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SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

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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: June 30, 2001                                            | 
|           | 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 0-19410                                                           | 

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SEPRACOR INC.(Exact name of registrant as specified in its charter)

|Delaware                                                                            | 22-2536587                       
|----------------------------------------------------------------------------------- | ---------------------------------
|(State or Other Jurisdiction of
Incorporation or Organization)                      | (IRS Employer Identification No.)
|111 Locke Drive,
Marlborough, Massachusetts(Address of Principal
Executive Offices) | 01752(zip code)                  

Registrant's telephone number, including area code:(508) 481-6700Securities registered pursuant to Section 12(b) of the Act:NONESecurities registered pursuant to Section 12(g) of the Act: Common Stock, $.10 par value(Title of class)

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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 / /

Number
of shares outstanding of the registrant's class of Common Stock as of August 7, 2001: 77,896,367 shares.

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SEPRACOR INC.  INDEX

|Part IFinancial Information |  |                                                                                                            
|---------------------------- |  | -----------------------------------------------------------------------------------------------------------
|Item 1.                      |  | Consolidated Condensed Financial Statements                                                                
|                             |  | Consolidated Condensed Balance Sheets as of June 30, 2001 and December 31, 2000 (Unaudited)                
|                             |  | Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2001 and 2000 (Unaudited)
|                             |  | Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2001 and 2000 (Unaudited)          
|                             |  | Notes to Consolidated Interim Financial Statements                                                         
|Item 2.                      |  | Management's Discussion and Analysis of Financial Condition and Results of Operations                      
|Item 3.                      |  | Quantitative and Qualitative Disclosures About Market Risk                                                 
|Part IIOther Information    |  |                                                                                                            
|Item 1.                      |  | Legal Proceedings                                                                                          
|Item 4.                      |  | Submission of Matters to a Vote of Security Holders                                                        
|Signatures                   |  | 25                                                                                                         

2

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SEPRACOR INC.  CONSOLIDATED CONDENSED BALANCE SHEETS  (Unaudited)  (In Thousands)

|                                                                              |  | June 30, 2001 |          | December 31, 2000 |  
|----------------------------------------------------------------------------- |  | ------------- | -------- | ----------------- | -
|Assets                                                                        |  |               |          |                   |  
|Current assets:                                                               |  |               |          |                   |  
|Cash and cash equivalents                                                     |  | $             | 333,135  |                   | $
|Short-term investments                                                        |  |               | 161,262  |                   |  
|Accounts receivable, net                                                      |  |               | 16,466   |                   |  
|Inventories                                                                   |  |               | 6,463    |                   |  
|Other current assets                                                          |  |               | 12,148   |                   |  
|                                                                              |  |               |          |                   |  
|Total current assets                                                          |  |               | 529,474  |                   |  
|Long-term investments                                                         |  |               | 31,452   |                   |  
|Property and equipment, net                                                   |  |               | 23,001   |                   |  
|Investment in Versicor                                                        |  |               | 22,687   |                   |  
|Patents, intangible assets and other assets, net                              |  |               | 55,469   |                   |  
|                                                                              |  |               |          |                   |  
|Total assets                                                                  |  | $             | 662,083  |                   | $
|                                                                              |  |               |          |                   |  
|Liabilities and Stockholders' Equity (Deficit)                                |  |               |          |                   |  
|Current liabilities:                                                          |  |               |          |                   |  
|Accounts payable                                                              |  | $             | 6,304    |                   | $
|Accrued expenses                                                              |  |               | 71,030   |                   |  
|Notes payable, current portion of long-term debt and capital lease obligation |  |               | 658      |                   |  
|Other current liabilities                                                     |  |               | 14,453   |                   |  
|                                                                              |  |               |          |                   |  
|Total current liabilities                                                     |  |               | 92,445   |                   |  
|Convertible subordinated debentures                                           |  |               | 759,960  |                   |  
|Long-term debt and capital lease obligation                                   |  |               | 1,825    |                   |  
|Other long-term liabilities                                                   |  |               | 871      |                   |  
|                                                                              |  |               |          |                   |  
|Total liabilities                                                             |  |               | 855,101  |                   |  
|Minority interest                                                             |  |               | 4,885    |                   |  
|Stockholders' equity (deficit):                                               |  |               |          |                   |  
|Preferred stock                                                               |  |               |         |                   |  
|Common stock                                                                  |  |               | 7,785    |                   |  
|Additional paid-in capital                                                    |  |               | 553,901  |                   |  
|Unearned compensation, net                                                    |  |               | (155     | )                 |  
|Accumulated deficit                                                           |  |               | (778,689 | )                 |  
|Accumulated other comprehensive income (loss)                                 |  |               | 19,255   |                   |  
|                                                                              |  |               |          |                   |  
|Total stockholders' equity (deficit)                                          |  |               | (197,903 | )                 |  
|                                                                              |  |               |          |                   |  
|Total liabilities and stockholders' equity (deficit)                          |  | $             | 662,083  |                   | $
|                                                                              |  |               |          |                   |  

