SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                    FORM 10-Q

                QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

                                   (Mark One)

[X]       Quarterly report pursuant to Section 13 or 15(d) of the Securities
          Exchange Act of 1934

                  For the Quarterly period ended: June 30, 1998

          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 0-19410
                         ------------------------------

                                  SEPRACOR INC.
             ------------------------------------------------------
             (Exact Name of Registrant as Specified in its Charter)


                Delaware                               22-2536587
    -------------------------------      ---------------------------------------
    (State or Other Jurisdiction of      (I.R.S. Employer Identification number)
     Organization or Incorporation)


                111 Locke Drive, Marlborough, Massachusetts 01752
               ---------------------------------------------------
               (Address of Principal Executive Offices) (Zip Code)


                                 (508) 481-6700
              ----------------------------------------------------
              (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 the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.

Common Stock, par value $.10 per share                 28,194,794
--------------------------------------       ------------------------------
                 Class                       Outstanding at August 10, 1998

<PAGE>


                                  SEPRACOR INC.

                                      INDEX

Part I - Financial Information

Item 1. Consolidated Condensed Financial Statements

<TABLE>
<S>                                                                      <C>
        Consolidated Condensed Balance Sheets as of
        June 30, 1998 and December 31, 1997 (Unaudited)                   3

        Consolidated Statements of Operations for the Three
        and Six Month Periods Ended June 30, 1998 and 1997 
        (Unaudited)                                                       4

        Consolidated Statements of Cash Flows for the Six Month
        Periods Ended June 30, 1998 and 1997 (Unaudited)                  5

        Notes to Consolidated Interim Financial Statements                6

Item 2. Management's Discussion and Analysis of Financial                10
        Condition and Results of Operations

Part II - Other Information                                              19

Item 1. Legal Proceedings                                                19

Item 4. Submission of Matters to a Vote of Security Holders              20

Item 5. Other Information                                                20

Item 6. Exhibits and Reports on Form 8-K                                 21

Signatures                                                               22

</TABLE>


                                        2

<PAGE>

                                  SEPRACOR INC.
                      CONSOLIDATED CONDENSED BALANCE SHEETS
                                   (Unaudited)
<TABLE>
<CAPTION>

 (in thousands)                                                             June 30,            December 31,
                                                                              1998                 1997
                                                                            --------            -----------
<S>                                                                          <C>                <C>
                    ASSETS

 Current Assets:
           Cash and cash equivalents                                         $113,335           $  82,579
           Marketable securities                                              137,997               9,981
           Accounts receivable, net                                             2,874               2,415
           Inventories                                                          3,296               2,722
           Other current assets                                                 2,928               1,543
                                                                             --------           ---------

           Total Current Assets                                               260,430              99,240

 Property, plant and equipment, net                                            16,499              15,126
 Deferred Financing Costs, net                                                  7,462               1,917
 Excess of investments over net assets acquired, net                            5,092               5,288
 Investment in affiliates                                                       2,725               3,971
 Other assets                                                                   3,395               2,965
                                                                             --------           ---------
           Total Assets                                                      $295,603           $ 128,507
                                                                             ========           =========

                 LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:
           Accounts payable                                                  $  4,243           $   4,018
           Accrued expenses                                                    27,729              17,670
           Notes payable and current portion
           of capital lease obligation and long-term debt                       2,860                 861
           Deferred revenue                                                       157                  21
           Convertible redeemable preferred stock                                   -               6,700
                                                                             --------           ---------

           Total Current Liabilities                                           34,989              29,270

 Long-term debt and capital lease obligation                                    2,803               3,388
 Convertible subordinated debentures                                          270,355              80,880
                                                                             --------           ---------

           Total Liabilities                                                  308,147             113,538
                                                                             --------           ---------

 Minority interest                                                              2,789               2,937

 Stockholders' Equity (Deficit):
           Common stock                                                         2,823               2,785
           Additional paid-in capital                                         224,514             222,504
           Unearned compensation, net                                             (41)                (94)
           Accumulated deficit                                               (242,330)           (213,028)
           Equity adjustments                                                    (299)               (135)
                                                                             --------           ---------

           Total Stockholders' Equity (Deficit)                               (15,333)             12,032
                                                                             --------           ---------

           Total Liabilities and Stockholders' Equity                        $295,603           $ 128,507
                                                                             ========           =========
</TABLE>


                   The accompanying notes are an integral part
                    of the consolidated financial statements


                                        3

<PAGE>


                                  SEPRACOR INC.
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                    FOR THE THREE AND SIX MONTH PERIODS ENDED
                              JUNE 30,1998 and 1997
                                   (Unaudited)

<TABLE>
<CAPTION>
(in thousands, except per share)
                                         Three month periods ended           Six month periods ended
                                                 June  30,                           June 30,
                                         -------------------------           -----------------------
                                            1998         1997                  1998          1997
<S>                                       <C>          <C>                   <C>           <C>
Revenues:

Collaborative research and development    $    545     $    128              $  2,408      $    128
License fees                                    18          600                 5,090           600
Product                                      1,615        1,606                 3,505         4,994
Royalties                                       60           51                   114           102
                                          --------     --------              --------      --------
     Total Revenues                          2,238        2,385                11,117         5,824

Cost of revenues:
License fees                                     -            -                   400             -
Product                                      1,011          994                 1,975         2,926
Royalties                                       18            -                    36             -
                                          --------     --------              --------      --------
     Total Cost of Revenues                  1,029          994                 2,411         2,926

Gross Margin                                 1,209        1,391                 8,706         2,898

     Operating Expenses:
Research and development                    10,636       11,268                24,003        23,003
Sales and marketing                          3,679        1,416                 6,120         2,477
Administration                               2,461        2,794                 4,426         5,465
Restructuring recoveries                         -            -                  (351)            -
Patent costs                                   471          343                   935           655
                                          --------     --------              --------      --------
     Total Operating Expenses
                                            17,247       15,821                35,133        31,600
                                          --------     --------              --------      --------

(Loss) from operations                     (16,038)     (14,430)              (26,427)      (28,702)

Other income (expense):
Interest income                              3,164        1,807                 5,976         3,171
Interest expense                            (4,530)      (1,501)               (7,630)       (2,990)
Other income (expense)                         (14)          92                  (123)          168
Equity in loss of investees                   (359)      (1,385)               (1,246)       (2,071)
Gain on sale of ChiRex Inc.                      -            -                     -        30,069
                                          --------     --------              --------      --------

     Total Other Income (Expense)           (1,739)        (987)               (3,023)       28,347
                                          --------     --------              --------      --------

Net income (loss) before minority
  interests                                (17,777)     (15,417)              (29,450)         (355)

Minority interest in subsidiary
                                               193          226                   148           395
                                          --------     --------              --------      --------

