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                                  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, 2005

                                       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 [ ]

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

                                 Yes [X] No [ ]

      As of May 3, 2005, 63,568,464 shares of the registrant's common stock, par
value $0.001 per share, were outstanding.

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                          LEXICON GENETICS INCORPORATED

                                TABLE OF CONTENTS

                                                                                                        PAGE
                                                                                                        ----
                                                                                                     
FACTORS AFFECTING FORWARD-LOOKING STATEMENTS..........................................................    2

PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
        Consolidated Balance Sheets - March 31, 2005 (unaudited) and December 31, 2004................    3
        Consolidated Statements of Operations (unaudited) - Three Months Ended
             March 31, 2005 and 2004..................................................................    4
        Consolidated Statements of Cash Flows (unaudited) - Three Months Ended
             March 31, 2005 and 2004..................................................................    5
        Notes to Consolidated Financial Statements (unaudited)........................................    6
Item 2. Management's Discussion and Analysis of Financial Condition and
        Results of Operations.........................................................................    8
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

      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

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

                          LEXICON GENETICS INCORPORATED

                           CONSOLIDATED BALANCE SHEETS
                        (IN THOUSANDS, EXCEPT PAR VALUE)

                                                                                AS OF              AS OF
                                                                               MARCH 31,        DECEMBER 31,
                                                                                 2005              2004
                                                                              ----------        ------------
                                   ASSETS                                     (UNAUDITED)
                                                                                          
Current assets:
    Cash and cash equivalents............................................     $   12,809        $     14,612
    Short-term investments, including restricted investments of $430.....         57,930              72,946
    Accounts receivable, net of allowance for doubtful accounts of $75...          1,747               5,345
    Other receivables....................................................              -               1,052
    Prepaid expenses and other current assets............................          3,084               4,793
                                                                              ----------        ------------
       Total current assets..............................................         75,570              98,748
Property and equipment, net of accumulated depreciation
    of $42,596 and $41,892, respectively.................................         85,026              84,573
Goodwill.................................................................         25,798              25,798
Intangible assets, net of amortization of $4,460 and $4,160,
 respectively............................................................          1,540               1,840
Other assets.............................................................            974               1,021
                                                                              ----------        ------------
       Total assets......................................................     $  188,908        $    211,980
                                                                              ==========        ============

                    LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
    Accounts payable.....................................................     $    3,495        $      7,574
    Accrued liabilities..................................................          5,682               6,945
    Current portion of deferred revenue..................................         19,066              19,500
    Current portion of long-term debt....................................          4,705               4,691
                                                                              ----------        ------------
       Total current liabilities.........................................         32,948              38,710
Deferred revenue, net of current portion.................................         14,136              18,092
Long-term debt...........................................................         32,748              32,940
Other long-term liabilities..............................................            677                 644
                                                                              ----------        ------------
       Total liabilities.................................................         80,509              90,386

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;
       63,552 and 63,491 shares issued and outstanding...................             63                  63
    Additional paid-in capital...........................................        382,757             382,666
    Deferred stock compensation..........................................             (7)                (20)
    Accumulated deficit..................................................       (274,381)           (261,115)
    Accumulated other comprehensive loss.................................            (33)                  -
                                                                              ----------        ------------
       Total stockholders' equity........................................        108,399             121,594
                                                                              ----------        ------------
       Total liabilities and stockholders' equity........................     $  188,908        $    211,980
                                                                              ==========        ============

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

                                       3

                          LEXICON GENETICS INCORPORATED

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

                                                                       THREE MONTHS ENDED MARCH 31,
                                                                       ----------------------------
                                                                           2005            2004
                                                                       -------------   ------------
                                                                                 
