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<CONFORMED-NAME>LEXICON GENETICS INC/TX
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<STATE>TX
<ZIP>77381
<PHONE>2813640100
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<DESCRIPTION>LEXICON GENETICS INCORPORATED - DATED 3/31/2003
<TEXT>
<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 THE QUARTERLY PERIOD ENDED MARCH 31, 2003

                                       OR

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

         FOR THE TRANSITION PERIOD FROM _____________ TO _____________

                        COMMISSION FILE NUMBER: 000-30111

                          LEXICON GENETICS INCORPORATED

             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)


           DELAWARE                                     76-0474169
 (STATE OR OTHER JURISDICTION OF                      (I.R.S. EMPLOYER
 INCORPORATION OR ORGANIZATION)                     IDENTIFICATION NUMBER)


                          8800 TECHNOLOGY FOREST PLACE
                           THE WOODLANDS, TEXAS 77381
                         (ADDRESS OF PRINCIPAL EXECUTIVE
                              OFFICES AND ZIP CODE)

                                 (281) 863-3000
                         (REGISTRANT'S TELEPHONE NUMBER,
                              INCLUDING AREA CODE)

         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 [ ]

         As of May 6, 2003, 52,495,423 shares of the registrant's common stock,
par value $0.001 per share, were outstanding.

<PAGE>

                          LEXICON GENETICS INCORPORATED

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                                                PAGE
                                                                                                                ----
<S>                                                                                                             <C>
FACTORS AFFECTING FORWARD-LOOKING STATEMENTS.................................................................    2

PART I - FINANCIAL INFORMATION
Item 1.  Financial Statements
         Consolidated Balance Sheets - March 31, 2003 (unaudited) and December 31, 2002......................    3
         Consolidated Statements of Operations (unaudited) - Three Months Ended
              March 31, 2003 and 2002........................................................................    4
         Consolidated Statements of Cash Flows (unaudited) - Three Months Ended
              March 31, 2003 and 2002........................................................................    5
         Notes to Consolidated Financial Statements (unaudited)..............................................    6
Item 2.  Management's Discussion and Analysis of Financial Condition and
         Results of Operations...............................................................................    9
Item 3.  Quantitative and Qualitative Disclosures About Market Risk..........................................   16

Item 4.  Controls and Procedures.............................................................................   16
PART II - OTHER INFORMATION
Item 6.  Exhibits and Reports on Form 8-K....................................................................   17

SIGNATURES...................................................................................................   18
</TABLE>

         The Lexicon name and logo, LexVision(R) and OmniBank(R) are registered
trademarks and Genome5000(TM) and e-Biology(TM) are trademarks of Lexicon
Genetics Incorporated.

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

                  FACTORS AFFECTING FORWARD LOOKING STATEMENTS

         This quarterly report on Form 10-Q contains forward-looking statements.
These statements relate to future events or our future financial performance. We
have attempted to identify forward-looking statements by terminology including
"anticipate," "believe," "can," "continue," "could," "estimate," "expect,"
"intend," "may," "plan," "potential," "predict," "should" or "will" or the
negative of these terms or other comparable terminology. These statements are
only predictions and involve known and unknown risks, uncertainties and other
factors, including the risks outlined under "Item 2. Management's Discussion and
Analysis of Financial Condition and Results of Operations - Risk Factors," that
may cause our or our industry's actual results, levels of activity, performance
or achievements to be materially different from any future results, levels or
activity, performance or achievements expressed or implied by these
forward-looking statements.

         Although we believe that the expectations reflected in the
forward-looking statements are reasonable, we cannot guarantee future results,
levels of activity, performance or achievements. We are not under any duty to
update any of the forward-looking statements after the date of this quarterly
report on Form 10-Q to conform these statements to actual results, unless
required by law.


                                       2

<PAGE>

PART I - FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

                          LEXICON GENETICS INCORPORATED

                           CONSOLIDATED BALANCE SHEETS
                        (IN THOUSANDS, EXCEPT PAR VALUE)

<TABLE>
<CAPTION>
                                                                               AS OF MARCH 31,        AS OF DECEMBER 31,
                                                                                     2003                   2002
                                                                              -------------------     ------------------
                                                                                  (UNAUDITED)
<S>                                                                           <C>                     <C>
                                   ASSETS
                                   ------
Current assets:
    Cash and cash equivalents............................................     $         39,177        $          39,362
    Restricted cash......................................................               44,831                   29,487
    Short-term investments, including restricted investments of
       $12,879 and $28,223, respectively ................................               23,579                   54,247
    Accounts receivable, net of allowance for doubtful accounts
       of $109...........................................................                3,809                    5,143
    Prepaid expenses and other current assets............................                4,590                    4,893
                                                                              ----------------        -----------------
       Total current assets..............................................              115,986                  133,132
Property and equipment, net of accumulated depreciation
    of $22,303 and $19,768, respectively.................................               35,516                   37,362
Goodwill.................................................................               25,798                   25,798
Intangible assets, net of amortization of $2,060 and $1,760, respectively                3,940                    4,240
Other assets.............................................................                  727                    1,240
                                                                              ----------------        -----------------
       Total assets......................................................     $        181,967        $         201,772
                                                                              ================        =================

                    LIABILITIES AND STOCKHOLDERS' EQUITY
                    ------------------------------------
Current liabilities:
    Accounts payable.....................................................     $          2,752        $           4,378
    Accrued liabilities..................................................                3,534                    4,161
    Current portion of deferred revenue..................................               10,503                   12,760
                                                                              ----------------        -----------------
       Total current liabilities.........................................               16,789                   21,299
Deferred revenue, net of current portion.................................                5,137                    5,887
Long-term debt...........................................................                4,000                    4,000
Other long-term liabilities..............................................                  720                      684
                                                                              ----------------        -----------------
       Total liabilities.................................................               26,646                   31,870

Commitments and contingencies

Stockholders' equity:
    Preferred stock, $.01 par value; 5,000 shares authorized;
       no shares issued and outstanding..................................                   --                       --
    Common stock, $.001 par value; 120,000 shares authorized;
       52,374 and 52,367 shares issued and outstanding...................                   52                       52
    Additional paid-in capital...........................................              330,666                  330,701
    Deferred stock compensation..........................................               (8,507)                 (11,106)
    Accumulated deficit..................................................             (166,890)                (149,745)
                                                                              ----------------        -----------------
       Total stockholders' equity........................................              155,321                  169,902
                                                                              ----------------        -----------------
       Total liabilities and stockholders' equity........................     $        181,967        $         201,772
                                                                              ================        =================
</TABLE>

              The accompanying notes are an integral part of these
                       consolidated financial statements.


                                       3

<PAGE>

                          LEXICON GENETICS INCORPORATED

                      CONSOLIDATED STATEMENTS OF OPERATIONS
                    (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                   THREE MONTHS ENDED MARCH 31,
                                                                 ----------------------------------
                                                                      2003               2002
                                                                 ---------------    ---------------
<S>                                                              <C>                <C>
Revenues:
   Subscription and license fees..............................   $       3,102      $       3,395
   Collaborative research.....................................           4,993              4,256
   Compound libraries and other...............................              11                  5
                                                                 -------------      -------------
     Total revenues...........................................           8,106              7,656
Operating expenses:
   Research and development, including stock-based
     compensation of $1,270 and $1,307, respectively..........          19,834             16,864
   General and administrative, including stock-based
     compensation of $1,276 and $1,282, respectively..........           5,804              5,969
                                                                 -------------      -------------
       Total operating expenses...............................          25,638             22,833
                                                                 -------------      -------------
Loss from operations..........................................         (17,532)           (15,177)
Interest and other income.....................................             468              1,120
Interest expense..............................................             (81)                (2)
                                                                 --------------     -------------
Net loss  ....................................................   $     (17,145)     $     (14,059)
                                                                 =============      =============
Net loss per common share, basic and diluted..................   $       (0.33)     $        (0.27)
Shares used in computing net loss per common share,
   basic and diluted..........................................          52,371             52,126
</TABLE>

              The accompanying notes are an integral part of these
                       consolidated financial statements.