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

3

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SEPRACOR INC.  CONSOLIDATED STATEMENTS OF OPERATIONS  (Unaudited)  (In Thousands, Except Per Share Amounts)

|                                                                      |                                                      | Three Months Ended       |         | Six Months Ended |       
|--------------------------------------------------------------------- | ---------------------------------------------------- | ------------------------ | ------- | ---------------- | ------
|
|Revenues:                                                             |                                                      |                          |         |                  |       
|                                                                      | Product sales                                        |                          | $       | 33,016           |       
|                                                                      | Collaborative research and development               |                          |         |                 |       
|                                                                      | License fees                                         |                          |         |                 |       
|                                                                      | Royalties and other                                  |                          |         | 11,194           |       
|                                                                      |                                                      |                          |         |                  |       
|                                                                      |                                                      | Total revenues           |         |                  | 44,210
|Costs and expenses:                                                   |                                                      |                          |         |                  |       
|                                                                      | Cost of product sold                                 |                          |         | 3,690            |       
|                                                                      | Cost of license fees                                 |                          |         |                 |       
|                                                                      | Cost of royalties and other                          |                          |         | 242              |       
|                                                                      | Research and development                             |                          |         | 47,739           |       
|                                                                      | Selling, general and administrative and patent costs |                          |         | 27,205           |       
|                                                                      |                                                      |                          |         |                  |       
|                                                                      |                                                      | Total costs and expenses |         |                  | 78,876
|                                                                      |                                                      |                          |         |                  |       
|Loss from operations                                                  |                                                      |                          | (34,666 | )                |       
|Other income (expense):                                               |                                                      |                          |         |                  |       
|                                                                      | Interest income                                      |                          |         | 6,660            |       
|                                                                      | Interest expense                                     |                          |         | (11,032          | )     
|                                                                      | Other income (expense), net                          |                          |         | 739              |       
|                                                                      | Equity in investee losses                            |                          |         |                 |       
|                                                                      |                                                      |                          |         |                  |       
|Net loss before minority interest                                     |                                                      |                          | (38,299 | )                |       
|Minority interest in subsidiary                                       |                                                      |                          | 1,027   |                  |       
|                                                                      |                                                      |                          |         |                  |       
|Net loss                                                              |                                                      | $                        | (37,272 | )                | $     
|Basic and diluted net loss per common share                           |                                                      | $                        | (0.48   | )                | $     
|Shares used in computing basic and diluted net loss per common share: |                                                     
|Basic and diluted                                                     |                                                      |                          | 77,832  |                  |       

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

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SEPRACOR INC.  CONSOLIDATED STATEMENTS OF CASH FLOWS  (Unaudited)  (In Thousands)

|                                                                            |                                                                             | Six Months Ended |         
|--------------------------------------------------------------------------- | --------------------------------------------------------------------------- | ---------------- | --------
|
|Cash flows from operating activities:                                       |                                                                             |                  |         
|Net loss                                                                    |                                                                             | $                | (85,302 
|Adjustments to reconcile net loss to net cash used in operating activities: |                                                                             |                  |         
|                                                                            | Depreciation and amortization                                               |                  |         
|                                                                            | Minority interest in subsidiary                                             |                  |         
|                                                                            | Provision for bad debt                                                      |                  |         
|                                                                            | Equity in investee losses                                                   |                  |         
|                                                                            | Other                                                                       |                  |         
|Changes in operating assets and liabilities:                                |                                                                             |                  |         
|                                                                            | Accounts receivable                                                         |                  |         
|                                                                            | Inventories                                                                 |                  |         
|                                                                            | Other current assets                                                        |                  |         
|                                                                            | Accounts payable                                                            |                  |         
|                                                                            | Accrued expenses                                                            |                  |         
|                                                                            | Other current liabilities                                                   |                  |         
|                                                                            |                                                                             |                  |         
|Net cash used in operating activities                                       |                                                                             |                  | (102,302
|                                                                            |                                                                             |                  |         
|Cash flows from investing activities:                                       |                                                                             |                  |         
|                                                                            | Purchases of short and long-term investments                                |                  |         
|                                                                            | Sales and maturities of short and long-term investments                     |                  |         
|                                                                            | Additions to property and equipment                                         |                  |         
|                                                                            | Change in other assets                                                      |                  |         
|                                                                            |                                                                             |                  |         
|Net cash provided by (used in) investing activities                         |                                                                             |                  | 78,427  
|                                                                            |                                                                             |                  |         
|Cash flows from financing activities:                                       |                                                                             |                  |         
|                                                                            | Net proceeds from issuance of common stock                                  |                  |         
|                                                                            | Net proceeds from BioSphere issuance of common stock                        |                  |         
|                                                                            | Proceeds from sale of 5% convertible subordinated debentures                |                  |         
|                                                                            | Costs associated with sale of 5% convertible subordinated debentures        |                  |         
|                                                                            | Repayments of long-term debt, capital leases and line of credit agreements  |                  |         
|                                                                            | Borrowings of long-term debt, capital leases and line of credit agreements  |                  |         
|                                                                            |                                                                             |                  |         
|Net cash provided by financing activities                                   |                                                                             |                  | 2,995   
|                                                                            |                                                                             |                  |         
|Effect of exchange rate changes on cash and cash equivalents                |                                                                             |                  | (43     
|                                                                            |                                                                             |                  |         
|Net increase (decrease) in cash and cash equivalents                        |                                                                             |                  | (20,923 
|Cash and cash equivalents at beginning of period                            |                                                                             | $                | 354,058 
|                                                                            |                                                                             |                  |         
|Cash and cash equivalents at end of period                                  |                                                                             | $                | 333,135 
|                                                                            |                                                                             |                  |         
|Non cash activities:                                                        |                                                                             |                  |         
|                                                                            | Conversion of convertible subordinated debentures to shares of common stock |                  | $       