Revenues:
   Subscription and license fees...................................    $       5,042   $      3,548
   Collaborative research..........................................            8,883          8,294
                                                                       -------------   ------------
     Total revenues................................................           13,925         11,842
Operating expenses:
   Research and development........................................           22,760         22,401
   General and administrative......................................            4,432          5,044
                                                                       -------------   ------------
     Total operating expenses......................................           27,192         27,445
                                                                       -------------   ------------
Loss from operations...............................................          (13,267)       (15,603)
Interest income....................................................              491            432
Interest expense...................................................             (805)          (291)
Other income, net..................................................              315             (4)
                                                                       -------------   ------------
Net loss  .........................................................    $     (13,266)  $    (15,466)
                                                                       =============   ============

Net loss per common share, basic and diluted.......................    $       (0.21)  $      (0.25)
Shares used in computing net loss per common share,
   basic and diluted...............................................           63,525         63,065

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

                                       4

                          LEXICON GENETICS INCORPORATED

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

                                                                               THREE MONTHS ENDED MARCH 31,
                                                                            ---------------------------------
                                                                                 2005                2004
                                                                            -------------       -------------
                                                                                          
Cash flows from operating activities:
   Net loss..............................................................   $     (13,266)      $     (15,466)
   Adjustments to reconcile net loss to net cash used in operating
   activities:
     Depreciation........................................................           2,585               2,821
     Amortization of intangible assets, other than goodwill..............             300                 300
     Amortization of deferred stock compensation.........................             (11)                830
     Loss on disposal of property and equipment..........................              10                   -
     Changes in operating assets and liabilities:
       Decrease in accounts receivable...................................           4,650               3,390
       Decrease in prepaid expenses and other current assets.............           1,709                 489
       (Increase) decrease in other assets...............................              47                 (22)
       Decrease in accounts payable and other liabilities................          (5,309)             (2,890)
       Decrease in deferred revenue......................................          (4,390)             (4,939)
                                                                            -------------       -------------
         Net cash used in operating activities...........................         (13,675)            (15,487)
Cash flows from investing activities:
   Purchases of property and equipment...................................          (3,133)             (1,291)
   Proceeds from disposal of property and equipment......................              85                   -
   Increase in restricted cash...........................................               -                (147)
   Purchases of investments..............................................         (29,226)            (46,633)
   Maturities of investments.............................................          44,208              34,061
                                                                            -------------       -------------
       Net cash provided by investing activities.........................          11,934              14,010
Cash flows from financing activities:
   Proceeds from issuance of common stock................................             116               1,202
   Repayment of debt borrowings..........................................            (178)                  -
                                                                            -------------       -------------
       Net cash provided by (used in) financing activities...............             (62)              1,202
                                                                            -------------       -------------
Net decrease in cash and cash equivalents................................          (1,803)            (28,295)
Cash and cash equivalents at beginning of period.........................          14,612              35,856
                                                                            -------------       -------------
Cash and cash equivalents at end of period...............................   $      12,809       $       7,561
                                                                            =============       =============

Supplemental disclosure of cash flow information:
   Cash paid for interest................................................   $         692       $         206

Supplemental disclosure of non-cash investing and financing activities:
   Unrealized loss on investments........................................   $         (33)      $           -
   Reversal of deferred stock compensation, in connection
     with stock options..................................................   $          24       $           7
   Retirement of property and equipment..................................   $       1,976       $          30

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

                                       5

                          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, 2005 are
not necessarily indicative of the results that may be expected for the year
ended December 31, 2005.

      The accompanying consolidated financial statements include the accounts of
Lexicon and its subsidiaries. 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, 2004, as filed with the SEC.

2. RECLASSIFICATION

      As of March 31, 2004 and December 31, 2003, Lexicon reclassified auction
rate securities of $43.6 million and $46.1 million, respectively, from cash
equivalents to short-term investments and $42.4 million and $42.6 million,
respectively, from restricted cash to short-term investments. The accompanying
consolidated statement of cash flows for the three months ended March 31, 2004
has been adjusted to reflect these reclassifications.