                                       4



<PAGE>


                          LEXICON GENETICS INCORPORATED

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                               THREE MONTHS ENDED MARCH 31,
                                                                            ------------------------------------
                                                                                 2003                2002
                                                                            ----------------    ----------------
<S>                                                                         <C>                 <C>
Cash flows from operating activities:
   Net loss..............................................................   $     (17,145)      $     (14,059)
   Adjustments to reconcile net loss to net cash used in operating
   activities:
     Depreciation........................................................           2,535               1,920
     Amortization of intangible assets, other than goodwill..............             300                 300
     Amortization of deferred stock compensation.........................           2,547               2,589
     Changes in operating assets and liabilities:
       Decrease in accounts receivable...................................           1,334                 262
       (Increase) decrease in prepaid expenses and other current assets..             303                (684)
       Decrease in other assets..........................................             513               2,307
       Decrease in accounts payable and other liabilities................          (2,217)               (113)
       Decrease in deferred revenue......................................          (3,007)             (1,752)
                                                                            -------------       -------------
         Net cash used in operating activities...........................         (14,837)             (9,230)
Cash flows from investing activities:
   Purchases of property and equipment...................................            (689)             (8,735)
   Increase in restricted cash...........................................         (15,344)            (17,949)
   Purchases of short-term investments...................................         (15,386)            (14,161)
   Maturities of short-term investments..................................          46,054              56,352
                                                                            -------------       -------------
       Net cash provided by investing activities.........................          14,635              15,507
Cash flows from financing activities:
   Proceeds from issuance of common stock................................              17                 267
                                                                            -------------       -------------
       Net cash provided by financing activities.........................              17                 267
                                                                            -------------       -------------
Net increase (decrease) in cash and cash equivalents.....................            (185)              6,544
Cash and cash equivalents at beginning of period.........................          39,362              16,355
                                                                            -------------       -------------
Cash and cash equivalents at end of period...............................   $      39,177       $      22,899
                                                                            =============       =============

Supplemental disclosure of cash flow information:
   Cash paid for interest................................................   $           1       $           2

Supplemental disclosure of non-cash investing and financing activities:
   Unrealized loss on long-term investments..............................   $          --       $        (322)
   Cancellation of equity securities issued in connection with acquisition  $          --       $         (78)
   Reversal of deferred stock compensation in connection with
     stock options.......................................................   $          52       $         309
</TABLE>

              The accompanying notes are an integral part of these
                       consolidated financial statements.


                                       5

<PAGE>

                          LEXICON GENETICS INCORPORATED

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

1.       BASIS OF PRESENTATION

         The accompanying unaudited consolidated financial statements of Lexicon
Genetics Incorporated (Lexicon or the Company) have been prepared in accordance
with generally accepted accounting principles for interim financial information
and pursuant to the rules and regulations of the Securities and Exchange
Commission (SEC). Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements.

         In the opinion of management, all adjustments (consisting of normal
recurring adjustments) 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 the year
ended December 31, 2003.

         The accompanying consolidated financial statements include the accounts
of Lexicon and its subsidiary. Intercompany transactions and balances are
eliminated in consolidation.

         For further information, refer to the financial statements and
footnotes thereto included in Lexicon's annual report on Form 10-K for the year
ended December 31, 2002, as filed with the SEC.

2.       RECLASSIFICATION

         The accompanying statement of cash flows for the three months ended
March 31, 2002, has been revised to reflect the reclassification of restricted
cash from cash and cash equivalents into a separate line item.

3.       RESTRICTED CASH AND INVESTMENTS

         Lexicon is required to maintain restricted cash or investments to
collateralize borrowings made under the synthetic lease agreement under which it
leases its office and laboratory facilities in The Woodlands, Texas, as well as
to collateralize standby letters of credit for the leases on its office and
laboratory facilities in East Windsor and Hopewell, New Jersey (see Note 7). As
of March 31, 2003 and December 31, 2002, the Company maintained restricted cash
and investments of $57.7 million under these agreements.

4.       COMPREHENSIVE LOSS

         Comprehensive loss is comprised of net loss and unrealized gains and
losses on long-term investments, which are considered available-for-sale
securities. Comprehensive loss for the three-month period ended March 31, 2002
was $14.4 million, which includes a $0.3 million unrealized loss on long-term
investments. During 2002, Lexicon sold its available-for-sale securities. As a
result there was no difference between net loss and comprehensive loss in the
three-month period ended March 31, 2003.

5.       NET LOSS PER SHARE

         Net loss per share is computed using the weighted average number of
shares of common stock outstanding during the applicable period. Shares
associated with stock options and warrants are not


                                       6

<PAGE>

included because they are antidilutive. There are no differences between basic
and diluted net loss per share for all periods presented.

6.       STOCK-BASED COMPENSATION

         Lexicon's stock-based compensation plans are accounted for under the
recognition and measurement provisions of Accounting Principles Board (APB)
Opinion No. 25, "Accounting for Stock Issued to Employees, and Related
Interpretations." Under the intrinsic value method described in APB Opinion No.
25, no compensation expense is recognized if the exercise price of the employee
stock option equals the market price of the underlying stock on the date of
grant. Lexicon recognized $2.5 million and $2.6 million of stock-based
compensation during the three-month periods ended March 31, 2003 and 2002,
respectively, which was primarily related to option grants made prior to
Lexicon's April 2000 initial public offering. The following table illustrates
the effect on net loss and net loss per share if the fair value recognition
provisions of Financial Accounting Standards Board (FASB) No. 123 "Accounting
for Stock Based Compensation," had been applied to all outstanding and unvested
awards in each period:

<TABLE>
<CAPTION>
                                                              ------------------------------------
                                                                 THREE MONTHS ENDED MARCH 31,
                                                              ------------------------------------
                                                                   2003                2002
                                                              ----------------    ----------------
<S>                                                           <C>                 <C>
Net loss, as reported........................................ $     (17,145)      $     (14,059)
Add:  Stock-based employee compensation
   expense included in reported net loss.....................         2,546               2,589
Deduct:  Total stock-based employee compensation
   expense determined under fair value based method
   for all awards............................................        (6,443)             (6,150)
                                                              -------------       -------------
Pro forma net loss........................................... $     (21,042)      $     (17,620)
                                                              =============       =============

Net loss per common share, basic and diluted
   As reported............................................... $      (0.33)       $       (0.27)
                                                              ============        =============

   Pro forma................................................. $      (0.40)       $       (0.34)
                                                              ============        =============
</TABLE>

7.       COMMITMENTS AND CONTINGENCIES

         In October 2000, Lexicon entered into a synthetic lease agreement under
which the lessor purchased the Company's existing laboratory and office
buildings and animal facility in The Woodlands, Texas and agreed to fund the
construction of an additional laboratory and office building and a second animal
facility. The synthetic lease agreement was subsequently expanded to include
funding for the construction of a central plant facility. Including the purchase
price for the Company's existing facilities, the synthetic lease, as amended,
provided for funding of up to $55.0 million in property and improvements. The
term of the agreement is six years, which includes the construction period and a
lease period. Lease payments for the new facilities began upon completion of
construction, which occurred at the end of the first quarter of 2002. Lease
payments are subject to fluctuation based on LIBOR rates. Based on a LIBOR rate
of 1.3% at March 31, 2003 the Company's total lease payments would be
approximately $0.9 million per year. At the end of the lease term, the lease may
be extended for one-year terms, up to seven additional terms, or the Company may
purchase the properties for a price equal to the $55.0 million funded under the
synthetic lease for property and improvements plus the amount of any accrued but
unpaid lease payments. If the Company elects not to renew the lease or purchase
the properties, it may arrange for the sale of the properties to a third party
or surrender the properties to the lessor. If the Company elects to arrange for
the sale of the properties or surrender the properties to the lessor, it has
guaranteed approximately 86% of the total original cost as the residual fair
value of the properties. The Company is required to maintain restricted cash or
investments to collateralize amounts funded under the synthetic lease agreement.
In addition, Lexicon has agreed to maintain cash and investments of at least
$12.0 million in excess of the Company's restricted cash and investments. If


                                       7

<PAGE>

the Company's cash and investments fall below that level, the Company may be
required to seek a waiver of that agreement or to purchase the properties or
arrange for their sale to a third party. Because the Company's cost to purchase
the properties would not materially exceed the $55.0 million funded under the
synthetic lease for property and improvements and would likely be less than the
amount of restricted cash and investments it is required to maintain under the
synthetic lease, the Company believes that any requirement that it do so would
not have a material adverse effect on its financial condition. As of March 31,
2003 and December 31, 2002, the Company maintained restricted cash and
investments of $57.2 million to collateralize funding for property and
improvements under the synthetic lease of $55.0 million.