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

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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 Sepracor'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,
2001 and 2000.

The
consolidated 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, 2000, which are contained in Sepracor's Annual Report on
Form 10-K for the year ended December 31, 2000, filed with the Securities and Exchange Commission.

The
consolidated interim financial statements include the accounts of Sepracor Inc. ("Sepracor" or the "Company") and its majority and wholly owned subsidiaries, including
BioSphere Medical, Inc. ("BioSphere") and Sepracor Canada Limited.

2. Summary of Significant Accounting Policies:

a) New Accounting Pronouncements

In June 2000, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 138, "Accounting
for Certain Derivative Instruments"an amendment of SFAS No. 133 ("Accounting for Certain 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 Company has adopted SFAS 138 in 2001, in accordance with SFAS 137, which deferred the effective date of SFAS 133. The adoption of SFAS 138
did not have a material impact on the Company's financial statements and related disclosures.

In
June 2001, the FASB issued SFAS No. 141 "business combinations" which addresses financial accounting and reporting for business combinations. All business
combinations initiated after June 30, 2001, in the scope of SFAS No. 141, are to be accounted for using one method, the purchase method. SFAS No. 141 also requires that certain
acquired intangible assets in a business combination be recognized as assets apart from goodwill. The Company notes that SFAS No. 141 does not currently have any effect on the reported
financial results.

In
June 2001, the FASB issued SFAS No. 142 "Goodwill and Other Intangible Assets" which addresses how intangible assets that are acquired individually or with a group of
other assets (but not those acquired in a business combination) should be accounted for in financial statements upon their acquisition. The statement also addresses how goodwill and other intangible
assets should be accounted for after they have been initially recognized in the financial statements. The provisions of the statement are required to be applied starting with fiscal years beginning
after December 15, 2001. Sepracor will review its goodwill and other intangible assets and adopt the provisions of the statement beginning on January 1, 2002. The adoption of this
standard is not expected to have a material impact on the Company's financial statements and related disclosures.

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b)  Accounting PoliciesRoyalty Revenue

The Company receives royalty revenues under license agreements with various third parties that sell products based on technology developed by the Company or to
which the Company has rights. The license agreements provide for the payment of royalties to the Company based on sales of the licensed product. The Company records these revenues based on estimates
of the sales that occurred during the relevant period. The relevant period estimates of sales are based on third party data and analysis of historical royalties paid to the Company (adjusted for any
changes in facts and circumstances, as appropriate). The Company maintains regular communication with its licensees in order to gauge the
reasonableness of its estimates. Differences between actual royalty revenues and estimated royalty revenues are reconciled and adjusted for in the following quarter. Historically, adjustments have not
been material based on actual amounts paid by licensees.

c) Basic and Diluted Net (Loss) Per Common Share

Basic earnings (loss) per share ("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, convertible subordinated debentures 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 treasury stock method.

For
the three and six months ended June 30, 2001 and 2000, 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 of common stock equivalents would be anti-dilutive. Certain securities were not included in the computation of diluted earnings per share
for the three and six months ended June 30, 2001 and 2000 because they would have an anti-dilutive effect due to net losses for such periods. These securities include the following:

Options
to purchase shares of common stock:

|(in thousands, except price per share data) |  | June 30, 2001 |                 | June 30, 2000
|------------------------------------------- |  | ------------- | --------------- | -------------
|Number of options                           |  |               | 10,744          |              
|Price range per share                       |  | $             | 2.50 to $125.44 |              

Shares
of common stock for issuance upon conversion of convertible subordinated debentures:

|(in thousands)                                     |  | June 30, 2001 |  | June 30, 2000
|-------------------------------------------------- |  | ------------- |  | -------------
|61/4% convertible subordinated debentures due 2005 |  |              |  | 3,925        
|7% convertible subordinated debentures due 2005    |  | 4,804         |  | 4,804        
|5% convertible subordinated debentures due 2007    |  | 4,979         |  | 4,979        
|                                                   |  |               |  |              
|                                                   |  | 9,783         |  | 13,708       