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

4. 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 no stock-based compensation expense during the
three-month period ended March 31, 2005 and $0.8 million during the three-month
period ended March 31, 2004, which expenses were 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

                                       6

(FASB) Statement of Financial Accounting Standards (SFAS) No. 123 "Accounting
for Stock Based Compensation," had been applied to all outstanding and unvested
awards in each period:

                                                              THREE MONTHS ENDED
                                                                   MARCH 31,
                                                             --------------------
                                                               2005        2004
                                                             ---------   --------
                                                          
Net loss, as reported:..................................     $ (13,266)  $(15,466)
Add:  Stock-based employee compensation
   expense included in reported net loss................           (11)       830
Deduct:  Total stock-based employee compensation
   expense determined under fair value based method
   for all awards.......................................        (3,130)    (4,882)
                                                             ---------   --------
Pro forma net loss......................................     $ (16,407)  $(19,518)
                                                             =========   ========

Net loss per common share, basic and diluted
   As reported..........................................     $   (0.21)  $  (0.25)
                                                             =========   ========
   Pro forma............................................     $   (0.26)  $  (0.31)
                                                             =========   ========

5. DEBT OBLIGATIONS

      Genentech Loan: On December 31, 2002, Lexicon borrowed $4.0 million under
a note agreement with Genentech, Inc. The proceeds of the loan are to be used to
fund research efforts under the alliance agreement with Genentech. The note
matures on December 31, 2005, but the Company may prepay it at any time. The
Company may repay the note, at its option, in cash, in shares of common stock
valued at the then-current market price, or in a combination of cash and shares,
subject to certain limitations. The note accrues interest at an annual rate of
8%, compounded quarterly.

      Mortgage Loan: In April 2004, Lexicon purchased its facilities in The
Woodlands, Texas that were previously subject to a synthetic lease. The Company
repaid the $54.8 million funded under the synthetic lease with proceeds from a
$34.0 million third-party mortgage financing and $20.8 million in cash. The
mortgage loan has a ten-year term with a 20-year amortization and bears interest
at a fixed rate of 8.23%. As a result of the refinancing, all restrictions on
the cash and investments that had secured the obligations under the synthetic
lease were eliminated.

6. COMMITMENTS AND CONTINGENCIES

      In May 2002, Lexicon's subsidiary Lexicon Pharmaceuticals (New Jersey),
Inc. leased a 76,000 square-foot laboratory and office space in Hopewell, New
Jersey under an agreement which expires in June 2013. The lease provides for an
escalating yearly rent payment of $1.3 million in the first year, $2.1 million
in years two and three, $2.2 million in years four to six, $2.3 million in years
seven to nine and $2.4 million in years ten and eleven. Lexicon is the guarantor
of the obligations of its subsidiary under the lease. The Company is required to
maintain restricted investments to collateralize the Hopewell lease. As of March
31, 2005, the Company had $430,000 in restricted investments to collateralize a
standby letter of credit for this lease.

                                       7

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

OVERVIEW

      We are a biopharmaceutical company focused on discovering and developing
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 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, antibody and protein drugs 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 Bristol-Myers
Squibb Company to discover and develop novel small molecule drugs in the
neuroscience field; with Genentech, Inc. for the discovery of therapeutic
proteins and antibody targets; and with Takeda Pharmaceutical Company Limited to
discover new drugs for the treatment of high blood pressure. In addition, we
have established collaborations and license agreements with many other leading
pharmaceutical and biotechnology companies under which we receive fees and, in
some 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 drug discovery alliances,
target validation collaborations for the development and, in some cases,
analysis of the physiological effects of genes altered in knockout mice and
technology licenses. 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, expirations of our
research collaborations, 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 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 offer subscriptions to our
databases or 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 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 discoveries and advancing our therapeutic programs to a later
stage, which could limit our near-term revenues. Because of these and other
factors, our operating results have fluctuated in the past and are likely to do
so in the future, and we

                                       8

do not believe that period-to-period 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, 2005, we had an accumulated deficit of $274.4 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 Genome5000(TM) programs, the
development and analysis of knockout mice and our other target validation
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 information technology, facilities costs and
general legal activities. In connection with the expansion of our drug discovery
programs and our target validation 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 collectibility is reasonably assured. Payments received in
advance under these arrangements are recorded as deferred revenue until earned.