         Lexicon's subsidiary leases laboratory and office space in East Windsor
and Hopewell, New Jersey under agreements which expire in January 2004 and May
2012, respectively. The Hopewell lease is a ten-year lease for a 76,000
square-foot facility in New Jersey. The lease provides for an escalating yearly
rent payment of $1.3 million in the first year, $1.7 million in years two and
three, $1.8 million in years four to six, $2.0 million in years seven to nine
and $2.1 million in year ten. The lease also provides an option in the second
year of the lease to borrow $2.0 million in tenant improvement funds from the
landlord, at which time rental payments due under the lease will increase as the
tenant improvement allowance is amortized over a ten-year period. Lexicon is the
guarantor of the obligations of its subsidiary under the lease. The Company is
required to maintain restricted investments to collateralize the East Windsor
and Hopewell leases. As of March 31, 2003, the Company had $0.5 million in
restricted investments to collateralize standby letters of credit for these
leases.


                                       8

<PAGE>

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

OVERVIEW

         We are a biopharmaceutical company focused on the discovery of
breakthrough treatments for human disease. We are using gene knockout technology
to systematically discover the physiological functions of genes in living
mammals, or in vivo. We generate our gene function discoveries using knockout
mice - mice whose DNA has been altered to disrupt, or "knock out," the function
of the altered gene. Our patented gene trapping and gene targeting technologies
enable us to rapidly generate these knockout mice by altering the DNA of genes
in a special variety of mouse cells, called embryonic stem (ES) cells, which can
be cloned and used to generate mice with the altered gene. We employ an
integrated platform of advanced medical technologies to systematically discover
and validate which genes, when knocked out, result in a favorable medical
profile with pharmaceutical utility. We then pursue those genes and the proteins
they encode as potential targets for therapeutic intervention in our drug
discovery programs.

         We employ internal resources and drug discovery alliances to discover
potential small molecule drugs, therapeutic antibodies and therapeutic proteins
for in vivo-validated drug targets that we consider to have high pharmaceutical
value. We use our own sophisticated libraries of drug-like chemical compounds
and an industrialized medicinal chemistry platform to identify small molecule
drug candidates for our in vivo-validated drug targets. We have established
alliances with Genentech, Inc. for the discovery of therapeutic proteins and
antibody targets; with Abgenix, Inc. for the discovery and development of
therapeutic antibodies based on our drug target discoveries; and with Incyte
Genomics, Inc. for the discovery and development of therapeutic proteins. In
addition, we have established collaborations and license agreements with many
other leading pharmaceutical and biotechnology companies under which we receive
fees and, in many cases, are eligible to receive milestone and royalty payments,
for access to some of our technologies and discoveries for use in their own drug
discovery efforts.

         We derive substantially all of our revenues from subscriptions to our
databases, drug discovery alliances, functional genomics collaborations for the
development and, in some cases, analysis of the physiological effects of genes
altered in knockout mice, technology licenses and compound library sales. To
date, we have generated a substantial portion of our revenues from a limited
number of sources.

         Our operating results and, in particular, our ability to generate
additional revenues are dependent on many factors, including our success in
establishing research collaborations and technology licenses, new database
subscriptions, expirations of our research collaborations and database
subscriptions, the success rate of our discovery efforts leading to
opportunities for new research collaborations and licenses, as well as milestone
payments and royalties, the timing and willingness of collaborators to
commercialize products which may result in royalties, and general and
industry-specific economic conditions which may affect research and development
expenditures. Our future revenues from database subscriptions, collaborations
and alliances are uncertain because our existing agreements have fixed terms or
relate to specific projects of limited duration. Our future revenues from
technology licenses are uncertain because they depend, in large part, on
securing new agreements. Subject to limited exceptions, we do not intend to
continue to make our compound libraries available for purchase in the future.
Our ability to secure future revenue-generating agreements will depend upon our
ability to address the needs of our potential future subscribers, collaborators
and licensees, and to negotiate agreements that we believe are in our long-term
best interests. We may determine that our interests are better served by
retaining rights to our


                                       9

<PAGE>

discoveries and advancing our therapeutic programs to a later stage, which could
limit our near-term revenues. Because of these and other factors, our quarterly
operating results have fluctuated in the past and are likely to do so in the
future, and we do not believe that quarter-to-quarter comparisons of our
operating results are a good indication of our future performance.

         Since our inception, we have incurred significant losses and, as of
March 31, 2003, we had an accumulated deficit of $166.9 million. Our losses have
resulted principally from costs incurred in research and development, general
and administrative costs associated with our operations, and non-cash
stock-based compensation expenses associated with stock options granted to
employees and consultants prior to our April 2000 initial public offering.
Research and development expenses consist primarily of salaries and related
personnel costs, material costs, facility costs, depreciation on property and
equipment, legal expenses resulting from intellectual property prosecution and
other expenses related to our drug discovery and LexVision programs, the
development and analysis of knockout mice and our other functional genomics
research efforts, and the development of compound libraries. General and
administrative expenses consist primarily of salaries and related expenses for
executive, finance and other administrative personnel, professional fees and
other corporate expenses including business development and general legal
activities. In connection with the expansion of our drug discovery programs and
our functional genomics research efforts, we expect to incur increasing research
and development and general and administrative costs. As a result, we will need
to generate significantly higher revenues to achieve profitability.

CRITICAL ACCOUNTING POLICIES

Revenue Recognition

         We recognize revenues when persuasive evidence of an arrangement
exists, delivery has occurred or services have been rendered, the price is fixed
and determinable, and collectability is reasonably assured. Payments received in
advance under these arrangements are recorded as deferred revenue until earned.

         Fees for access to our databases and other functional genomics
resources are recognized ratably over the subscription or access period.
Collaborative research payments are recognized as revenue as we perform our
obligations related to such research to the extent such fees are non-refundable.
Milestone-based fees are recognized upon completion of specified milestones
according to contract terms. Non-refundable technology license fees are
recognized as revenue upon the grant of the license to third parties, when
performance is complete and there is no continuing involvement.

         Revenues recognized from multiple element contracts are allocated to
each element of the arrangement based on the relative fair value of the
elements. The determination of fair value of each element is based on objective
evidence. When revenues for an element are specifically tied to a separate
earnings process, revenue is recognized when the specific performance obligation
associated with the element is completed. When revenues for an element are not
specifically tied to a separate earnings process, they are recognized ratably
over the term of the agreement.

         A change in our revenue recognition policy or changes in the terms of
contracts under which we recognize revenues could have an impact on the amount
and timing of our recognition of revenues.