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3. Inventories, Net:

Inventories consist of the following:

|(in thousands)   |  | June 30, 2001 |       | December 31, 2000
|---------------- |  | ------------- | ----- | -----------------
|Raw materials    |  | $             | 1,902 |                  
|Work in progress |  |               | 1,871 |                  
|Finished goods   |  |               | 2,690 |                  
|                 |  |               |       |                  
|                 |  | $             | 6,463 |                  

4. Convertible Subordinated Debentures:

|(in thousands)                                        |  | June 30, 2001 |         | December 31, 2000
|----------------------------------------------------- |  | ------------- | ------- | -----------------
|61/4% convertible subordinated debentures due 2005(1) |  | $             |        |                  
|7% convertible subordinated debentures due 2005       |  |               | 299,960 |                  
|5% convertible subordinated debentures due 2007       |  |               | 460,000 |                  
|                                                      |  |               |         |                  
|                                                      |  | $             | 759,960 |                  

5. Comprehensive Income (Loss):

Total comprehensive income (loss) is comprised of net income (loss), net currency translation adjustments, and unrealized gain (loss) on
available-for-sale securities.

|                                  |                                                  | Three Months Ended |         | Six Months Ended |  
|--------------------------------- | ------------------------------------------------ | ------------------ | ------- | ---------------- | -
|
|Comprehensive income (loss):      |                                                  |                    |         |                  |  
|                                  | Net loss                                         |                    | $       | (37,272          | )
|                                  | Cumulative translation adjustment                |                    |         | (15              | )
|                                  | Unrealized gain on available-for-sale securities |                    |         | 8,053            |  
|                                  |                                                  |                    |         |                  |  
|Total comprehensive income (loss) |                                                  | $                  | (29,234 | )                | $

6. Investment in Versicor and Related Party:

Investment in Versicor:

Sepracor considers its investment in Versicor as an available-for-sale security and as such has
marked-to-market its investment at the June 29, 2001 market price, which resulted in the recording of an unrealized gain of approximately $8,941,000 as a separate
component of stockholders' equity for the six months ended June 30, 2001. Sepracor's ownership in Versicor at June 30, 2001 was approximately 7.8%.

Related Party:

In February 2001, HemaSure signed an asset purchase agreement with Whatman plc. Under the terms of the agreement, Whatman agreed to purchase HemaSure's
assets, except for cash, cash equivalents and marketable securities of HemaSure, subject to certain exceptions as defined in the

8

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agreement. On May 29, 2001, HemaSure completed the sale to Whatman Bioscience Inc., a Massachusetts corporation and a subsidiary of Whatman plc. The transaction was approved by
HemaSure's stockholders at a special meeting of stockholders on May 21, 2001. The Company's investment in HemaSure is recorded at zero.

7. Litigation:

Currently Sepracor is not a party to any material legal proceedings.

On
February 7, 2001, Artes Medical USA, Inc. filed a complaint in the United States District Court for the Central District of California (Los Angeles), alleging that
BioSphere was liable for infringement, inducement of infringement, and contributory infringement of U.S. Patent No. 5,344,452, which BioSphere refers to as the '452 patent. The '452 patent
relates to "...implant[s] based on a biocompatible solid in powder form, in particular a plastic." Artes sought monetary damages as compensation for the alleged infringement
and a permanent injunction against the alleged infringing activity. Artes alleged that all of BioSphere's microsphere-related products, including its Embosphere Microspheres, HepaSphere SAP
Microspheres and MatrX Microspheres infringe the '452 patent. In addition, BioSphere filed a complaint for declaratory judgment in the United States District Court for the District of Delaware against
Artes. The complaint sought a declaration that the '452 patent is invalid and not infringed by BioSphere and BSMD Ventures.

On
May 16, 2001, representatives of Artes, BSMD Ventures, and BioSphere Medical executed an agreement to settle the Delaware and California actions. On May 24, 2001, the
parties submitted joint stipulations and orders of dismissal in both the Delaware and California courts. The California action was dismissed by the court on May 25, 2001. The Delaware action
was dismissed by the court on May 29, 2001.

The
impact of this settlement did not and will not have a material impact on Sepracor's operating results.

8. Subsequent Events:

On July 10, 2001, Sepracor announced that it had sold 2,000,000 shares of BioSphere common stock as part of a public offering in which BioSphere also
sold 2,000,000 shares of its common stock at a price to the public of $11.00 per share. On August 2, 2001, the underwriters exercised their option to purchase an additional 600,000 shares of
BioSphere common stock from Sepracor at a price to the public of $11.00 per share. Sepracor received net proceeds, after offering costs, from the sales of approximately $26,634,000. As a result of
these sales, Sepracor's ownership in BioSphere has been reduced from approximately 55% to 26%.