      Upfront fees and annual research funding under our drug discovery
alliances are recognized as revenue on a straight-line basis over the estimated
period of service, generally the contractual research term, to the extent they
are non-refundable. Milestone-based fees are recognized upon completion of
specified milestones according to contract terms. Fees for access to our
databases and other target validation resources are recognized ratably over the
subscription or access period. Payments received under target validation
collaborations and government grants are recognized as revenue as we perform our
obligations related to such research to the extent such fees are non-refundable.
Non-refundable technology license fees are recognized as revenue upon the grant
of the license, 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.

                                       9

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.

      Prior to preclinical development work, we are unable to segregate the
costs related to research performed on drug candidates because the drug
candidate is often not specifically identified until the later stages of our
research. With the commencement of formal preclinical development in 2005, we
will account on a program-by-program basis for the costs related to the
development of the identified drug products.

Goodwill Impairment

      Goodwill is not amortized, but is tested at least annually for impairment
at the reporting unit level. We have determined that the reporting unit is the
single operating segment disclosed in our current financial statements.
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. We determined that the market capitalization
approach is the most appropriate method of measuring fair value of the reporting
unit. Under this approach, fair value is calculated as the average closing price
of our common stock for the 30 days preceding the date that the annual
impairment test is performed, multiplied by the number of outstanding shares on
that date. A control premium, which is representative of premiums paid in the
marketplace to acquire a controlling interest in a company, is then added to the
market capitalization to determine the fair value of the reporting unit. 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.

RESULTS OF OPERATIONS

Three Months Ended March 31, 2005 and 2004

      Revenues. Total revenues and dollar and percentage changes as compared to
the corresponding period in the prior year are as follows (dollar amounts are
presented in millions):

                                             THREE MONTHS ENDED MARCH 31,
                                             ----------------------------
                                               2005                2004
                                             --------            --------
                                                           
Total revenues...........................    $   13.9            $   11.8
Dollar increase..........................    $    2.1
Percentage increase......................          18%

         -  Subscription and license fees - Revenue from subscriptions and
            license fees increased 42% to $5.0 million primarily due to
            technology license fees received from Deltagen, Inc. in connection
            with the settlement of Lexicon's claim in Deltagen's bankruptcy
            proceedings. This was offset in part by decreased subscription fees
            as a result of the termination of Incyte Corporation's and
            Bristol-Myers Squibb's subscriptions to our LexVision(R) database in
            June 2004 and December 2004, respectively.

                                       10

         -  Collaborative research - Revenue from collaborative research
            increased 7% to $8.9 million primarily due to our recognition of
            revenues under our hypertension drug discovery alliance with Takeda,
            which was entered into in July 2004. This was offset in part by a
            decrease in revenues from the termination of our therapeutic protein
            discovery alliance with Incyte Corporation in June 2004.

      Research and Development Expenses. Research and development expenses and
dollar and percentage changes as compared to the corresponding period in the
prior year are as follows (dollar amounts are presented in millions):

                                             THREE MONTHS ENDED MARCH 31,
                                             ----------------------------
                                               2005                2004
                                             --------            --------
                                                           
Total research and development expense....   $   22.8            $   22.4
Dollar increase...........................   $    0.4
Percentage increase.......................          2%

      Research and development expenses consist primarily of salaries and other
personnel-related expenses, stock-based compensation expenses, laboratory
supplies, facility and equipment costs, consulting and other services. The
change in the three months ended March 31, 2005 as compared to the corresponding
period in 2004 resulted primarily from the following costs:

         -  Personnel - Personnel costs increased 12% to $11.7 million primarily
            due to increased personnel to support the expansion of our drug
            discovery programs and merit-based pay increases for employees.
            Salaries, bonuses, employee benefits, payroll taxes, recruiting and
            relocation costs are included in personnel costs.