                                       10

<PAGE>

Research and Development Expenses

         Research and development expenses consist of costs incurred for
company-sponsored as well as collaborative research and development activities.
These costs include direct and research-related overhead expenses and are
expensed as incurred. Patent costs and technology license fees for technologies
that are utilized in research and development and have no alternative future use
are expensed when incurred.

Stock-Based Compensation

         Deferred stock-based compensation and related amortization represents
the difference between the exercise price of stock options granted and the fair
value of our common stock at the applicable date of grant. Stock-based
compensation is amortized as research and development expense or general and
administrative expense, as appropriate, over the vesting period of the
individual stock options for which it was recorded, generally four years. If
employees and consultants continue to vest in accordance with their individual
stock options, we expect to record amortization expense for deferred stock-based
compensation as follows: $7.6 million during the remaining nine months of 2003
and $0.9 million during 2004. The amount of stock-based compensation expense to
be recorded in future periods may decrease if unvested stock options for which
deferred stock-based compensation has been recorded are subsequently canceled or
forfeited or may increase if additional stock options are granted to individuals
other than employees or directors.

Goodwill Impairment

         Goodwill is not amortized, but is tested at least annually for
impairment at the reporting unit level. Impairment is the condition that exists
when the carrying amount of goodwill exceeds its implied fair value. The first
step in the impairment process is to determine the fair value of the reporting
unit and then compare it to the carrying value, including goodwill. If the fair
value exceeds the carrying value, no further action is required and no
impairment loss is recognized. Additional impairment assessments may be
performed on an interim basis if we encounter events or changes in circumstances
that would indicate that, more likely than not, the carrying value of goodwill
has been impaired.

RECENT ACCOUNTING PRONOUNCEMENTS

         In November 2002, the Emerging Issues Task Force, or EITF, reached a
consensus on EITF Issue No. 00-21, "Accounting for Revenue Arrangements with
Multiple Deliverables." This consensus requires that revenue arrangements with
multiple deliverables be divided into separate units of accounting if the
delivered items have value to the customer on a standalone basis, there is
objective and reliable evidence of fair value of the undelivered items and, if
the arrangement includes a general right of return, performance of the
undelivered item is considered probable and substantially in our control. The
final consensus will be applicable to agreements entered into in fiscal periods
beginning after June 15, 2003, with early adoption permitted.

         In December 2002, the Financial Accounting Standards Board, or FASB,
issued Statement of Financial Accounting Standards, or SFAS, No. 148,
"Accounting for Stock-Based Compensation - Transition and Disclosure." This
statement amends SFAS 123, "Accounting for Stock-Based Compensation," to provide
alternative methods of transition for a voluntary change to the fair value based
method of accounting for stock-based employee compensation. In addition, this
statement amends the disclosure requirements of SFAS 123 to require prominent
disclosures in both annual and interim financial statements about the method of
accounting for stock-based accounting for employee


                                       11

<PAGE>

compensation and the effect of the method used on reported results. The Company
is currently evaluating whether to adopt the fair value based method.

         In January 2003, the FASB issued Interpretation, or FIN, No. 46,
"Consolidation of Variable Interest Entities." FIN 46 requires that
unconsolidated variable interest entities be consolidated by their primary
beneficiaries. A primary beneficiary is the party that absorbs a majority of the
entity's expected losses or residual benefits. FIN 46 applies immediately to
variable interest entities created after January 31, 2003 and to existing
variable interest entities in the periods beginning after June 15, 2003. We are
evaluating whether the adoption of FIN 46 will require us to consolidate the
lessor under our synthetic lease. If such consolidation is required, our balance
sheet will reflect as assets additional property and equipment approximating the
$55.0 million funded under the synthetic lease for property and improvements,
less accumulated depreciation, and a similar amount as a liability. In addition,
we will be required to depreciate such improvements over their useful lives. We
may, however, elect to restructure or replace the synthetic lease prior to the
adoption of FIN 46, whether or not such consolidation would be required. We
believe that the consolidation of the lessor or restructuring of the synthetic
lease will not have a material adverse effect on our financial condition or
results of operations.

RESULTS OF OPERATIONS

Three Months Ended March 31, 2003 and 2002

         Revenues. Total revenues increased 6% to $8.1 million in the three
months ended March 31, 2003 from $7.7 million in the corresponding period in
2002. The increase of $0.4 million was primarily the result of revenues
recognized under our drug discovery alliance with Genentech, entered in December
2002, offset in part by reduced revenues under technology license agreements.

         Research and Development Expenses. Research and development expenses
increased 18% to $19.8 million in the three months ended March 31, 2003 from
$16.9 million in the corresponding period in 2002. The increase of $2.9 million
was primarily attributable to increased personnel costs and facilities costs to
support the expansion of our drug discovery programs, the development and
analysis of knockout mice and our other functional genomics research efforts.
Research and development expenses for both three-month periods included $1.3
million of stock-based compensation primarily relating to option grants made
prior to our April 2000 initial public offering.

         General and Administrative Expenses. General and administrative
expenses decreased 3% to $5.8 million in the three months ended March 31, 2003
from $6.0 million in the corresponding period in 2002. General and
administrative expenses for both three-month periods included $1.3 million of
stock-based compensation primarily relating to option grants made prior to our
April 2000 initial public offering.

         Interest and Other Income. Interest and other income decreased to $0.5
million in the three months ended March 31, 2003 from $1.1 million in the
corresponding period in 2002. The decrease resulted from lower average cash and
investment balances and lower average interest rates during the 2003 period.

         Net Loss and Net Loss Per Common Share. Net loss increased to $17.1
million in the three months ended March 31, 2003 from $14.1 million in the
corresponding period in 2002. Net loss per common share increased to $0.33 in
the three months ended March 31, 2003 from $0.27 in the corresponding period of
2002. As a complement to reporting net loss and net loss per common share in
accordance with generally accepted accounting principles, or GAAP, Lexicon
provides net loss and net loss per common share excluding non-cash, stock-based
compensation. Lexicon uses these results in


                                       12

<PAGE>

establishing budgets and believes it is useful in measuring the performance of
the Company's business. Excluding stock-based compensation expense of $2.5
million and $2.6 million in the three months ended March 31, 2003 and 2002,
respectively, we would have had a net loss of $14.6 million and net loss per
common share of $0.28 in the three months ended March 31, 2003, as compared to a
net loss of $11.5 million and net loss per common share of $0.22 in the
corresponding period in 2002.

         Our quarterly operating results have fluctuated in the past and are
likely to do so in the future, and we believe that quarter-to-quarter
comparisons of our operating results are not a good indication of our future
performance.

LIQUIDITY AND CAPITAL RESOURCES

         We have financed our operations from inception primarily through sales
of common and preferred stock, contract and milestone payments to us under our
database subscription, collaboration and license agreements, equipment financing
arrangements and leasing arrangements. From our inception through March 31,
2003, we had received net proceeds of $242.7 million from issuances of common
and preferred stock, including $203.2 million of net proceeds from the initial
public offering of our common stock in April 2000. In addition, from our
inception through March 31, 2003, we received $108.1 million in cash payments
from database subscription and technology license fees, drug discovery
alliances, functional genomics collaborations, sales of compound libraries and
reagents, and government grants, of which $96.6 million had been recognized as
revenues through March 31, 2003.

         As of March 31, 2003, we had $107.6 million in cash, cash equivalents
and short-term investments (including $57.7 million of restricted cash and
investments), as compared to $123.1 million as of December 31, 2002. We used
cash of $14.8 million in operations in the three months ended March 31, 2003.
This consisted primarily of the net loss for the period of $17.1 million offset
by non-cash charges of $2.5 million related to stock-based compensation expense,
$2.5 million related to depreciation expense and $0.3 million related to
amortization of intangible assets other than goodwill. Investing activities
provided cash of $14.6 million in the three months ended March 31, 2003,
principally as a result of net maturities of short-term investments, offset in
part by an increase in restricted cash.