Net income (loss)                          (17,584)     (15,191)              (29,302)           40
                                          ========     ========              ========      ========
Dividends on preferred stock                     -        (150)                  (150)         (300)
                                          --------     --------              --------      --------
Net loss applicable to
  common shares                           $(17,584)    $(15,341)             $(29,452)     $   (260)
                                          ========     ========              ========      ========
Basic and diluted net loss
  per common share                        $  (0.63)    $  (0.56)             $  (1.05)     $  (0.01)
                                          --------     --------              --------      --------
Shares used in computing basic and
  diluted net loss per
  common share:
Basic and diluted                           28,055       27,499                27,983        27,452
                                          --------     --------              --------      --------
</TABLE>

                   The accompanying notes are an integral part
                    of the consolidated financial statements


                                        4

<PAGE>


                                  SEPRACOR INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)

<TABLE>
<CAPTION>
(in thousands)                                                              Six month periods ended
                                                                                     June 30
                                                                          ------------------------------
                                                                             1998                    1997
<S>                                                                      <C>                      <C>
Cash flows from operating activities:
Net Income (loss)                                                        $ (29,302)               $     40
Adjustments to reconcile net loss to net cash
used in operating activities:
Minority interests in subsidiaries                                            (148)                   (395)
Gain on sale of equity investee                                                  -                 (30,069)
Depreciation and amortization                                                2,349                   2,284
Provision for doubtful accounts                                               (235)                     93
Equity in investee losses                                                    1,246                   2,071
Issuance of warrants                                                            31                      --
Loss on disposal of property and equipment                                      14                       5
Changes in operating assets and liabilities:
Accounts receivable                                                           (265)                    621
Inventories                                                                   (589)                    (70)
Other current assets                                                        (1,355)                   (497)
Accounts payable                                                               232                    (389)
Accrued expenses                                                            10,062                   3,168
Deferred revenue                                                               137                    (618)
                                                                         ---------                --------

Net cash (used in) operating activities:                                   (17,823)                (23,756)

Cash flows from investing activities:
Purchases of marketable securities                                        (128,015)                (41,516)
Sales of marketable securities                                                   -                  20,358
Additions to property and equipment                                         (3,390)                 (3,540)
Proceeds from sale of equipment                                                 11                       -
Net proceeds from sale of equity investee                                        -                  30,625
Other assets                                                                   123                    (376)
                                                                         ---------                --------

Net cash (used in) provided by investing activities:                      (131,271)                  5,551

Cash flows from financing activities:
Proceeds from sale of convertible debentures                               189,475                       -
Costs associated with sale of Convertible Debentures                        (6,103)                      -
Repurchase of Series B Redeemable Exchangeable Preferred Stock              (6,850)                      -
Net proceeds from issuances of common stock                                  2,047                   1,309
Borrowings of long term debt                                                     -                     150
Repayments of long term debt and capital lease                                (599)                   (532)
Borrowings under line of credit agreements                                   2,020                      64
                                                                         ---------                --------

Net cash provided by financing activities                                  179,990                     991

Effect of exchange rates on cash and cash equivalents                         (140)                   (140)
                                                                         ---------                --------

Net increase (decrease) in cash and cash equivalents                        30,756                 (17,354)
Cash and cash equivalents at beginning of period                            82,579                  83,344
                                                                         ---------                --------
Cash and cash equivalents at end of period                               $ 113,335                $ 65,990
                                                                         =========                ========
</TABLE>

                   The accompanying notes are an integral part
                    of the consolidated financial statements


                                        5

<PAGE>


                                     ITEM 1.
               NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS

1.  Basis of presentation:

The accompanying consolidated interim financial statements are unaudited and
have been prepared on a basis substantially consistent with the audited
financial statements. Certain information and footnote disclosures normally
included in the Company's annual financial statements have been condensed or
omitted. The year-end consolidated condensed balance sheet data was derived from
audited financial statements but does not include all disclosures required by
generally accepted accounting principles. The consolidated interim financial
statements, in the opinion of management, reflect all adjustments (including
normal recurring accruals) necessary for a fair presentation of the results for
the interim periods ended June 30, 1998 and 1997.

The results of operations for the interim periods are not necessarily indicative
of the results of operations to be expected for the fiscal year. These
consolidated interim financial statements should be read in conjunction with the
audited financial statements for the year ended December 31, 1997, which are
contained in the Company's Annual Report on Form 10-K for the year ended
December 31, 1997, filed with the Securities and Exchange Commission.

The consolidated interim financial statements include the accounts of Sepracor
Inc. ("Sepracor") and its majority and wholly-owned subsidiaries, including
BioSepra Inc. ("BioSepra"), Sepracor Canada Limited, and Versicor (from May 1995
to December 1997).

Effective December 10, 1997, Sepracor's ownership percentage of Versicor, Inc.
was approximately 22%, thereby making Versicor an affiliate and reportable under
the equity method. At June 30, 1998, Sepracor's investment in HemaSure Inc. was
zero.

2.  Inventories:

Inventories consist of the following:

<TABLE>
<CAPTION>
                         June 30,                     December 31,
                            1998                            1997
                            ----                            ----
<S>                        <C>                             <C>
Raw materials               $807                            $600
Work in progress             255                             129
Finished goods             2,234                           1,993
                          ------                          ------
                          $3,296                          $2,722
                          ======                          ======
</TABLE>

3. Basic and diluted net (loss) per common share:

In the quarter ended December 31, 1997, the Company adopted Financial Accounting
Standards Board Statement of Financial Accounting Standard No. 128, "Earnings
Per Share", which modifies the way in which earnings per share ("EPS") is
calculated and disclosed. Basic EPS excludes dilution and is computed by
dividing income available to common shareholders by the weighted average number
of common shares outstanding for the period. Diluted EPS is based upon the
weighted average number of common shares outstanding during the period plus the
additional weighted average common equivalent shares during the period. Common
equivalent shares are not included in the per share calculations where the
effect of their inclusion would be anti-dilutive. Common equivalent shares
result from the assumed conversion of preferred stock and convertible debt and
the assumed exercises of outstanding stock options, the proceeds of which are
then assumed to have been used to repurchase outstanding stock options using the


                                        6

<PAGE>

treasury stock method. For the three and six months ended June 30, 1998 and
1997, basic and diluted net loss per common share is computed based on the
weighted-average number of common shares outstanding during the period, because
the effect on common stock equivalents would be anti-dilutive. Included in the
three and six months ended June 30, 1998 and 1997 basic net loss applicable to
common shares is $0 and $150,000, and $150,000 and $300,000, respectively, of
dividends relating to Series B Redeemable Exchangeable Preferred Stock. Certain
securities were not included in the computation of diluted earnings per share
for the three and six months ended June 30, 1998 and 1997, respectively, because
they would have an anti-dilutive effect due to net losses for such periods.
These securities include (i) options to purchase 4,525,559 and 4,525,559 shares,
3,341,258 and 3,341,258 shares, of common stock with a purchase price of $1.00
to $42.50 per share, $1.00 to $42.50 per share, and $1.00 to $24.75 and $1.00 to
$24.75, respectively; (ii) 8,109,735 and 8,109,735 shares and 4,109,756 and
4,109,756 shares of common stock for issuance upon conversion of 7% and 6 1/4%
subordinated convertible debentures, and (iii) 312,500 shares of common stock
for conversion of Series B Redeemable Exchangeable Preferred Stock for the three
and six months ended June 30, 1997.