         -  Stock-based compensation - We had no stock-based compensation
            expenses for the three months ended March 31, 2005, as compared to
            $0.4 million for the corresponding period in 2004, primarily
            relating to option grants made prior to our April 2000 initial
            public offering. All deferred stock compensation relating to these
            options was fully amortized as of January 31, 2004 when these
            options became fully vested.

         -  Laboratory supplies - Laboratory supplies expense decreased 9% to
            $3.1 million due primarily to the bulk purchase of certain supplies
            in the prior year quarter.

         -  Facilities and equipment - Facilities and equipment costs were
            unchanged at $5.1 million in both of the three-month periods ended
            March 31, 2005 and 2004.

         -  Third-party services - Costs associated with third-party services
            decreased 18% to $1.4 million primarily due to the termination in
            June 2004 of our LifeSeq(R) Gold database subscription, offset in
            part by an increase in third-party research costs. Costs associated
            with third-party services include third-party research,
            subscriptions to third-party databases, technology licenses, legal
            and patent fees.

         -  Other - Other costs increased by 11% to $1.3 million primarily
            related to increased information technology costs.

                                       11

      General and Administrative Expenses. General and administrative expenses
and dollar and percentage changes as compared to the corresponding period in the
prior year are as follows (dollar amounts are presented in millions):

                                                    THREE MONTHS ENDED MARCH 31,
                                                    ----------------------------
                                                      2005                2004
                                                    --------            --------
                                                                  
Total general and administrative expense.....       $    4.4            $    5.0
Dollar decrease..............................       $    0.6
Percentage decrease..........................             12%

      General and administrative expenses consist primarily of personnel costs
to support our research activities, stock-based compensation expense, facility
and equipment costs and professional fees, such as legal fees. The change in the
three months ended March 31, 2005 as compared to the corresponding period in
2004 resulted primarily from the following costs:

         -  Personnel - Personnel costs decreased 6% to $2.7 million. Salaries,
            bonuses, employee benefits, payroll taxes, recruiting and relocation
            costs are included in personnel costs.

         -  Stock-based compensation - Stock-based compensation expense,
            primarily relating to option grants made prior to our April 2000
            initial public offering, decreased 100%. All deferred stock
            compensation relating to these options was fully amortized as of
            January 31, 2004 when these options became fully vested.

         -  Facilities and equipment - Facilities and equipment costs decreased
            6% to $0.8 million.

         -  Professional fees - Professional fees increased 23% to $0.4 million
            primarily due to increased consulting fees.

         -  Other - Other costs decreased 8% to $0.6 million.

      Interest Income. Interest income increased 14% to $0.5 million in the
three months ended March 31, 2005 from $0.4 million in the corresponding period
in 2004.

      Interest Expense. Interest expense increased to $0.8 million in the three
months ended March 31, 2005 from $0.3 million in the corresponding period in
2004. The increase was attributable to the interest expense on the $34.0 million
mortgage loan on our facilities in The Woodlands, Texas.

      Net Loss and Net Loss Per Common Share. Net loss decreased 14% to $13.3
million in the three months ended March 31, 2005 from $15.5 million in the
corresponding period in 2004. Net loss per common share decreased to $0.21 in
the three months ended March 31, 2005 from $0.25 in the corresponding period in
2004. Net loss includes stock-based compensation expense of $0.8 million in the
three months ended March 31, 2004.

      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 drug
discovery alliance, target validation, database subscription and license
agreements, equipment financing arrangements and leasing arrangements. From our
inception through March 31, 2005, we had received net proceeds of

                                       12

$294.9 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 and $50.1 million from our July 2003 common stock offering. In
addition, from our inception through March 31, 2005, we received $238.1 million
in cash payments from drug discovery alliances, target validation
collaborations, database subscription and technology license fees, sales of
compound libraries and reagents, and government grants, of which $207.0 million
had been recognized as revenues through March 31, 2005.