         In October 2000, we entered into a synthetic lease agreement under
which the lessor purchased our existing laboratory and office buildings and
animal facility in The Woodlands, Texas and agreed to fund the construction of
an additional laboratory and office building and a second animal facility. The
synthetic lease agreement was subsequently expanded to include funding for the
construction of a central plant facility for the distribution of utilities and
related services among our facilities. Including the purchase price for our
existing facilities, the synthetic lease, as amended, provided for funding of up
to $55.0 million in property and improvements. The term of the agreement is six
years, which includes the construction period and a lease period. Lease payments
for the new facilities began upon completion of construction, which occurred at
the end of the first quarter of 2002. Lease payments are subject to fluctuation
based on LIBOR rates. Based on a LIBOR rate of 1.3% at March 31, 2003, our total
lease payments would be approximately $0.9 million per year. At the end of the
lease term, the lease may be extended for one-year terms, up to seven additional
terms, or we may purchase the properties for a price equal to the $55.0 million
funded under the synthetic lease for property and improvements plus the amount
of any accrued but unpaid lease payments. If we elect not to renew the lease or
purchase the properties, we may arrange for the sale of the properties to a
third party or surrender the properties to the lessor. If we elect to arrange
for the sale of the properties or surrender the properties to the lessor, we
have guaranteed approximately 86% of the total original cost as the residual
fair value of the properties. We are required to maintain restricted cash or
investments to collateralize amounts funded under the synthetic lease
agreement. In addition, we have agreed to maintain cash and investments of at
least $12.0 million in excess of our restricted cash and investments. If our
cash and investments fall below that level, we


                                       13

<PAGE>

may be required to seek a waiver of that agreement or to purchase the properties
or arrange for their sale to a third party. Because our cost to purchase the
properties would not materially exceed the $55.0 million funded under the
synthetic lease for property and improvements and would likely be less than the
amount of restricted cash and investments we are required to maintain under the
synthetic lease, we believe that any requirement that we do so would not have a
material adverse effect on our financial condition. As of March 31, 2003 and
December 31, 2002, we maintained restricted cash and investments of $57.2
million to collateralize funding for property and improvements under the
synthetic lease of $55.0 million.

         In May 2002, our subsidiary Lexicon Pharmaceuticals (New Jersey), Inc.
signed a ten-year lease for a 76,000 square-foot facility in Hopewell, New
Jersey. The lease provides for an escalating yearly rent payment of $1.3 million
in the first year, $1.7 million in years two and three, $1.8 million in years
four to six, $2.0 million in years seven to nine and $2.1 million in year ten.
The lease also provides our subsidiary with the option in the second year of the
lease to borrow $2.0 million in tenant improvement funds from the landlord, at
which time rental payments due under the lease will increase as the tenant
improvement allowance is amortized over a ten-year period. We are the guarantor
of the obligations of our subsidiary under the lease.

         In December 2002, we borrowed $4.0 million under a note agreement with
Genentech. The proceeds of the loan are to be used to fund research efforts
under our alliance with Genentech for the discovery of therapeutic proteins and
antibody targets. The note matures on or before December 31, 2005, but we may
prepay it at any time. We may repay the note, at our option, in cash or in
shares of our common stock valued at the then-current market value, or in a
combination of cash and shares, subject to certain limitations. The note accrues
interest at an annual rate of 8%, compounded quarterly.

         Our future capital requirements will be substantial and will depend on
many factors, including our ability to obtain database subscription, alliance,
collaboration and technology license agreements, the amount and timing of
payments under such agreements, the level and timing of our research and
development expenditures, market acceptance of our products, the resources we
devote to developing and supporting our products and other factors. Our capital
requirements will also be affected by any expenditures we make in connection
with license agreements and acquisitions of and investments in complementary
technologies and businesses. We expect to devote substantial capital resources
to continue our research and development efforts, to expand our support and
product development activities, and for other general corporate activities. We
believe that our current unrestricted cash and investment balances and revenues
we expect to derive from subscriptions to our databases, functional genomics
collaborations, technology licenses and drug discovery alliances will be
sufficient to fund our operations at least through the next 12 months. During or
after this period, if cash generated by operations is insufficient to satisfy
our liquidity requirements, we will need to sell additional equity or debt
securities, restructure or replace our synthetic lease to reduce the required
amount of restricted cash and investments, or obtain additional credit
arrangements. Additional financing may not be available on terms acceptable to
us or at all. The sale of additional equity or convertible debt securities may
result in additional dilution to our stockholders.

DISCLOSURE ABOUT MARKET RISK

         We are exposed to limited market and credit risk on our cash
equivalents, which have maturities of three months or less. We maintain a
short-term investment portfolio which consists of U.S. government agency debt
obligations, investment grade commercial paper, corporate debt securities and
certificates of deposit that mature three to 12 months from the time of
purchase, which we believe are subject to limited market and credit risk. We
currently do not hedge interest rate exposure or hold any derivative financial
instruments in our investment portfolio.


                                       14

<PAGE>

         We have operated primarily in the United States and substantially all
sales to date have been made in U.S. dollars. Accordingly, we have not had any
material exposure to foreign currency rate fluctuations.

RISK FACTORS

         Our business is subject to certain risks and uncertainties, including
those referenced below:

Risks Related to Our Business

     o   we have a history of net losses, and we expect to continue to incur net
         losses and may not achieve or maintain profitability

     o   our quarterly operating results have been and likely will continue to
         fluctuate, and we believe that quarter-to-quarter comparisons of our
         operating results are not a good indication of our future performance

     o   we will need additional capital in the future and, if it is not
         available, we will have to curtail or cease operations

     o   we are an early-stage company with an unproven business strategy

     o   we face substantial competition in the discovery of the DNA sequences
         of genes and their functions and in our drug discovery and product
         development efforts

     o   we rely heavily on collaborators to develop and commercialize
         pharmaceutical products based on genes that we identify as promising
         candidates for development as drug targets

     o   any cancellation by or conflicts with our collaborators could harm our
         business

     o   we have no experience in developing and commercializing pharmaceutical
         products on our own

     o   we lack the capability to manufacture compounds for preclinical studies
         and clinical trials and will rely on third parties to manufacture our
         potential products

     o   we may engage in future acquisitions, which may be expensive and time
         consuming and from which we may not realize anticipated benefits

     o   if we lose our key personnel or are unable to attract and retain
         additional personnel, we may be unable to pursue collaborations or
         develop our own products

     o   we may encounter difficulties in managing our growth, which could
         increase our losses

     o   because all of our functional genomics operations are located at a
         single facility, the occurrence of a disaster could significantly
         disrupt our business

Risks Related to Our Industry

     o   our ability to patent our discoveries is uncertain because patent laws
         and their interpretation are highly uncertain and subject to change

     o   our patent applications may not result in enforceable patent rights


                                       15

<PAGE>

     o   if other companies and institutions obtain patents claiming the
         functional uses of genes and gene products based upon gene sequence
         information and predictions of gene function, we may be unable to
         obtain patents for our discoveries of biological function in knockout
         mice

     o   we may be involved in patent litigation and other disputes regarding
         intellectual property rights, and can give no assurance that we will
         prevail in any such litigation or other dispute

     o   issued patents may not fully protect our discoveries, and our
         competitors may be able to commercialize products similar to those
         covered by our issued patents

     o   our rights to the use of technologies licensed by third parties are not
         within our control

     o   we may be unable to protect our trade secrets

     o   we and our collaborators are subject to extensive and uncertain
         government regulatory requirements, which could increase our operating
         costs or adversely affect our ability to obtain government approval of
         products based on genes that we identify in a timely manner or at all

     o   the uncertainty of pharmaceutical pricing and reimbursement may
         decrease the commercial potential of our products and affect our
         ability to raise capital

     o   security risks in electronic commerce or unfavorable Internet
         regulation may deter future use of our products and services

     o   we use hazardous chemicals and radioactive and biological materials in
         our business; any disputes relating to improper handling, storage or
         disposal of these materials could be time consuming and costly

     o   we may be sued for product liability

     o   public perception of ethical and social issues may limit or discourage
         the use of our technologies, which could reduce our revenues

         For additional discussion of the risks and uncertainties that affect
our business, see "Item 1. Business - Risk Factors" included in our annual
report on Form 10-K for the year ended December 31, 2002, as filed with the
Securities and Exchange Commission.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

         See "Disclosure about Market Risk" under "Item 2. Management's
Discussion and Analysis of Financial Condition and Results of Operations for
quantitative and qualitative disclosures about market risk.