4.  6 1/4% Convertible Subordinated Debentures

On February 10, 1998, Sepracor issued $189,475,000 of 6 1/4% Convertible
Subordinated Debentures due 2005 (the "6 1/4% Debentures"). The 6 1/4%
Debentures are convertible into Sepracor Common Stock, at the option of the
holder, at a price of $47.369 per share. The 6 1/4% Debentures bear interest at
6 1/4% payable semi-annually, commencing on August 15, 1998. As of June 30,
1998, the Company had accrued interest of $4,575,000 relating to the 6 1/4%
Debentures. The 6 1/4% Debentures are not redeemable by the Company prior to
February 18, 2001. The Company may be required to repurchase the 6 1/4%
Debentures at the option of the holders in certain circumstances. As part of the
sale of the 6 1/4% Debentures, Sepracor has incurred to date approximately
$6,103,000 of offering costs, which are being amortized over seven years, the
term of the 6 1/4% Debentures. The net proceeds to the Company after offering
costs are $183,372,000. The Company intends to use the proceeds from the sale of
the 6 1/4% Debentures for the establishment of the Company's respiratory sales
force, marketing of certain improved chemical entities ("ICEs"), ongoing
preclinical and clinical trials, funding of other research and development
programs, and working capital and other general corporate purposes.

5. Series B Redeemable Exchangeable Preferred Stock:

In March 1995, Beckman Instruments, Inc. acquired 312,500 shares of Sepracor's
Series B Redeemable Exchangeable Preferred Stock for $5,000,000. On March 26,
1998, Sepracor and Beckman terminated their Stock Purchase Agreement under which
Beckman acquired 312,500 shares of Sepracor Series B Redeemable Exchangeable
Preferred Stock. Sepracor paid Beckman the original purchase price of the stock
plus accrued dividends totaling $6,850,000. In addition, BioSepra and Beckman
amended their distribution agreement whereby BioSepra granted a non-exclusive
right to manufacture instruments to Beckman, removed its obligation to
manufacture instruments for Beckman, and sold the discontinued instrument
product inventory to Beckman for $250,000.


                                        7


<PAGE>

6. Comprehensive Income

The Company has adopted Statement of Financial Accounting Standard No. 130
"Reporting Comprehensive Income" ("SFAS 130"), which requires that changes in
comprehensive income be shown in a financial statement that is displayed with
the same prominence as other financial statements. The Company's only
significant item of other comprehensive income relates to foreign currency
translation adjustments, and is presented separately on the balance sheet as
required.

<TABLE>
<CAPTION>
                                              Three Months Ended            Six Months Ended
                                                   June 30                       June 30
(in thousands)
                                              1998           1997           1998         1997
                                              ----           ----           ----         ----
<S>                                        <C>            <C>            <C>            <C>   
Comprehensive income (loss):
   Net loss                                $(17,584)      $(15,341)      $(29,452)      $(260)
   Cumulative translation adjustment           (125)          (130)          (164)       (481)
                                           ----------  -----------       ----------  --------
Total comprehensive income (loss)          $(17,709)      $(15,471)      $(29,616)      $(741)
                                           ==========  ===========       ==========  ========
</TABLE>

7. Other

In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard No. 131, "Disclosures about Segments of an
Enterprise and Related Information" ("SFAS 131"). SFAS 131 specifies new
guidelines for determining a company's operating segments and related
requirements for disclosure. Sepracor is in the process of evaluating the impact
of the new standard on the presentation of the financial statements and the
disclosure therein. SFAS 131 is effective for fiscal years beginning after
December 15, 1997, but need not be applied to interim financial statements in
the initial year of application.

In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133 (SFAS 133), "Accounting for Derivative
Instruments and Hedging Activities." This statement establishes accounting and
reporting standards for derivative instruments embedded in other contracts
(collectively referred to as derivatives), and for hedging activities. The
statement requires companies to recognize all derivatives as either assets or
liabilities, with the instruments measured at fair value. The accounting for
changes in fair value, gains or losses, depends on the intended use of the
derivative and its resulting designation. The statement is effective for fiscal
years beginning after June 15, 1999. The Company will adopt SFAS 133 by January
1, 2000. The Company is evaluating SFAS 133 to determine its impact on its
consolidated financial statements.

8. Litigation

In July 1997, the United States Patent and Trademark Office (the "PTO") informed
Sepracor that it had declared an interference between Sepracor's previously
issued method-of-use patent on fexofenadine to treat allergic rhinitis and
another similar patent application of Sepracor, and Hoechst Marion Roussel Inc.
("HMRI") method-of-use patent application on the anti-histaminic effects of
fexofenadine on hepatically impaired patents. The primary objective of a patent
interference, which can only be declared by the PTO, is to determine the first
to invent any overlapping subject matter claimed by more than one party. In the
course of an interference, the parties typically present evidence relating to
their inventive activities as to the overlapping subject matter. The PTO then
reviews the evidence to determine which party has the earliest legally
sufficient inventive date, and, therefore, is entitled to a patent claiming the
overlapping subject matter.

If Sepracor prevails in the interference, Sepracor will retain all of its claims
in its issued patent. If, however, Sepracor loses the interference, HMRI will be
issued a U.S. patent containing its claims involved in the interference and may
not be obligated to pay Sepracor milestone or royalty payments pursuant to the
terms of the license agreement whereby Sepracor licensed its U.S.
patent rights covering fexofenadine to HMRI in 1993.

HemaSure is a defendant in two lawsuits brought by Pall Corporation ("Pall"). In
complaints filed in February 1996 and November 1996, Pall alleged that
HemaSure's manufacture, use and/or sale of the LeukoNet product infringes upon
three patents held by Pall.

On October 14, 1996, in connection with the first action concerning U.S. Patent
No. 5,451,321(the "'321 patent"), HemaSure filed for summary judgment of
noninfringement. Pall filed a cross motion for summary judgment of infringement
at the same time.

In October 1997, the U.S. District Court of the Eastern District of New York
("the court") granted in part Pall's summary judgment motion relating to the
'321 patent. HemaSure has agreed to terminate the manufacture, use, sale and
offer for sale of the filter, subject to the court's order. In April 1998, the
court granted to HemaSure its request to appeal the October 1997 decision. The
appeal of the October 1997 decision is currently pending before the U.S. Court
of Appeals for the Federal Circuit.


                                        8


<PAGE>

With respect to the second action concerning U.S. Patent No. 4,952,572 (the
"'572 patent"), HemaSure has answered the complaint stating that it does not
infringe any claim of the asserted patents and has filed for summary judgement
of noninfringement. Pall filed a cross motion for summary judgement of
infringement at the same time. Further, HemaSure has counterclaimed for
declaratory judgment of invalidity, noninfringement and unenforceability of the
'572 patent.