      As of March 31, 2005, we had $70.7 million in cash, cash equivalents and
short-term investments (including $0.4 million of restricted investments), as
compared to $87.6 million (including $0.4 million of restricted investments) as
of December 31, 2004. We used cash of $13.7 million in operations in the three
months ended March 31, 2005. This consisted primarily of the net loss for the
period of $13.3 million offset by non-cash charges of $2.6 million related to
depreciation expense and $0.3 million related to amortization of intangible
assets other than goodwill; a $4.4 million decrease in deferred revenue; and
changes in other operating assets and liabilities of $1.1 million. Investing
activities provided cash of $11.9 million in the three months ended March 31,
2005, primarily due to net maturities of short-term investments of $15.0
million. This was offset by purchases of property and equipment of $3.1 million.
We used cash of $0.1 million in financing activities.

      In April 2004, we purchased our facilities in The Woodlands, Texas from
the lessor under our previous synthetic lease agreement. In connection with such
purchase, we repaid the $54.8 million funded under the synthetic lease with
proceeds from a $34.0 million third-party mortgage financing and $20.8 million
in cash. The mortgage loan has a ten-year term with a 20-year amortization and
bears interest at a fixed rate of 8.23%. As a result of the refinancing, all
restrictions on the cash and investments that had secured our obligations under
the synthetic lease were eliminated.

      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 term of the lease extends until June 30, 2013. The lease provides
for an escalating yearly base rent payment of $1.3 million in the first year,
$2.1 million in years two and three, $2.2 million in years four to six, $2.3
million in years seven to nine and $2.4 million in years ten and eleven. 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, 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 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
drug discovery alliances, target validation collaborations and technology
licenses will be sufficient to fund our operations at least through the next two
years. During or after this period, if cash generated by operations is
insufficient to satisfy our liquidity requirements, we will need to

                                       13

sell additional equity or debt securities 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 at the time of purchase. 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 within twelve months and
auction rate securities that mature greater than twelve 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.

      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 Company and Business

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

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

   -  any sale of additional equity securities in the future may be dilutive to
      our stockholders

   -  we are an early-stage company, and we may not successfully develop or
      commercialize any therapeutics or drug targets that we have identified

   -  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

   -  we rely heavily on our collaborators to develop and commercialize
      pharmaceutical products based on genes that we identify as promising
      candidates for development as drug targets, and our collaborators' efforts
      may fail to yield pharmaceutical products on a timely basis, if at all

   -  we rely on several key collaborators for a significant portion of our
      revenues, the loss of any of which would negatively impact our business to
      the extent such losses are not offset by additional collaborators

   -  cancellations by or conflicts with our collaborators could harm our
      business

   -  we may be unsuccessful in developing and commercializing pharmaceutical
      products on our own

   -  we lack the capability to manufacture materials for preclinical studies,
      clinical trials or commercial sales and will rely on third parties to
      manufacture our potential products, which may harm or delay our product
      development and commercialization efforts

                                       14

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

   -  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

   -  any contamination among our knockout mouse population could negatively
      affect the reliability of our scientific research or cause us to incur
      significant remedial costs

   -  because all of our target validation operations are located at a single
      facility, the occurrence of a disaster could significantly disrupt our
      business

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

Risks Related to Our Industry

   -  our ability to patent our inventions is uncertain because patent laws and
      their interpretation are highly uncertain and subject to change

   -  our patent applications may not result in enforceable patent rights and,
      as a result, the protection afforded to our scientific discoveries may be
      insufficient

   -  if other companies and institutions obtain patents relating to our drug
      target or product candidate discoveries, we may be unable to obtain
      patents for our inventions based upon those discoveries and may be blocked
      from using or developing some of our technologies and products

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

   -  we may be involved in patent litigation and other disputes regarding
      intellectual property rights and may require licenses from third parties
      for our discovery and development and planned commercialization
      activities, and we may not prevail in any such litigation or other dispute
      or be able to obtain required licenses