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

This Quarterly Report on Form 10-Q contains, in addition to historical information, forward-looking statements within the meaning of
Section 21E of the Securities Exchange Act of 1934, as amended. These forward looking statements involve risk and uncertainties and are not guarantees of future performance. Sepracor's actual
results could differ significantly from the results discussed in such forward-looking statements. See "Factors Affecting Future Operating Results" below.

OVERVIEW

Sepracor is a specialty pharmaceutical company that develops and commercializes proprietary pharmaceutical products for the primary care and specialty markets.
The Company develops and markets these drugs by leveraging its expertise in chiral chemistry and pharmacology with its experience in conducting clinical trials and seeking regulatory approvals for new
drugs. Sepracor's pharmaceutical development program has yielded an extensive portfolio of drug candidates intended to treat a broad range of indications in respiratory care, urology,
gastroenterology, psychiatry and neurology. The Company is also broadening its development efforts in new drug discovery and in the development of new drug candidates.

The
consolidated financial statements include the accounts of Sepracor Inc. ("Sepracor" or the "Company") and its majority and wholly-owned subsidiaries, including BioSphere
Medical Inc. ("BioSphere", formerly "BioSepra Inc.", or "BioSepra") and Sepracor Canada Limited. The consolidated financial statements also include equity ownership in Sepracor's related
party HemaSure Inc. ("HemaSure") and an investment in Versicor Inc. ("Versicor") which is currently accounted for as a marketable equity security.

In
May 1999, Sepracor introduced XOPENEX®, a single isomer of the bronchodilator albuterol. XOPENEX is the first pharmaceutical product developed and commercialized
by Sepracor.

In
July 2001, Sepracor announced that it had sold 2,000,000 shares of BioSphere common stock as part of a public offering in which BioSphere also sold 2,000,000 shares of its
common stock at a price to the public of $11.00 per share. On August 2, 2001, the underwriters exercised their option to purchase an additional 600,000 shares of BioSphere common stock from
Sepracor at a price to the public of $11.00
per share. Sepracor received net proceeds, after offering costs, from the sales of approximately $26,634,000. As a result of these sales, Sepracor's ownership in BioSphere has been reduced from
approximately 55% to 26%.

In
May 2001, the Company announced that the U.S. Food and Drug Administration ("FDA") had accepted for review the Company's New Drug Application ("NDA") for
SOLTARA brand norastemizole capsules for the treatment of allergic rhinitis, which the Company submitted in March 2001.

In
April 2001, the Company was notified by Janssen Pharmaceutica, N.V., that during the week of April 23, 2001, clinical investigators were to be informed that two Phase
II trials to evaluate the efficacy and safety of ticalopride ((+)-norcisapride) in subjects with symptoms of gastroesophageal reflux disease (GERD), or gastroparesis, were being suspended pending
further analysis of a small number of adverse events reported in GERD and diabetic patients. Although it is unknown if these events are related to the drug, Janssen informed the Company that it had
determined that it would be prudent to suspend the trials to better understand the observations made. Janssen has stated that it has taken steps to preserve the scientific integrity in order to
reinitiate the trials and facilitate regulatory acceptance of the results.

10

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In February 2001, HemaSure signed an asset purchase agreement with Whatman plc. Under the terms of the agreement, Whatman agreed to purchase HemaSure's assets, except for cash,
cash equivalents and marketable securities of HemaSure, subject to certain exceptions as defined in the agreement. On May 29, 2001, HemaSure completed the sale to Whatman
Bioscience Inc., a Massachusetts corporation and a subsidiary of Whatman plc. The transaction was approved by HemaSure's stockholders at a special meeting of stockholders on May 21,
2001.

In
January 2001, the Company announced that on February 21, 2001 it would redeem the $92,858,000 in principal amount of 61/4% convertible subordinated
debentures due 2005 (the "61/4 Debentures") that remained outstanding. On February 20, 2001, prior to the redemption, all outstanding 61/4% Debentures were
converted. As a result of the conversion, 3,920,608 shares of Sepracor Common Stock were issued and deferred financing costs of approximately $1,525,000 were written off against additional
paid-in capital.

In
January 2001, Sepracor signed a lease to occupy approximately 192,600 square feet of office and research and development space in a facility to be built in Marlborough,
Massachusetts. The lease has a term of 15 years, and will begin on the occupancy date contingent upon the completion of the building, expected to be June 2002. In addition, Sepracor has
an option to lease two additional buildings, totaling approximately 232,400 square feet, which may be constructed on the same site in the future. Sepracor is financing the construction of the first
building through two interest bearing, secured
loans totaling up to approximately $27,000,000, loaned by Sepracor to the developer of the site. Sepracor will have first right to purchase the entire property from the developer beginning in
June 2002 and extending through January 2004.

For
the remainder of 2001, the Company expects that it will incur increasing operating expenses, primarily due to expansion of research and development activities relating to
development of the Company's portfolio of pharmaceuticals and drug candidates, and due to increasing sales and marketing and general and administrative efforts required in preparation of the
anticipated commercialization of SOLTARA brand norastemizole and to further advance its drug development programs to commercialization.