HemaSure believes, based on advice of its patent counsel, that a properly
informed court should conclude that the manufacture, use and/or sale by HemaSure
or its customers of the present LeukoNet product did not infringe any valid
enforceable claim of the two Pall patents. However, there can be no assurance
that HemaSure will prevail in the pending litigations, and an adverse outcome in
a patent infringement action would have a material adverse effect on HemaSure's
future business and operations.

9. Summarized income statement information:

The following is the summarized income statement information for the Company's
subsidiaries HemaSure and Versicor for the three and six month periods ended
June 30, 1998 and 1997:

<TABLE>
<CAPTION>
                               Three Months Ended               Six Months Ended
                                    June 30                        June 30
(in thousands)
                               1998        1997               1998         1997
                               ----        ----               ----         ----
<S>                            <C>         <C>              <C>         <C>
HemaSure

Net sales                      $     -     $   517          $    25     $ 1,068
Gross profit (loss)                  -        (330)            (632)       (811)
Loss from continuing
     operations                 (2,895)     (3,527)          (6,362)     (6,306)
Net loss                       $(2,863)    $(3,744)         $(6,292)    $(6,634)

Versicor

Net sales                      $     -     $     -          $     -     $     -
Gross profit (loss)                  -           -                -           -
Loss from continuing
    operations                  (2,038)     (1,714)          (6,185)     (3,466)
Net loss                       $(1,972)    $(1,932)         $(6,006)    $(3,830)
</TABLE>

The Company recognized 22% of Versicor's net loss as equity in loss of
subsidiary. The Company has recognized none of HemaSure's current year loss
since its investment in subsidiary is zero.


                                        9

<PAGE>


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

Overview

The consolidated interim financial statements include the accounts of Sepracor
Inc. ("Sepracor") and its majority and wholly-owned subsidiaries, including
BioSepra Inc. ("BioSepra"), Sepracor Canada Limited, and Versicor (from May 1995
to December 1997).

Effective December 10, 1997, Sepracor's ownership percentage of Versicor was
approximately 22%, thereby making Versicor an affiliate and reportable under the
equity method. Sepracor has recorded $359,000 and $1,246,000 as its share of
Versicor losses for the three and six month periods ended June 30, 1998. At June
30, 1998, Sepracor had an investment in Versicor of $2,725,000.
At June 30, 1998, Sepracor's investment in HemaSure was zero.

In December 1997, Sepracor signed a licensing agreement with Schering-Plough
Corporation ("Schering") giving Schering exclusive worldwide rights to
Sepracor's patents covering descarboethoxyloratadine ("DCL"), an active
metabolite of loratadine ("the Schering Agreement"). Under the terms of the
Schering Agreement, Sepracor has exclusively licensed its DCL rights to
Schering, which expects to develop and market the DCL product worldwide. Under
the Schering Agreement, Schering would pay Sepracor an upfront license fee of
$5,000,000 and royalties, if any, on DCL sales beginning at first product
launch. Any royalties paid to Sepracor will escalate over time and upon the
achievement of sales volume and other milestones.

In January 1998, Sepracor and Schering were notified that no objection would be
raised under the Hart Scott Rodino Act with respect to the Schering Agreement.
Sepracor received the $5,000,000 upfront license fee (which will be offset
against potential future royalties) and recorded it as license revenue in
January 1998. As a result of the Schering Agreement, Sepracor made a
sub-licensee payment to a third party for $400,000, which is reflected as cost
of revenue.

On February 4, 1998, Sepracor signed a collaboration and license agreement with
Janssen Pharmaceutica, N.V. ("Janssen"), a wholly-owned subsidiary of Johnson &
Johnson, relating to the development and marketing of norastemizole, a third
generation nonsedating antihistamine ("the Janssen Agreement"). Under the terms
of the Janssen Agreement, the companies will jointly fund the development of
norastemizole, and Janssen has an option to acquire certain rights regarding the
product in the U.S. and abroad. When exercised, Janssen and Sepracor will
equally share the costs and profits associated with the further development,
marketing and sale of norastemizole in the United States. Sepracor will also
retain the right to co-promote the product in the U.S. Alternatively, Sepracor
can elect to receive royalties, if any, on Janssen sales of norastemizole in the
U.S. in the event it decides not to co-promote the product. Outside of the U.S.,
Janssen has the right to develop and market norastemizole, and Sepracor will
earn royalties, if any, on product sales. In addition, Janssen has worldwide OTC
rights to norastemizole. In the first quarter of 1998, Sepracor recorded
collaborative research and development revenue of $1,753,000. In the second
quarter of 1998, Sepracor recorded collaborative research and development
revenue of $497,000.

On July 2, 1998, Sepracor Inc. received an approvable letter for Xopenex (TM)
(levalbuterol HCl), inhalation solution, in multidose strengths, from the U.S.
Food and Drug Administration (FDA). Xopenex is the therapeutically active isomer
of racemic albuterol. Final approval by the FDA of the Xopenex New Drug
Application (NDA) is subject to satisfactory completion of the product labeling
discussions and certain other conditions.

On July 20, 1998, Sepracor signed a license agreement (the "Janssen Agreement")
with Janssen Pharmaceutica N.V. ("Janssen"), a wholly owned subsidiary of
Johnson & Johnson, giving Janssen exclusive worldwide rights to Sepracor's
patents covering Norcisapride, an isomer of the active metabolite of Propulsid.
Under the terms of the Janssen Agreement, Sepracor has exclusively licensed its
Norcisapride rights to Janssen, which expects to develop and market the
Norcisapride product worldwide. Under the Janssen Agreement, Janssen would pay
Sepracor royalties, if any, on Norcisapride sales beginning at first product
launch. Any royalties paid to Sepracor will escalate upon the achievement of
sales volume milestones.

In August 1998, HemaSure received a written commitment from a commercial bank
for a $5 million revolving line of credit. Up to $3 million under the line will
be available upon the signing of the definitive loan agreement, with the
remainder available upon the completion of certain events as defined. The
revolving line of credit, which is expected to expire on August 31, 2000, will
be used to help finance HemaSure's working capital requirements. Amounts
borrowed under the line are anticipated to bear interest at the banks prime
lending rate plus 1/2% payable quarterly in arrears. The bank will have a first
lien on all assets of HemaSure including its intellectual property. Sepracor has
agreed in principle to guarantee repayment by HemaSure of amounts borrowed under
the line of credit. In exchange for the guarantee, subject to the approval of
HemaSure's Board of Directors, HemaSure will grant to Sepracor warrants to
purchase up to 1,700,000 shares of HemaSure's common stock at a price of $0.69
per share, of which 1,000,000 warrants will be exercisable upon issuance and
700,000 warrants will be exercisable in the event HemaSure draws down in
excess of $3 million under the line of credit. The warrants will expire in the
year 2003 and have certain registration rights associated with them. The closing
of the line of credit is subject to the satisfaction of customary conditions,
including the negotiation and execution of customary loan documents and related
agreements with Sepracor. Accordingly, there can be no assurance that the line
of credit will close on the terms set forth in the commitment, if at all.