   -  we use intellectual property that we license from third parties, and if we
      do not comply with these licenses, we could lose our rights under them

   -  we have not sought patent protection outside of the United States for some
      of our inventions, and some of our licensed patents only provide coverage
      in the United States, and as a result, our international competitors could
      be granted foreign patent protection with respect to our discoveries

   -  we may be unable to protect our trade secrets

   -  our efforts to discover, evaluate and validate potential targets for drug
      intervention and our drug discovery programs are subject to evolving data
      and other risks inherent in the drug discovery process

   -  our industry is subject to extensive and uncertain government regulatory
      requirements, which could significantly hinder our ability, or the ability
      of our collaborators, to obtain, in a timely

                                       15

      manner or at all, government approval of products based on genes that we
      identify, or to commercialize such products

   -  if our potential products receive regulatory approval, we or our
      collaborators will remain subject to extensive and rigorous ongoing
      regulation

   -  the uncertainty of pharmaceutical pricing and reimbursement may decrease
      the commercial potential of any products that we or our collaborators may
      develop and affect our ability to raise capital

   -  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

   -  we may be sued for product liability

   -  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, 2004, 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

      Our chief executive officer and chief financial officer have concluded
that our disclosure controls and procedures (as defined in rules 13a-15(e) and
15d-15(e) under the Securities Exchange Act of 1934 (the "Exchange Act")) are
sufficiently effective to ensure that the information required to be disclosed
by us in the reports we file under the Exchange Act is gathered, analyzed and
disclosed with adequate timeliness, accuracy and completeness, based on an
evaluation of such controls and procedures as of the end of the period covered
by this report.

      Subsequent to our 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.

                                       16

PART II OTHER INFORMATION

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

      (a)   Exhibits

EXHIBIT NO.                                        DESCRIPTION
- -----------                                        -----------
            
   10.1     -- Consulting Agreement with C. Thomas Caskey, M.D. dated March 28, 2005 (filed as
               Exhibit 10.1 to the Company's Current Report on Form 8-K dated March 28, 2005 and
               incorporated by reference herein)

   31.1     -- Certification of CEO Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

   31.2     -- Certification of CFO Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

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

      (b)   Reports on Form 8-K:

            On January 7, 2005, we filed a Current Report on Form 8-K dated
January 7, 2005 related to our financial results for the year ended December 31,
2004 and our expectations with respect to our financial results for the year
ending December 31, 2005.

            On February 24, 2005, we filed a Current Report on Form 8-K dated
February 24, 2005 related to our issuance of a press release reporting our
financial results for the year and quarter ended December 31, 2004, which press
release included our consolidated balance sheet data and consolidated statements
of operations data for the periods.

                                       17

                                   SIGNATURES

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

                            LEXICON GENETICS INCORPORATED

Date: May 5, 2005           By:   /s/ Arthur T. Sands
                               ------------------------------------------------
                                Arthur T. Sands, M.D., Ph.D.
                                President and Chief Executive Officer

Date: May 5, 2005           By:   /s/ Julia P. Gregory
                               ------------------------------------------------
                                Julia P. Gregory
                                Executive Vice President, Corporate Development
                                and Chief Financial Officer

                                       18

                                INDEX TO EXHIBITS

EXHIBIT NO.                                        DESCRIPTION
- -----------                                        -----------
            
   10.1     -- Consulting Agreement with C. Thomas Caskey, M.D. dated March 28, 2005 (filed as
               Exhibit 10.1 to the Company's Current Report on Form 8-K dated March 28, 2005
               and incorporated by reference herein)

   31.1     -- Certification of CEO Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

   31.2     -- Certification of CFO Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

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

                                                                    EXHIBIT 31.1

                                 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 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 report;