ITEM 4.  CONTROLS AND PROCEDURES

         Lexicon's chief executive officer and chief financial officer have
concluded that the Company's disclosure controls and procedures (as defined in
Securities Exchange Act of 1934 (the "Exchange Act") Rules 13a-14 (c) and
15d-14(c)) are sufficiently effective to ensure that the information required to
be disclosed by the Company in the reports it files under the Exchange Act is
gathered, analyzed and disclosed with adequate timeliness, accuracy and
completeness, based on an evaluation of such controls and procedures conducted
within 90 days prior to the date hereof.


                                       16

<PAGE>

         Subsequent to the Company's evaluation, there were no significant
changes in internal controls or other factors that could significantly affect
internal controls, including any corrective actions with regard to significant
deficiencies and material weaknesses.

PART II  OTHER INFORMATION

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

         (a)      Exhibits

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

      10.1       --    Consulting Letter Agreement, dated March 31, 2003, with
                       Robert J. Lefkowitz, M.D.

      99.1       --    Certification of CEO and CFO Pursuant to Section 906 of
                       the Sarbanes-Oxley Act of 2002


         (b)      Reports on Form 8-K:


                  None.


                                       17

<PAGE>

                                   SIGNATURES


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



                          LEXICON GENETICS INCORPORATED


Date:   May 9, 2003                  By:  /s/ ARTHUR T. SANDS
                                          -------------------------------------
                                          Arthur T. Sands, M.D., Ph.D.
                                          President and Chief Executive Officer


Date:   May 9, 2003                  By:  /s/ JULIA P. GREGORY
                                          -------------------------------------
                                          Julia P. Gregory
                                          Executive Vice President and
                                          Chief Financial Officer


                                       18
<PAGE>

                                 CERTIFICATIONS

I, Arthur T. Sands, certify that:

1.       I have reviewed this quarterly report on Form 10-Q of Lexicon Genetics
         Incorporated;

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 officers 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
         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 (the "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 officers and I have disclosed, based
         on our most recent evaluation, to the registrant's auditors and the
         audit committee of registrant's board of directors (or persons
         performing the equivalent functions):

         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 officers and I have indicated in
         this quarterly report whether there were significant changes in
         internal controls or in other factors that could significantly
         affect internal controls subsequent to the date of our most recent
         evaluation, including any corrective actions with regard to
         significant deficiencies and material weaknesses.



Date: May 9, 2003
                                                  /s/ Arthur T. Sands
                                        -------------------------------------
                                             Arthur T. Sands, M.D., Ph.D.
                                        PRESIDENT AND CHIEF EXECUTIVE OFFICER


                                       19

<PAGE>

                                 CERTIFICATIONS

I, Julia P. Gregory, certify that:

1.       I have reviewed this quarterly report on Form 10-Q of Lexicon Genetics
         Incorporated;

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 officers 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
         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 (the "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 officers and I have disclosed, based
         on our most recent evaluation, to the registrant's auditors and the
         audit committee of registrant's board of directors (or persons
         performing the equivalent functions):

         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 officers and I have indicated in this
         quarterly report whether there were significant changes in internal
         controls or in other factors that could significantly affect internal
         controls subsequent to the date of our most recent evaluation,
         including any corrective actions with regard to significant
         deficiencies and material weaknesses.




Date: May 9, 2003

                                              /s/ Julia P. Gregory
                                         ----------------------------------
                                                Julia P. Gregory
                                         EXECUTIVE VICE PRESIDENT AND CHIEF
                                                FINANCIAL OFFICER

                                       20

<PAGE>

                                INDEX TO EXHIBITS



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

      10.1       --    Consulting Letter Agreement, dated March 31, 2003, with
                       Robert J. Lefkowitz, M.D.

      99.1       --    Certification of CEO and CFO Pursuant to Section 906 of
                       the Sarbanes-Oxley Act of 2002


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.1
<SEQUENCE>3
<FILENAME>h05669exv10w1.txt
<DESCRIPTION>CONSULTING LETTER AGREEMENT
<TEXT>
<PAGE>
                                                                   EXHIBIT 10.1


                                 March 31, 2003

VIA FEDERAL EXPRESS
Dr. Robert J. Lefkowitz
Duke University Medical Center
Box 3821
Durham, North Carolina 27710

Dear Bob:

         We are delighted that you, an investigator of the Howard Hughes Medical
Institute (the "Institute") at the Institute's laboratory at Duke University
("Duke"), will be able to provide consulting services to Lexicon Genetics
Incorporated (which, together with its subsidiaries and affiliates, is referred
to as the "Company" or "Lexicon"). The purpose of this letter agreement (this
"Agreement") is to set forth our mutual understanding of the terms and
conditions of your service as consultant to the Company, as set forth below.

         1. Consulting Services. Under this agreement, you will provide such
consulting and advisory services as may be requested by Arthur T. Sands, M.D.,
Ph.D., the Company's President and Chief Executive Officer, relating to: (i)
evaluation of the Company's drug discovery and development programs; (ii)
identification of key personnel, consultants and service providers to assist in
the Company's drug discovery and development efforts; (iii) provision of
assistance and advice relating to the establishment of drug discovery
collaborations and alliances; and (iv) such other consulting and advisory
services relating to the Company's drug discovery and development efforts as you
and the Company may agree. We agree, however, that your consulting and advisory
services shall be limited to the exchange of ideas only, and that you shall not
direct or conduct research for or on behalf of the Company. You will devote up
to 10 days annually (inclusive of your time attending scientific review meetings
held on the day prior to meetings of the Company's Board of Directors) to
providing services to the Company under this Agreement, on a schedule and at
times mutually agreed upon by you and Dr. Sands. Your services will be rendered
by means of correspondence, telephone calls, submitted reports, information,
visits and by other means and manner as may be reasonably requested by Dr. Sands
and agreed to by you.

         2. Compensation. As full consideration for your services as a
consultant to the Company and your obligations under this Agreement, you will
receive fees of $50,000 per year, payable in 12 monthly installments. In
addition, you will be reimbursed for your reasonable, ordinary and necessary
travel expenses incurred by you at the Company's prior request in connection
with your performance of your services under this Agreement.

         3. Confidential Information.

             (a) In the course of your services for the Company, you may learn
         or be exposed, orally, visually, electronically or in writing, to
         inventions, discoveries, improvements, materials, data, technology,
         processes, formulas, know-how, trade secrets, ideas and other
         information which we consider proprietary or confidential
         ("Confidential

<PAGE>

Dr. Robert J. Lefkowitz
March 31, 2003
Page 2


         Information"). You agree to hold any Confidential Information
         disclosed to you by the Company or learned by you from the Company in
         conjunction with your services for the Company in strict confidence and
         to take all reasonable precautions to protect such Confidential
         Information, not to disclose any such Confidential Information to any
         third party, and to use such Confidential Information only in
         furtherance of your service as an Advisory Panel member; provided that
         your nondisclosure obligation shall not apply to the extent such
         Confidential Information (i) is already in the public domain or
         hereafter enters the public domain other than through your acts or
         omissions in violation of this Agreement; (ii) is already known to you,
         as may be shown by competent written records; and (iii) is hereafter
         received by you without restriction as to confidentiality or use from a
         third party lawfully entitled so to disclose same in such manner.
         Information shall not be deemed to be within the foregoing exceptions
         merely because such information is embraced by more general information
         in the public domain or in your possession. Information generated by
         you, alone or with others, shall not constitute Confidential
         Information subject to the foregoing restrictions unless that
         information (x) is generated solely as a direct result of the
         performance of your services under this Agreement and (y) is not
         generated in the course of the your activities as an employee of the
         Institute or as a Duke faculty member. All Confidential Information
         (and any copies and notes thereof) shall remain the sole property of
         the Company.