Three Month Periods ended June 30, 2001 and 2000

Product revenues were $33,016,000 and $9,635,000 for the three months ended June 30, 2001 and 2000, respectively. The increase for the three month
period ended June 30, 2001 is due primarily to increased sales of XOPENEX.

Collaborative
research and development revenues were $0 and $3,573,000 for the three months ended June 30, 2001 and 2000, respectively. The $3,573,000 in 2000 is attributed to
proceeds from the collaboration and license agreement dated December 1998 (the "Lilly (R)-Fluoxetine Agreement") with Eli Lilly and Company.

License
fee revenues were $0 and $20,000,000 for the three months ended June 30, 2001 and 2000, respectively. The $20,000,000 in 2000 is attributed to initial milestone
payments received under the Lilly (R)-Fluoxetine Agreement.

Royalties
and other revenues were $11,194,000 and $1,044,000 for the three months ended June 30, 2001 and 2000, respectively. The increase for the three months ended
June 30, 2001 is due primarily to the royalty agreement with Aventis, under which Sepracor currently receives royalties on U.S. and non-U.S. sales of ALLEGRA® in
countries where Sepracor holds issued patents on terfenadine carboxylate (also known as fexofenadine). Sepracor began earning royalties on sales of ALLEGRA in the U.S. and Canada in the first quarter
of 2001. Prior to 2001, Sepracor was earning royalties only in Europe, Japan and Australia.

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Cost of product sold, as a percentage of product sales, was approximately 11% and 8% for the three months ended June 30, 2001 and 2000, respectively. The increase for the three
months ended June 30, 2001 is the result of fewer favorable manufacturing cost variances than in the three months ended June 30, 2000. In the three months ended June 30, 2001,
there was an approximate $1,000,000 credit resulting from the partial resolution of a third party manufacturing issue.

Cost
of license fee revenues was $0 and $2,000,000 for the three months ended June 30, 2001 and 2000, respectively. The $2,000,000 in the three month period ended
June 30, 2000 represents sublicense fees owed under a license agreement with McLean Hospital pertaining to patents related to the Lilly (R)-Fluoxetine Agreement.

Research
and development expenses were $47,739,000 and $38,507,000 for the three months ended June 30, 2001 and 2000, respectively. The increase for the three months ended
June 30, 2001 is primarily due to Phase III norastemizole clinical study costs and is also due to costs related to the submission of an NDA for SOLTARA brand norastemizole and Phase III
clinical study costs relating to esopiclone (formerly (S)-zopiclone).

Selling,
general and administrative and patent expenses were $27,205,000 and $22,979,000 for the three months ended June 30, 2001 and 2000, respectively. Of the total, selling
and marketing expenses were $22,201,000 and $17,740,000 for the three months ended June 31, 2001 and 2000, respectively. The increase for the three months ended June 30, 2001 is
primarily due to increased selling and marketing expenses as a result of the increase in XOPENEX sales, and costs relating to the commercialization of SOLTARA.

The
net of interest income, interest (expense) and other income (expense) was ($3,633,000) and ($1,206,000) for the three months ended June 30, 2001 and 2000, respectively. The
increase in expense for the three months ended June 30, 2001 is primarily due to lower interest income in 2001, as the cash available for investment was lower than in 2000 and invested at lower
interest rates.

Equity
in investee losses was $0 and $659,000 for the three months ended June 30, 2001 and 2000, respectively. The loss in the three month period ended June 30, 2000
related to Sepracor's investment in HemaSure which was written down to zero during the third quarter of fiscal 2000.

Minority
interest in subsidiary resulted in a decrease to consolidated net loss of $1,027,000 and $922,000 for the three months ended June 30, 2001 and 2000, respectively. The
fluctuation in minority interest resulted from the minority interest in BioSphere increasing from approximately 42% in 2000 to 45% in 2001 combined with the recording by BioSphere of a larger net loss
in the three month period ended June 30, 2001 than in the three month period ended June 30, 2000.

Six Month Periods ended June 30, 2001 and 2000

Product revenues were $61,465,000 and $23,501,000 for the six months ended June 30, 2001 and 2000, respectively. The increase for the six months ended
June 30, 2001 is due primarily to increased sales of XOPENEX.

Collaborative
research and development revenues were $0 and $3,573,000 for the six months ended June 30, 2001 and 2000, respectively. The $3,573,000 in 2000 is attributed to
proceeds from the Lilly (R)-Fluoxetine Agreement received in 2000.

License
fee revenues were $0 and $20,000,000 for the six months ended June 30, 2001 and 2000 respectively. The $20,000,000 in 2000 is attributed to initial milestone payments
received under the Lilly (R)-Fluoxetine Agreement.