      3. Based on my knowledge, the financial statements, and other financial
         information included in this 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 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-15(e) and 15d-15(e)) and internal
         control over financial reporting (as defined in Exchange Act Rules
         13a-15(f) and 15d-15(f)) for the registrant and have:

         a) designed such disclosure controls and procedures, or caused such
            disclosure controls and procedures to be designed under our
            supervision, 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 report is being prepared;

         b) designed such internal control over financial reporting, or caused
            such internal control over financial reporting to be designed under
            our supervision, to provide reasonable assurance regarding the
            reliability of financial reporting and the preparation of financial
            statements for external purposes in accordance with generally
            accepted accounting principles;

         c) evaluated the effectiveness of the registrant's disclosure controls
            and procedures and presented in this report our conclusions about
            the effectiveness of the disclosure controls and procedures, as of
            the end of the period covered by this report based on such
            evaluation; and

         d) disclosed in this report any change in the registrant's internal
            control over financial reporting that occurred during the
            registrant's most recent fiscal quarter (the registrant's fourth
            fiscal quarter in the case of an annual report) that has materially
            affected, or is reasonably likely to materially affect, the
            registrant's internal control over financial reporting; and

      5. The registrant's other certifying officers and I have disclosed, based
         on our most recent evaluation of internal control over financial
         reporting, to the registrant's auditors and the audit committee of the
         registrant's board of directors (or persons performing the equivalent
         functions):

         a) all significant deficiencies and material weaknesses in the design
            or operation of internal control over financial reporting which are
            reasonably likely to adversely affect the registrant's ability to
            record, process, summarize and report financial information; and

         b) any fraud, whether or not material, that involves management or
            other employees who have a significant role in the registrant's
            internal control over financial reporting.

Date: May 5, 2005

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

                                                                    EXHIBIT 31.2

                                 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 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 report;

      3. Based on my knowledge, the financial statements, and other financial
         information included in this 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 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-15(e) and 15d-15(e)) and internal
         control over financial reporting (as defined in Exchange Act Rules
         13a-15(f) and 15d-15(f)) for the registrant and have:

         a) designed such disclosure controls and procedures, or caused such
            disclosure controls and procedures to be designed under our
            supervision, 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 report is being prepared;

         b) designed such internal control over financial reporting, or caused
            such internal control over financial reporting to be designed under
            our supervision, to provide reasonable assurance regarding the
            reliability of financial reporting and the preparation of financial
            statements for external purposes in accordance with generally
            accepted accounting principles;

         c) evaluated the effectiveness of the registrant's disclosure controls
            and procedures and presented in this report our conclusions about
            the effectiveness of the disclosure controls and procedures, as of
            the end of the period covered by this report based on such
            evaluation; and

         d) disclosed in this report any change in the registrant's internal
            control over financial reporting that occurred during the
            registrant's most recent fiscal quarter (the registrant's fourth
            fiscal quarter in the case of an annual report) that has materially
            affected, or is reasonably likely to materially affect, the
            registrant's internal control over financial reporting; and

      5. The registrant's other certifying officers and I have disclosed, based
         on our most recent evaluation of internal control over financial
         reporting, to the registrant's auditors and the audit committee of the
         registrant's board of directors (or persons performing the equivalent
         functions):

         a) all significant deficiencies and material weaknesses in the design
            or operation of internal control over financial reporting which are
            reasonably likely to adversely affect the registrant's ability to
            record, process, summarize and report financial information; and

         b) any fraud, whether or not material, that involves management or
            other employees who have a significant role in the registrant's
            internal control over financial reporting.

Date: May 5, 2005

                                        /s/ Julia P. Gregory
                       -------------------------------------------------------
                                          Julia P. Gregory
                           Executive Vice President, Corporate Development
                                     and Chief Financial Officer

                                                                    EXHIBIT 32.1

                                  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, 2005, and to which this Certification is attached as Exhibit
            32.1 (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
5th day of May, 2005.

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

                                   By:  /s/ Julia P. Gregory
                                       --------------------------------------
                                        Julia P. Gregory
                                        Executive Vice President,
                                        Corporate Development and
                                        Chief Financial Officer