Three and six months ended June 30, 1998 and 1997

License fees were $18,000 and $5,090,000 for the three and six months ended June
30, 1998, respectively, compared to $600,000 for each of the same periods in
1997. The increase for the six month period ended June 30, 1998 compared to the
six month period ended June 30, 1997 is primarily due to the $5,000,000 license
payment which Sepracor received under the Schering Agreement.


                                       10

<PAGE>

Product sales were $1,615,000 and $3,505,000 for the three and six months ended
June 30, 1998, respectively, compared to $1,606,000 and $4,994,000,
respectively, for the same periods in 1997. The decrease in revenue for the six
month period ended June 30, 1998 is attributed to BioSepra's discontinuation of
the instrument product line and to the fluctuation in the timing of large
production scale media orders. BioSepra expects fluctuations in the timing of
large production scale orders to continue to occur in future periods.

Collaborative research and development revenue was $545,000 and $2,408,000 for
the three and six months ended June 30, 1998, respectively, compared to $128,000
in each of the same periods last year. The increases for the three and six
months periods ending June 30, 1998, related primarily to revenue from the
Janssen Agreement of $497,000 and $2,250,000, respectively.

Cost of products sold, as a percentage of product sales, were 63% and 56% for
the three and six months ended June 30, 1998, respectively, compared to 62% and
59% for the same periods in 1997.

Research and development expenses were $10,636,000 and $24,003,000 in the three
and six months ended June 30, 1998, respectively, compared to $11,268,000 and
$23,003,000, respectively, in the same periods last year. The decrease for the
three month period ending June 30, 1998 is primarily due to the Company no
longer consolidating Versicor. The increase for the six month period ending June
30, 1998 is primarily the result of increased expenses related to preclinical
and clinical trials in the Company's pharmaceutical programs offset by the
Company no longer consolidating Versicor.

Sales and marketing expenses were $3,679,000 and $6,120,000 for the three and
six months ended June 30, 1998, respectively, compared to $1,416,000 and
$2,477,000, respectively, for the same periods last year. The increase for the
periods in 1998 as compared to 1997 is due primarily to costs related to
infrastructure development for a specialty sales force. Sepracor is currently
planning to introduce Xopenex commercially in late 1998.

General and administrative expenses were $2,461,000 and $4,426,000 for the three
and six months ended June 30, 1998, respectively, compared to $2,794,000 and
$5,465,000, respectively, for the same periods last year. The decrease for the
periods in 1998 as compared to 1997 is due to personnel reductions and related
costs at BioSepra as well as the Company's no longer consolidating Versicor.

Legal expenses related to patents were $471,000 and $935,000 for the three and
six months ended June 30, 1998, respectively, compared to $343,000 and $655,000
for the same periods last year. The increase for the periods in 1998 as compared
to 1997 is due to costs associated with the increased volume of patent filings
as well as costs related to the patent interference proceedings which commenced
in the second quarter of 1997.


                                       11


<PAGE>

Equity in loss of investees was $359,000 and $1,246,000 for the three and six
months ended June 30, 1998, respectively, compared to $1,385,000 and $2,071,000
in the same periods last year. In the three and six month period ended June 30,
1998, the equity in loss consists of the Company's portion of Versicor's
results. The change in the periods in 1998 as compared to 1997 relates to no
longer recognizing equity losses related to HemaSure, the sale of the Company's
ownership of ChiRex in 1997, and to the recognition of Versicor losses beginning
in December 1997.

Interest income, interest expense and other income (expense) was ($1,380,000)
and ($1,777,000) in the three and six months ended June 30, 1998, respectively,
compared to $398,000 and $349,000 in the same periods in 1997. The increase in
expense in 1998 as compared to 1997 is primarily the result of increased
interest expense related to the 6 1/4% Debentures.

Minority interest in subsidiary resulted in a decrease to consolidated net loss
of $193,000 and $148,000 for the three and six months ended June 30, 1998,
respectively, compared to a decrease in net loss of $226,000 and an increase in
net income of $395,000 for the same periods last year. The change in the periods
in 1998 as compared to 1997 is the result of BioSepra's fluctuation in earnings.

Liquidity and Capital Resources

Cash and cash equivalents plus marketable securities of Sepracor and its
subsidiaries, including BioSepra, totaled $251,332,000 at June 30, 1998,
compared to $92,560,000 at December 31, 1997. Cash and cash equivalents plus
marketable securities of Sepracor, excluding BioSepra, at June 30, 1998 were
$248,167,000.

The net cash used in operating activities for the six months ended June 30, 1998
was $17,822,000. The net cash used in operating activities includes a net loss
of $29,302,000 adjusted by non-cash charges of $3,405,000. The accounts payable
and accrued expense balances increased a total of $10,284,000 from the December
31, 1997 balances, primarily due to increased research and development accruals
and accrued interest at Sepracor.

In 1994, Sepracor, BioSepra and HemaSure entered into an equipment leasing
arrangement that provides for a total of up to $2,000,000 of financing to
Sepracor and its subsidiaries for the purpose of financing capital equipment in
the United States. All outstanding amounts are collateralized by the assets so
financed and are guaranteed by Sepracor. At June 30, 1998, there was $551,000
outstanding under this credit facility relating to Sepracor, BioSepra and
HemaSure of which $114,000, $102,000 and $335,000 represented Sepracor's,
BioSepra's and HemaSure's portion, respectively.

At June 30, 1998, Sepracor had guaranteed $516,000 of outstanding bank
borrowings of BioSepra S.A., BioSepra's wholly owned French subsidiary.


                                       12

<PAGE>

In 1994, Sepracor's wholly owned subsidiary, Sepracor Canada Limited, entered
into two credit agreements with two Canadian provincial and federal business
development agencies for approximately $2,960,000 in term debt, of which
$2,590,000 is at an annual interest rate of 9.25% and $370,000 is interest free.
As of June 30, 1998, Sepracor Canada Limited had received approximately
$2,960,000 of such term debt, of which $1,973,000 was outstanding.

In December 1996, Sepracor and BioSepra amended their revolving credit agreement
with a commercial bank that provides for borrowing of up to an aggregate of
$10,000,000 (the "Revolving Credit Agreement"). The Revolving Credit Agreement
was amended to remove Versicor as a party thereto. Under the amended revolving
credit agreement BioSepra could borrow up to $3,000,000. All borrowings are
collateralized by certain assets of Sepracor and BioSepra. The revolving credit
agreement contains covenants relating to minimum tangible capital base, minimum
cash or cash equivalents, minimum liquidity ratio and maximum leverage for
Sepracor and BioSepra. Sepracor is a guarantor of all outstanding borrowings. At
June 30, 1998, there was $2,000,000 outstanding under this agreement, relating
to BioSepra. The annual interest rate on such borrowings is at the lower of the
prime rate or LIBOR plus 175 basis points.