Royalties
and other revenues were $16,685,000 and $2,311,000 for the six months ended June 30, 2001 and 2000, respectively. The increase for the six months ended
June 30, 2001 is due primarily to the royalty agreement with Aventis, under which Sepracor currently receives royalties on U.S. and

12

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non-U.S. sales of ALLEGRA® in countries where Sepracor holds issued patents on terfenadine carboxylate (also known as fexofenadine). Sepracor began earning royalties on sales
of ALLEGRA in the U.S. and Canada in the first quarter of 2001. Prior to 2001, Sepracor was earning royalties only in Europe, Japan and Australia.

Cost
of product sold, as a percentage of product sales, was approximately 14% and 24% for the six months ended June 30, 2001 and 2000, respectively. The decrease for the six
months ended June 30, 2001 was due to the inclusion in the six months ended June 30, 2000 of costs of approximately $2,766,000, or 12% of product sales, related to a third party
manufacturing issue. The six months ended June 30, 2001 includes an approximate $1,000,000 credit resulting from the partial resolution of a third party manufacturing issue.

Cost
of license fee revenues was $0 and $2,000,000 for the six months ended June 30, 2001 and 2000, respectively. The $2,000,000 in the six month period ended June 30,
2000 represents sublicense fees owed under a license agreement with McLean Hospital pertaining to patents related to the Lilly (R)-Fluoxetine Agreement.

Research
and development expenses were $97,246,000 and $70,512,000 for the six months ended June 30, 2001 and 2000, respectively. The increase for the six months ended
June 30, 2001 is primarily due to Phase III norastemizole clinical study costs and costs related to the submission of an NDA for SOLTARA brand norastemizole, and Phase III clinical study costs
relating to esopiclone (formerly (S)-zopiclone).

Selling,
general and administrative and patent expenses were $53,158,000 and $45,581,000 for the six months ended June 30, 2001 and 2000, respectively. Of the total, selling
and marketing expenses were $42,550,000 and $35,624,000 for the six months ended June 31, 2001 and 2000, respectively. The increase for the six months ended June 30, 2001 is primarily
due to increased selling and marketing expenses as a result of the increase in XOPENEX sales, and costs relating to the commercialization of SOLTARA.

The
net of interest income, interest (expense) and other income (expense) was ($5,997,000) and ($11,036,000) for the six months ended June 30, 2001 and 2000, respectively. The
decrease in the net expense for the six months ended June 30, 2001 is primarily due to ($7,497,000) of other expense in the first quarter of 2000, relating to inducements and other costs for
the conversion of $96,424,000 of 61/4% Debentures, partially offset by lower interest income in 2001, as the cash available for investment was lower than in 2000 and invested at lower
interest rates.

Equity
in investee losses was $0 and $989,000 for the six months ended June 30, 2001 and 2000, respectively. The loss in the six month period ended June 30, 2000 related
to Sepracor's investment in HemaSure which was written down to zero during the third quarter of fiscal 2000.

Minority
interest in subsidiary resulted in a decrease to consolidated net loss of $2,152,000 and $1,489,000 for the six months ended June 30, 2001 and 2000, respectively. The
fluctuation in minority interest resulted from the minority interest in BioSphere increasing from approximately 42% in 2000 to 45% in 2001, combined with the recording by BioSphere of a larger net
loss in the six month period ended June 30, 2001 than in the six month period ended June 30, 2000.

Liquidity and Capital Resources

Cash and cash equivalents and short and long-term investments totaled $525,849,000 at June 30, 2001, compared to $634,479,000 at
December 31, 2000.

The
net cash used in operating activities for the six months ended June 30, 2001 was $102,302,000. The net cash used in operating activities includes a net loss of $85,302,000
adjusted by non-cash charges of $5,967,000. These charges were offset by the minority interest in subsidiary's net loss of

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$2,152,000. Accounts receivable increased by $1,840,000 due to increased sales of XOPENEX. Other current assets increased by $6,260,000 primarily due to increased royalty receivables from Aventis
related to ALLEGRA. Accounts payable decreased by $24,363,000 due to the timing of cash disbursements. Accrued expenses increased by $5,470,000 due to higher research and development costs. Other
current liabilities increased by $6,643,000 primarily due to additional accruals for product revenue rebates and return reserves as a result of increased XOPENEX revenues.

The
net cash provided by investing activities for the six months ended June 30, 2001 was $78,427,000. Cash resulted from net sales and maturities of short and
long-term investments of $87,740,000. The Company made purchases of property and equipment of $3,541,000, and other assets increased by $5,772,000 primarily due to the loan receivable for
the construction financing from the developer of the property to be leased by Sepracor upon its completion.

The
net cash provided by financing activities for the six months ended June 30, 2001 was $2,995,000. The Company received approximately $1,754,000 in proceeds from the issuance
of common stock and had a net increase in capital lease and debt activity of $1,241,000.