             (b) You agree not to disclose or otherwise make available to the
         Company any information that you possess under an obligation of
         confidentiality to a third party. You may disclose to the Company any
         information that you would normally freely disclose to other members of
         the scientific community at large, whether by publication, by
         presentation at seminars or in informal scientific discussions.
         However, you shall not disclose to us information that is proprietary
         to the Institute or Duke and is not generally available to the public
         other than through formal technology transfer procedures.

             4. Inventions and Discoveries.

             (a) You hereby assign and transfer to the Company all of your
         right, title and interest throughout the world in all inventions,
         discoveries, improvements and other intellectual property, whether or
         not patentable or subject to copyright, which may be made, written or
         conceived by you, alone or with others, (i) solely as a direct result
         of the performance of your services for the Company under this
         Agreement and (ii) not in the course of your activities as an Institute
         employee or Duke faculty member (collectively, "Lexicon Intellectual
         Property"). All such Lexicon Intellectual Property shall be the sole
         property of the Company or its nominee. The Company agrees that it
         shall have no rights by reason of this Agreement in any inventions,
         discoveries, improvements or other intellectual property, whether or
         not patentable or subject to copyright, which may be made, written or
         conceived by you, alone or with others, in the course of your
         activities as an Institute employee or Duke faculty member or as a
         result of a program of research financed, in whole or in part, by funds
         provided by or under the control of the Institute or Duke. The Company
         further acknowledges and agrees that it will enjoy no priority or
         advantage as a result of the consultancy created by this Agreement in
         gaining access, whether by license or otherwise, to any proprietary
         information or intellectual property that arises from any research you
         undertake in your capacity as an Institute employee or Duke faculty
         member.

<PAGE>

Dr. Robert J. Lefkowitz
March 31, 2003
Page 3


             (b) You shall promptly disclose any Lexicon Intellectual Property
         in writing to the Company in order to permit the Company to claim
         rights to which it may be entitled under this Agreement. The Company
         shall have full power and authority to file and prosecute patent
         applications and copyright registrations throughout the world with
         respect to all Lexicon Intellectual Property, and to procure and
         maintain patents and copyrights with respect thereto. You agree, at the
         Company's reasonable request and expense, to sign, execute and
         acknowledge, or cause to be signed, executed and acknowledged, any
         applications, assignments, instruments and other documents, and to
         perform such other acts, as the Company may deem necessary, useful or
         convenient to confirm and vest in the Company or its nominee all right,
         title and interest throughout the world in and to any Lexicon
         Intellectual Property and all patent, copyright and other intellectual
         property rights and protections therein, and to assist the Company in
         procuring, maintaining, enforcing and defending such patent, copyright
         and other intellectual property rights and protections throughout the
         world. You agree to treat all such Lexicon Intellectual Property as
         Confidential Information under this Agreement.

             5. Indemnification.

             (a) The Company agrees, at its sole expense, to defend you, the
         Institute and Duke against, and to indemnify and hold you, the
         Institute and Duke, and their respective trustees, directors, officers,
         employees, and agents (collectively, "Indemnitees") harmless from, any
         liability, claim, judgment, cost, expense, damage, deficiency, loss, or
         obligation, of any kind or nature (including without limitation
         reasonable attorneys' fees and other costs and expenses of defense)
         relating to a claim or suit by a third party against you, the
         Institute, or Duke, or any liabilities or judgments based thereon,
         either arising from this Agreement, your performance of services for
         the Company under this Agreement, or any products or services of the
         Company which result from your services under this Agreement
         ("Claims"); provided, however, that the Company shall have no
         obligation to indemnify you for any liability, damage, loss or expense
         to the extent that it is attributable to: (i) your negligent or
         wrongful acts or omissions, reckless misconduct or intentional
         misconduct; (ii) your failure to comply with the terms of this
         Agreement; (iii) your failure to comply with applicable governmental or
         legal requirements; (iv) any breach by you of a contractual or
         fiduciary obligation owed to a third party; and/or (v) misappropriation
         of trade secrets by you.

             (b) As a condition precedent to Lexicon' obligations under Section
         5(a) above, each affected Indemnitee must:

                (i) reasonably promptly following actual receipt of written
             notice thereof by you (in the case of a Claim against you) or by an
             officer or attorney of any other Indemnitee (in the case of a Claim
             against such other Indemnitee), you or any other Indemnitee (as the
             case may be) will notify the Company in writing of any such Claim
             for which such Indemnitee intends to seek indemnification under
             Section 5(a) above; provided, however, that the delay or failure of
             an Indemnitee to give reasonably prompt notice to the Company of
             any Claim shall not affect the Indemnitee's rights unless, and then
             only to the extent that, such delay or failure is prejudicial to or
             otherwise adversely affects the Company;

<PAGE>

Dr. Robert J. Lefkowitz
March 31, 2003
Page 4


                (ii)  permit and authorize the Company to conduct and exercise
             sole control of the defense and disposition of any such Claim
             (including, without limitation, all decisions to litigate, settle
             or appeal) and to represent the Indemnitee in connection therewith
             (and, as necessary and if prior written notice is given to the
             Indemnitee and the Indemnitee consents to the use of Indemnitee's
             name, which consent shall not unreasonably be withheld, to use such
             Indemnitee's name in connection with such defense and disposition);
             and

               (iii)  cooperate with the Company in the handling of any such
             Claim by providing and permitting the Company reasonable access to
             and copies of pertinent records and documents and by making
             themselves (and other relevant individuals whom an Indemnitee may
             control) reasonably available for interview and testimony.

         Subject to the foregoing: (x) the Company agrees, at its own expense,
         to provide attorney(s) to defend against any such Claims, whether or
         not such actions are rightfully brought (the Company agrees to select
         attorneys reasonably acceptable to any Indemnitee), (y) the Company
         will pay all costs necessary to defend against such Claims, and (z) an
         Indemnitee may, at its/his/her own expense, participate in any such
         Claim using attorneys of its/his/her choice. In no event may any
         Indemnitee settle any such Claim for which it/he/she intends to seek
         indemnification from the Company hereunder without the Company's prior
         written consent, to be given or withheld in the Company's discretion.
         The Company agrees not to settle any Claim against an Indemnitee
         without such Indemnitee's written consent, where such settlement would
         include any admission of liability on the part of the Indemnitee or
         where the settlement would impose any restriction on the Indemnitee's
         conduct of its/his/her activities or where such settlement would not
         include an unconditional release of the Indemnitee from all liability
         for claims that are the subject matter of the settled Claim.

         6. Term and Termination. You will render your advisory and consulting
services to the Company for an initial period of one year commencing upon the
date of your signature accepting the provisions of this Agreement on the
signature page. The term of this Agreement shall be automatically renewed for
additional one-year terms on each anniversary unless either party gives 30 days'
advance written notice of non-renewal. This Agreement may be terminated (i) at
any time by either party, with or without cause, upon 30 days' advance written
notice to the other party and (ii) by either party for breach of this Agreement
by the other party that, where curable, is not cured within 10 business days
after written notice of such breach is delivered to the breaching party.