On December 30, 1997, Sepracor entered into a put agreement with a commercial
bank pursuant to which Sepracor agreed to purchase $2,000,000 of indebtedness of
Versicor, a former wholly owned subsidiary, in the event of a default by
Versicor under its loan agreement with the bank. In the event that the put right
is exercised by the bank, the bank will assign its security interest in the
fixed assets of Versicor to Sepracor. As of June 30, 1998, Versicor is in
compliance with all requirements under this agreement.

On February 10, 1998, Sepracor issued $189,475,000 of 6 1/4% Convertible
Subordinated Debentures due 2005 (the "6 1/4% Debentures"). The 6 1/4%
Debentures are convertible into Sepracor Common Stock, at the option of the
holder, at a price of $47.369 per share. The 6 1/4% Debentures bear interest at
6 1/4% payable semi-annually, commencing on August 15, 1998. The 6 1/4%
Debentures are not redeemable by the Company prior to February 18, 2001. The
Company may be required to repurchase the 6 1/4% Debentures at the option of the
holders in certain circumstances. As part of the sale of the 6 1/4% Debentures,
Sepracor has incurred $6,103,000 of offering costs, which are being amortized
over seven years, the term of the 6 1/4% Debentures. The net proceeds to the
Company after offering costs are $183,372,000. The Company intends to use the
proceeds from the sale of the 6 1/4% Debentures for the establishment of the
Company's respiratory sales force, marketing of certain ICEs, ongoing
preclinical and clinical trials, funding of other research and development
programs, and working capital and other general corporate purposes.

In June 1995, Beckman acquired 312,500 shares of Sepracor's Series B Redeemable
Exchangeable Preferred Stock for $5,000,000. On March 26, 1998, Sepracor and
Beckman terminated their Stock Purchase Agreement. Sepracor paid Beckman the
original purchase price of the stock plus accrued dividends totaling $6,850,000.
In addition, BioSepra and Beckman amended their distribution agreement whereby
BioSepra granted a non-exclusive right to manufacture instruments to Beckman,
removed its obligation to manufacture instruments for Beckman, and sold the
discontinued instrument product inventory to Beckman for $250,000.


                                       13

<PAGE>

Factors Affecting Future Operating Results

Certain of the information contained in this quarterly Report, including
information with respect to the safety, efficacy and potential benefits of the
Company's improved chemical entities ("ICEs") under development and the scope of
patent protection with respect to these products and information with respect to
the other plans and strategy for the Company's business and the business of the
subsidiaries and certain affiliates of the Company, consists of forward-looking
statements. Important factors that could cause actual results to differ
materially from the forward-looking statements include the following:

Since substantially all of Sepracor's ICEs are at the early stages of
development, there can be no assurance that these drugs will have improved
characteristics that provide greater benefits or fewer side effects than the
corresponding parent drugs or that research efforts undertaken by Sepracor will
lead to the discovery of future drugs with such improved characteristics. All of
the drugs under development will require significant additional research,
development, preclinical and/or clinical testing, regulatory approval and an
additional commitment of resources prior to their successful development and
commercialization. Sepracor has limited experience in conducting human clinical
trials and in manufacturing pharmaceutical products and has no experience in
marketing such products.

Proprietary rights relating to the products of Sepracor will be protected from
unauthorized use by third parties only to the extent that they are covered by
valid and enforceable patents or are maintained in confidence as trade secrets.

Sepracor has filed patent applications covering compositions containing, and
methods of using, single isomer or active-metabolite forms of various compounds
for specific applications. The ability to commercialize successfully any ICE
will depend to a significant degree upon the ability to obtain and maintain use
patents of sufficient scope to prevent third parties from developing similar or
competitive products. Most of the ICEs for which Sepracor has obtained use
patents or filed applications therefor are claimed by composition of matter or
other patents or patent applications held by third parties. In each such case,
unless subject to an existing license agreement, the ICE may not be
commercialized until the expiration of corresponding third party
composition-of-matter or other patents. There can be no assurance that any
pending patent applications relating to the products of Sepracor will result in
patents being issued or that any such patents will afford protection against
competitors with similar technology. There may be pending or issued third-party
patents relating to the product of Sepracor and Sepracor may need to acquire
licenses to, or to contest the validity of, any such patents. It is likely that
significant funds would be required to defend any claim that Sepracor infringes
a third-party patent, and any such claim could adversely affect sales of the
challenged product of Sepracor until the claim is resolved. There can be no
assurance that any license required under any such patent would be made
available. Certain of the technology that may be used in the products of
Sepracor is not covered by any patent or patent application. In the absence of
patent protection, the business of Sepracor may be adversely affected by
competitors who independently develop substantially equivalent technology.


                                       14

<PAGE>

In July 1997, the United States Patent and Trademark Office (the "PTO") informed
Sepracor that it had declared an interference between Sepracor's previously
issued use patent on fexofenadine to treat allergic rhinitis and another similar
patent application of Sepracor, and the use patent application of HMRI on the
anti-histaminic effects of fexofenadine on hepatically impaired patients. The
primary objective of a patent interference, which can only be declared by the
PTO, is to determine which party was the first to invent any overlapping subject
matter claimed by more than one party. In the course of an interference, the
parties typically present evidence relating to their invention of the
overlapping subject matter. The PTO then reviews the evidence to determine which
party has the earliest legally sufficient date of invention, and, therefore, is
entitled to a patent claiming the overlapping subject matter. If Sepracor
prevails in the interference, Sepracor will retain all of its claims in its
issued patent. If, however, Sepracor loses the interference, HMRI will be issued
a U.S. patent containing its claims involved in the interference and may not be
obligated to pay Sepracor milestone or royalty payments pursuant to the terms of
the license agreement whereby Sepracor licensed its U.S. patent rights covering
fexofenadine to HMRI in 1993. Sepracor and HMRI have agreed to resolve the
interference by arbitration. The arbitrator has been selected and the
arbitration proceeding is ongoing. While it is possible that the arbitrator's
decision may be rendered during 1998, there can be no assurance that the
arbitrator's decision will be rendered at that time. Once rendered, the
arbitrator's decision must be submitted to the PTO for final approval. The
interference is ongoing and the Company is unable to predict its outcome.

The marketing and sale of pharmaceutical products developed by Sepracor or its
development partners will require FDA approvals as well as similar approvals in
foreign countries. To obtain such approvals, the safety and efficacy of such
products must be demonstrated through clinical trials. There can be no assurance
that the results of such clinical trials will be consistent with the results
obtained in preclinical studies or that the results obtained in later phases of
clinical trials will be consistent with those obtained in earlier phases. There
also can be no assurance that any such products will be shown to be safe and
efficacious or that regulatory approval for any such products will be obtained
on a timely basis, if at all. The clinical trial and regulatory approval process
can take a number of years and require the expenditure of substantial resources.
With respect to certain of the Company's ICEs, the Company has been able to
shorten the regulatory approval process of its ICEs by relying on preclinical
and clinical toxicology data already on file with the FDA with respect to the
parent drug. Although Sepracor has to date been successful in employing this
strategy in connection with the approval process of certain of its proposed
products, there can be no assurance that the FDA will permit the Company to
utilize this strategy in the future. Accordingly, the Company may be required to
expend significant resources to complete such preclinical and clinical studies
for its other ICEs, thereby significantly delaying the regulatory approval
process. The failure of the Company to obtain regulatory approval on a timely
basis and unanticipated significant expenditures on preclinical and clinical
studies could adversely affect the financial condition of the Company. While the
Company in July 1998 has received an approvable letter for Xopenex, it expects
FDA approval of its NDA for the nebulized form of Xopenex in late 1998, there
can be no assurance that the FDA will approve such NDA by such date, if at all.


