Page 13
<PAGE>   16

PART II OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

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

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

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

ITEM 2.  CHANGES IN SECURITIES

       Common Stock Transactions

       In July and August of 1998, the Company issued an aggregate of 58,576
       shares of its Common Stock to certain institutions and individuals,
       pursuant to the exercise of outstanding warrants for an aggregate
       purchase price of $205,016. The issuance of the Common Stock was exempt
       from registration under Section 4 (2) of the Securities Act of 1933, as
       amended. The warrants and the Common Stock underlying the warrants may
       not be sold in the United States absent registration or an applicable
       exemption from registration requirements.



                                                                         Page 14
<PAGE>   17

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

       None

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

       None

ITEM 5.  OTHER INFORMATION

       Dr. Rita R. Colwell resigned as a Director of the Company's Board on
       September 1, 1998, to pursue other interests following her appointment to
       the National Science Foundation.

       The Board of Directors of the Company extended the expiration date of the
       Company's publicly traded warrant from 5:00 p.m., New York time on
       December 14, 1998, to 5:00 p.m., New York Time on September 30, 1999. All
       other terms of the warrants remain in effect.

       Dr. Philip Jochelson resigned his position as Vice President, Clinical
       Development and Regulatory Affairs to pursue other interests effective
       November 30, 1998. The Company has appointed Dr. John McMurdo to replace
       Dr. Jochelson.

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

     EXHIBIT NO.             DESCRIPTION

     27.1                    Financial Data Schedule

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


                                                                         Page 15
<PAGE>   18

                         TEXAS BIOTECHNOLOGY CORPORATION

                               SEPTEMBER 30, 1998

                                   SIGNATURES




Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized, on the 12th day of November, 1998.




                           TEXAS BIOTECHNOLOGY CORPORATION


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






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



                                                                         Page 16
<PAGE>   19


                                INDEX TO EXHIBITS


<TABLE>
<CAPTION>
   Exhibit No.                        Description of Exhibit
   -----------                        ----------------------
<S>                          <C>
     27.1                    Financial Data Schedule
</TABLE>