         7. Independent Contractor. For purposes of this Agreement, you will be
deemed an independent contractor and not an employee or agent of the Company. In
this connection, you will not be eligible for, nor entitled to, any employee
benefits that we normally extend to our employees, and we will not withhold any
taxes from the compensation paid to you, all of which shall be your
responsibility. The manner in which you render your services under this
Agreement will be within your reasonable control and discretion. You have no
express or implied authority to incur any liability, or to make any decision or
to create any binding obligation, on our behalf.

<PAGE>

Dr. Robert J. Lefkowitz
March 31, 2003
Page 5


         8. Reference to Affiliation. The Company may use your name, and in
doing so may make reference to your affiliation with the Institute and Duke, so
long as any such usage is limited to reporting factual events or occurrences
(including your relationship with the Company) and is made in a manner that
could not reasonably constitute an endorsement of the Company or of any of its
programs, products or services. However, the Company shall not use your name or
the name of the Institute or Duke in any press release, quote you in any Lexicon
materials, or otherwise use your name or the name of the Institute or Duke in a
manner not specifically permitted by the preceding sentence, unless in each case
the Company obtains your consent and the advance written consent of the
Institute or Duke, as applicable.

         9. Compliance with Laws and Procedures. To the extent you provide your
services under this Agreement on our premises, you agree to observe our business
hours, as well as our rules, policies and security procedures concerning conduct
and the health, safety and protection of persons and property. You will comply
with all applicable governmental laws, ordinances, rules and regulations
applicable to the performance of your services under this Agreement. The Company
acknowledges that you are an employee of the Institute and a faculty member of
Duke and are subject to the Institute and Duke's policies, including policies
concerning consulting, conflicts of interest, and intellectual property.

         10. No Implied Grants, Options, or Licenses. Except for the express
provisions contained herein, nothing in this Agreement shall be deemed as
constituting, a grant, option, license, or sublicense to make, use, sell,
disclose, or otherwise disseminate any of the Company's patents, Confidential
Information or other intellectual property presently in force or existence, or
which may be acquired by, issued to, granted upon, invented by, licensed or
sublicensed by the Company at a future date.

         11. Governing Law. This Agreement shall be governed by, and construed
and enforced in accordance with, the laws of the State of Texas as they apply to
contracts entered into and wholly to be performed in Texas.

         12. Enforcement. You agree that a breach of any of the restrictions set
forth in the provisions of this Agreement would cause the Company irreparable
injury and damage, and that, in the event of any breach or threatened breach,
the Company, in addition to all other rights and remedies at law or in equity,
shall have the right to enforce the specific performance of such restrictions
and to apply for injunctive relief against their violation.

         13. Survival of Terms. The provisions of Sections 3, 4, 5 and 11
through 20 hereof shall survive termination of this Agreement.

         14. Successors and Assigns. You may not assign this Agreement without
the written consent of the Company. This Agreement shall be binding on your
heirs, executors, administrators and legal representatives and the Company's
successors and assigns.

         15. Severability. The invalidity or unenforceability of any provision
of this Agreement (or portion thereof) shall not affect the validity or
enforceability of any other provision of this Agreement, and if such provision
(or portion thereof) is so broad as to be unenforceable, it shall be interpreted
to be only as broad as is enforceable; provided that, if any provision of this
Agreement affecting the rights or property of the Institute is adjudicated to be

<PAGE>

Dr. Robert J. Lefkowitz
March 31, 2003
Page 6


invalid, unenforceable, contrary to or prohibited under applicable laws or
regulations of any jurisdiction, this Agreement shall terminate as of the date
such adjudication is effective.

         16. Entire Agreement. This Agreement constitutes the sole and complete
agreement of the parties with respect to the matters included herein, and
supersedes any previous oral or written agreement, if any, relating to the
subject matters included herein.

         17. Amendment and Waiver. This Agreement may not be amended or
supplemented in any way, nor may the benefit of any provision hereof be waived,
except by a written agreement duly executed by both you and the Company. The
Company and you acknowledge and agree that any amendment of this Agreement
(including, without limitation, any change from the terms of Section 2 in the
consideration to be provided to you with respect to services to be provided
hereunder or any extension of this Agreement other than as set forth in Section
6) or any departure from the terms or conditions hereof with respect to your
services for the Company is subject to the Institute's prior written approval.

         18. No Conflict. You represent that you have the right under the terms
of your relationship with the Institute and Duke to enter into and perform this
Agreement, and that the performance of your obligations and duties under this
Agreement does not conflict with the Institute or Duke's policies or with any
obligations or duties, express or implied, that you may have to third parties.
You further represent that you have provided a copy of this Agreement to the
Institute and that the Institute has provided written confirmation to you that
this Agreement does not violate its policies. We acknowledge and agree that
nothing in this Agreement shall affect your obligations to, or research on
behalf of, the Institute or Duke, including, without limitation, your
obligations or research in connection with a transfer by the Institute or Duke
of materials or intellectual property developed in whole or in part by you, or
in connection with research collaborations.

         19. Individual Capacity; Third Party Beneficiary. You and the Company
acknowledge that (i) you are entering into this Agreement in your individual
capacity and not as an employee or agent of the Institute, (ii) the Institute is
not a party to this Agreement and has no liability or obligation hereunder, and
(iii) the Institute is an intended third-party beneficiary of this Agreement and
certain provisions of this Agreement are for the benefit of the Institute and
are enforceable by the Institute in its own name.

         20. Construction. Each party to this Agreement has had the opportunity
to review this Agreement with legal counsel. This Agreement shall not be
construed or interpreted against any party on the basis that such party drafted
or authored a particular provision, parts of or the entirety of this Agreement.

<PAGE>

Dr. Robert J. Lefkowitz
March 31, 2003
Page 7


         If the foregoing correctly sets forth our mutual understanding, please
so indicate by signing this letter in the space provided below and return it to
the Company at the above address, whereupon this Agreement shall constitute a
binding contract between us and our legal representatives, successors, and
assigns.

                                  Very truly yours,

                                  LEXICON GENETICS INCORPORATED


                                   By:  /s/ Arthur T. Sands
                                        -------------------------------------
                                        Arthur T. Sands, M.D., Ph.D.
                                        President and Chief Executive Officer


ACCEPTED AND AGREED TO AS OF THE DATE SET FORTH BELOW:


By:  /s/ Robert J. Lefkowitz, M.D.
     -----------------------------
     Robert J. Lefkowitz, M.D.

Social Security No.:
                      -------------------------------

Date:  March 31, 2003

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.1
<SEQUENCE>4
<FILENAME>h05669exv99w1.txt
<DESCRIPTION>CERTIFICATION OF CEO AND CFO
<TEXT>
<PAGE>
                                                                   EXHIBIT 99.1


                                  CERTIFICATION

         Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C.
1350, as adopted), Arthur T. Sands, M.D., Ph.D., Chief Executive Officer of
Lexicon Genetics Incorporated ("Lexicon"), and Julia P. Gregory, Chief Financial
Officer of Lexicon, each hereby certify that:

         1.  Lexicon's Quarterly Report on Form 10-Q for the period ended March
             31, 2003, and to which this Certification is attached as Exhibit
             99.1 (the "Periodic Report"), fully complies with the requirements
             of section 13(a) or section 15(d) of the Securities Exchange Act of
             1934, and

         2.  The information contained in the Periodic Report fairly presents,
             in all material respects, the financial condition and results of
             operations of Lexicon.

         IN WITNESS WHEREOF, the undersigned have set their hands hereto as of
the 9th day of May, 2003.

Date:   May 9, 2003                  By:  /s/ ARTHUR T. SANDS
                                          -------------------------------------
                                          Arthur T. Sands, M.D., Ph.D.
                                          President and Chief Executive Officer


Date:   May 9, 2003                  By:  /s/ JULIA P. GREGORY
                                          -------------------------------------
                                          Julia P. Gregory
                                          Executive Vice President and
                                          Chief Financial Officer

</TEXT>
</DOCUMENT>
</SUBMISSION>