                                       15

<PAGE>

The Company currently has very limited sales and marketing experience. If the
Company is successful in developing and obtaining regulatory approval for its
products under development, it expects to license certain products to large
pharmaceutical companies and market and sell certain other products through its
direct specialty sales forces or through other arrangements, including
co-promotion arrangements. In anticipation of expected FDA approval of the
nebulized form of levalbuterol later this year, the Company is beginning to
establish a direct sales force to market the inhalation solution of
levalbuterol. Further, as the Company begins to enter into co-promotion
arrangements or market and sell additional products directly, the Company will
need to significantly expand its sales force. It is expected that the Company
will incur significant expense in establishing its direct sales force. The
ability of the Company to realize significant revenues from its direct marketing
and sales activities is dependent on its ability to attract and retain qualified
sales personnel in the pharmaceutical industry. There can be no assurance,
however, that the Company will be able to attract and retain such qualified
sales personnel, that it will successfully expand its marketing and direct sales
force in the future on a timely basis, that the cost of establishing such
marketing or sales force will not exceed any product revenues, that its sales
and marketing efforts will be successful, or that the need to comply with FDA
limits on drug product marketing, including limits on claims of comparative
safety or efficacy, will not inhibit the effectiveness of such marketing. In
addition, the Company will need to enter into co-promotion arrangements with
third parties where its own direct sales force is neither well situated nor
large enough to achieve maximum penetration in the market. There can be no
assurance that the Company will be successful in entering into any such
arrangements or that the terms of any such arrangements will be favorable to the
Company.

Sepracor's ability to commercialize certain drugs that it develops is likely to
depend in significant part on its ability to enter into collaborative agreements
with pharmaceutical companies to fund all or part of the costs to complete the
development of such drugs and to manufacture and/or market such drugs. To date,
the Company has entered into four such collaborative agreements. The Company has
licensed its U.S. patent rights to Allegra (fexofenadine) to HMRI and is
entitled to receive royalties on all U.S. sales of Allegra when the patent on
the parent drug expires. The Company, however, is currently party to an
interference involving Allegra which, if decided adversely to the Company, could
result in the loss of all or substantially all of the royalties to which the
Company is entitled under the license agreement on future sales of Allegra. The
Company has also licensed its worldwide patent rights in DCL to Schering-Plough,
pursuant to which the Company is entitled to receive royalties from
Schering-Plough upon the initial sale of the product. The Company has entered
into two agreements with Janssen with respect to the joint development and
co-promotion of norastemizole and license of worldwide patent rights for
Norcisapride. In each of these collaborative arrangements and, to the extent the
Company enters into additional collaborative arrangements, the Company is
dependent upon the efforts of the collaboration partners and there can be no
assurance that such efforts will be successful. If any collaborators were to
breach or terminate their agreements with the Company or fail to perform their
obligations thereunder in a timely manner, the development and commercialization
of the products could be delayed or terminated. Any such delay or termination
could have a material, adverse effect on the Company's financial condition and
results of operation. Sepracor's failure or inability to perform certain of its
obligations under a collaborative agreement could result in a reduction or loss
of the benefits to which Sepracor is otherwise entitled under such agreement.
There can be no assurance that Sepracor will be able to enter into any such
agreements for ICEs in the future or that such collaborative agreements, if any,
will be entered into on terms favorable to the Company.


                                       16

<PAGE>

The Company currently operates a current Good Manufacturing Practices ("cGMP")
compliant manufacturing plant which the Company believes has sufficient capacity
to support the production of its drugs in quantities required for its clinical
trials. While the Company believes it has the capability to scale up its
manufacturing processes and manufacture sufficient quantities of certain of the
products which may be approved for sale, without additional expansion, the
Company will not have the capability to manufacture in sufficient quantities all
of the products which may be approved for sale. Accordingly, the Company may be
required to expend additional resources to expand its current facility,
construct an additional facility or contract the production of these drugs to
third party manufacturers. There can be no assurance that the Company will have
the resources to expand its existing or develop additional facilities or
contract with manufacturers to produce its products in commercial quantities or
that any contract with third party manufacturers will be on favorable terms to
the Company. There can be no assurance that the Company will succeed in scaling
up its manufacturing processes or maintaining cGMP compliance. Failure in either
respect can lead to refusal by the FDA to approve marketing applications.
Failure to maintain cGMP compliance may also be the basis for action by the FDA
to withdraw approvals that have been granted and for other regulatory action.

The testing, marketing and sale of human health care products entails an
inherent risk of product liability and there can be no assurance that product
liability claims will not be asserted against Sepracor. Sepracor and its
subsidiaries maintain limited product liability insurance coverage for both the
clinical trials and commercialization of its products. There can be no assurance
that Sepracor will be able to obtain further product liability insurance on
acceptable terms, if at all, or that any current insurance subsequently obtained
will provide adequate coverage against all potential claims.

The Company will require substantial additional funds for its research and
product development programs, operating expenses, the pursuit of regulatory
approvals and expansion of its production, sales and marketing capabilities.
Adequate funds for these purposes, whether through equity or debt financing,
collaborative or other arrangements with corporate partners or from other
sources, may not be available when needed or at terms acceptable to the Company.
Insufficient funds could require the Company to delay, scale back or eliminate
certain of its research and product development programs or to license to third
parties to commercialize products or technologies that the Company would
otherwise develop or commercialize itself. While the Company believes that its
available cash balances will be sufficient to meet its capital requirements into
2000, the Company may need to raise additional funds to support its long-term
product development and commercialization programs. There can be no assurance
that such capital will be available on favorable terms, if at all. The Company's
cash requirements may vary materially from those now planned because of results
of research and development, results of product testing, relationships with
customers, changes in focus and direction of the Company's research and
development programs, competitive and technological advances, patent
developments, the FDA regulatory process, the capital requirements of BioSepra
and Sepracor Canada Limited, and other factors.

The Company is currently evaluating the potential impact of the year 2000 on the
processing of date-sensitive information by the Company's computerized
information systems. The year 2000 problem is the result of computer programs
being written using two digits (rather than four) to define the applicable year.
Any of the Company's programs that have time-sensitive software may recognize a
date using "00" as the year 1900 rather than the year 2000, which could result
in miscalculation or system failures. Based on preliminary information, costs of
addressing potential problems are not currently expected to have a material
adverse impact on the Company's financial position, results of operations or
cash flows in the future periods. However, if the Company, its customers or
vendors are unable to resolve such processing issues in a timely manner, it
could result in a material financial risk. Accordingly, the Company plans to
devote the necessary resources to resolve all significant year 2000 issues in a
timely manner.


                                       17

<PAGE>

Other factors that may affect the Company's future operating results include the
Company's fluctuations in quarterly operating results, its ability to meet its
debt service requirements and to compete successfully in the market.

Because of the foregoing factors, past financial results should not be relied
upon as an indication of future performance. The Company believes that
period-to-period comparisons of its financial results are not necessarily
meaningful and it expects that its results of operations may fluctuate from
period to period in the future.


                                       18

<PAGE>

                                     PART II
                                OTHER INFORMATION

Item 1. Legal proceedings

In July 1997, the United States Patent and Trademark Office (the "PTO") informed
Sepracor that it had declared an interference between Sepracor's previously
issued method-of-use patent on fexofenadine to treat allergic rhinitis and
another similar patent application of Sepracor, and Hoechst Marion Roussel Inc.
("HMRI") method-of-use patent application on the anti-histaminic effects of
fexofenadine on hepatically impaired patents. The primary objective of a patent
interference, which can only be declared by the PTO, is to determine the first
to invent any overlapping subject matter claimed by more than one party. In the
course of an interference, the parties typically present evidence relating to
their inventive activities as to the overlapping subject matter. The PTO then
reviews the evidence to determine which party has the earliest legally
sufficient inventive date, and, therefore, is entitled to a patent claiming the
overlapping subject matter.

If Sepracor prevails in the interference, Sepracor will retain all of its claims
in its issued patent. If, however, Sepracor loses the interference, HMRI will be
issued a U.S. patent containing its claims involved in the interference and may
not be obligated to pay Sepracor milestone or royalty payments pursuant to the
terms of the license agreement whereby Sepracor licensed its U.S.
patent rights covering fexofenadine to HMRI in 1993.

HemaSure is a defendant in two lawsuits brought by Pall Corporation ("Pall"). In
complaints filed in February 1996 and November 1996, Pall alleged that
HemaSure's manufacture, use and/or sale of the LeukoNet product infringes upon
three patents held by Pall.

On October 14, 1996, in connection with the first action concerning U.S. Patent
No. 5,451,321(the "'321 patent"), HemaSure filed for summary judgment of
noninfringement. Pall filed a cross motion for summary judgment of infringement
at the same time.

In October 1997, the U.S. District Court of the Eastern District of New York
("the court") granted in part Pall's summary judgment motion relating to the
'321 patent. HemaSure has agreed to terminate the manufacture, use, sale and
offer for sale of the filter, subject to the court's order. In April 1998, the
court granted to HemaSure its request to appeal the October 1997 decision. The
appeal of the October 1997 decision is currently pending before the U.S. Court
of Appeals for the Federal Circuit.

With respect to the second action concerning U.S. Patent No. 4,952,572 (the
"'572 patent"), HemaSure has answered the complaint stating that it does not
infringe any claim of the asserted patents and has filed for summary judgement
of noninfringement. Pall filed a cross motion for summary judgement of
infringement at the same time. Further, HemaSure has counterclaimed for
declaratory judgment of invalidity, noninfringement and unenforceability of the
'572 patent.

HemaSure believes, based on advice of its patent counsel, that a properly
informed court should conclude that the manufacture, use and/or sale by HemaSure
or its customers of the present LeukoNet product did not infringe any valid
enforceable claim of the two Pall patents. However, there can be no assurance
that HemaSure will prevail in the pending litigations, and an adverse outcome in
a patent infringement action would have a material adverse effect on HemaSure's
future business and operations.

                                       19

<PAGE>

Items 2 - 3      None

Item 4   Submission of Matters to a Vote of Security Holders

         At the Company's Annual Meeting of stockholders held on May 27, 1998
         the following proposals were approved as further specified below:

<TABLE>
<CAPTION>
Proposal                   Total For Each Director                     Withheld From Each Director
--------                   -----------------------                     ---------------------------
<S>                                <C>                                                      <C>
Election of  Class III
Directors:

Digby W. Barrios                   24,160,971                                               901,361
Alan A. Steigrod                   24,159,934                                               902,398
</TABLE>

<TABLE>
<CAPTION>
                                              For              Against        Abstain         No Vote
                                              ---              -------        -------         -------
<S>                                        <C>               <C>              <C>           <C>
Approval of amendment to the Company's
Restated Certificate of Incorporation
increasing from 40,000,000 to 80,000,000
the number of authorized shares of
Common Stock.                              24,410,661        584,894          66,777               --

Approval of amendment to the
Company's 1991 Director Stock
Option Plan.                               15,163,304      1,975,755         118,919        7,804,354

Approval of amendment to the
Company's 1991 Restated Stock
Option Plan.                                9,726,108      7,188,720         119,922        8,027,852

Approval of  1996 Employee
Stock Purchase Plan.                       16,785,666        394,012          78,297        7,804,357

</TABLE>

Item 5   Other Information

         Stockholder Proposals for 1999 Annual Meeting

As set forth in the Company's Proxy Statement for its 1998 Annual Meeting of
Stockholders, stockholder proposals submitted pursuant to Rule 14a-8 under the
Exchange Act for inclusion in the Company's proxy materials for its 1999 Annual
Meeting of Stockholders must be received by the Secretary of the Company at the
principal offices of the Company no later than December 23, 1998.

In addition, the Company's by-laws require that the Company be given advance
notice of stockholder nominations for election to the Company's Board of
Directors and of other matters which stockholders wish to present for action at
an annual meeting of stockholders (other than matters included in the Company's
proxy statement in accordance with Rule 14a-8). The required notice must be
delivered to the Secretary of the Company at the principal offices of the
Company not later than the close of business on the 10th day following the date
on which notice of the meeting was given to stockholders of record on the record
date for such meeting, provided that such notice need not be provided more than
60 days prior to the annual meeting of stockholders. The advance notice
provisions of the Company's bylaws supersede the notice requirements contained
in recent amendments to Rule 14a-4 under the Exchange Act.


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<PAGE>

Item 6.  Exhibits and Reports on Form 8-K

Exhibit listed in the Exhibit Index which immediately precedes the exhibits
attached thereto.

         a) Exhibits:

                   3.1 Restated Certificate of Incorporation, as amended
                  27.1 Financial Data Schedule
                  27.2 Financial Data Schedule Restated


         b) Reports on Form 8-K

                  1. Form 8-K filed with the Securities and Exchange
                     Commission on July 28, 1998



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<PAGE>

                                   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.

                                  SEPRACOR INC.

Date:      August 14, 1998    /s/ Timothy J. Barberich
                              ------------------------------------
                                  Timothy J. Barberich
                                  President and Chief
                                  Executive Officer
                                  (Principal Executive Officer)

Date:      August 14, 1998    /s/ Robert F. Scumaci
                              ------------------------------------
                                  Robert F. Scumaci
                                  Senior Vice President
                                  of Finance and Administration
                                  (Principal Financial and
                                  Accounting Officer)



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