In
July 2001, Sepracor announced that it had sold 2,000,000 shares of BioSphere common stock as part of a public offering in which BioSphere also sold 2,000,000 shares of its
common stock at a price to the public of $11.00 per share. On August 2, 2001, the underwriters exercised their option to purchase an additional 600,000 shares of BioSphere common stock from
Sepracor at a price to the public of $11.00 per share. Sepracor received net proceeds, after offering costs, from the sales of approximately $26,634,000. As a result of these sales, Sepracor's
ownership in BioSphere has been reduced from approximately 55% to 26%.

In
January 2001, the Company announced that on February 21, 2001 it would redeem the $92,858,000 in principal amount of 61/4% Debentures that remained
outstanding. On February 20, 2001, prior to the redemption, all outstanding 61/4% Debentures were converted. As a result of the conversion, 3,920,608 shares of Sepracor Common
Stock were issued and deferred financing costs of approximately $1,525,000 were written off against additional paid-in capital.

The
Company believes its existing cash and the anticipated cash flow from its current strategic alliances and operations will be sufficient to support existing operations through
2002. Sepracor's actual future cash requirements, however, will depend on many factors, including the progress of its preclinical, clinical, and research programs, the number and breadth of these
programs, the costs associated with commercialization of the Company's products and products under development, achievement of milestones under its strategic alliance arrangements, sales of its
products, acquisitions, its ability to establish and maintain additional strategic alliances and licensing arrangements and the progress of the Company's development efforts and the development
efforts of its strategic partners.

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Factors Affecting Future Operating Results

Certain of the information contained in this Quarterly Report on Form 10-Q, including information with respect to the safety, efficacy and
potential benefits of the Company's drugs under development and the scope of patent protection with respect to these products and information with respect to the other plans and strategies for the
Company's business and the business of the subsidiaries and certain affiliates of the Company, consists of forward-looking statements. The forward-looking statements contained in this Quarterly Report
on Form 10-Q represent our expectations as of the date of this Quarterly Report on Form 10-Q. Subsequent events will cause our expectations to change. However,
while we may elect to update these forward-looking statements, we specifically disclaim any intention or obligation to do so. Important factors that could cause actual results to differ materially
from the forward-looking statements include the following:

We have never been profitable and we may not be able to generate revenues sufficient to achieve profitability.We have
not been profitable since inception, and it is possible that we will not achieve profitability. We incurred net losses applicable to common shares on a consolidated basis of approximately
$85.3 million for the six months ended June 30, 2001, $204.0 million for the year ended December 31, 2000 and $183.1 million for the year ended December 31,
1999. We expect to continue to incur significant operating and capital expenditures. As a result, we will need to generate significant revenues to achieve and maintain profitability. We cannot assure
you that we will achieve significant revenues or that we will ever achieve profitability. Even if we do achieve profitability, we cannot assure you that we can sustain or increase profitability on a
quarterly or annual basis in the future. If revenues grow more slowly than we anticipate or if operating expenses exceed our expectations or cannot be adjusted accordingly, our business, results of
operations and financial conditions will be materially and adversely affected.

If
we or our development partners are not successful in developing and commercializing our principal products under development, then our ability to become profitable will be
adversely affected. Our ability to achieve profitability will depend in large part on successful commercialization of our initial products and successful development and commercialization of principal
products under development. Failure to successfully commercialize our products and products under development by us and our development partners may have a material adverse effect on our business. In
October 2000, we announced that Lilly had notified us that it was terminating the Lilly Agreement. Accordingly, we will not receive the royalties that we would have received if (R)-fluoxetine
had been successfully developed and commercialized by Lilly or milestone payments based upon achievement by Lilly of certain development objectives. As a result, our revenues will be adversely
affected. We are entitled to receive royalties on sales, if any, of desloratadine under the DCL Agreement with Schering. In February 2001, Schering announced that it had been advised by the
U.S. Food and Drug Administration, which we refer to as the FDA, that current good manufacturing practices deficiencies cited by the FDA would need to be resolved prior to FDA approval of
desloratadine. We are entitled to receive royalties on sales, if any, of ticalopride under the Ticalopride Agreement with Janssen. In April 2001, Janssen announced that it had suspended
clinical trials of ticalopride pending further analysis of a small number of adverse events reported in patients. We do not know if or when desloratadine or ticalopride
may be approved, or the timing of commercialization of these compounds. In addition, if other collaborative development arrangements are terminated or commercialization efforts under those agreements
are delayed or are unsuccessful, then successful commercialization of our products under development may be delayed or terminated, which could have a material adverse effect on our business.

In
May 2001, an advisory panel to the FDA recommended that the FDA allow certain popular allergy medications to be sold without a prescription. The FDA may or may not accept
the recommendation of the advisory panel. If the FDA approves the sale of these allergy medications without prescription, our business may be adversely affected because royalty revenues may be reduced

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and the market for prescription drugs, including SOLTARA brand norastemizole, may be adversely affected.

We will be required to expend significant resources for research, development, testing and regulatory approval of our drugs under development and these drugs
may not be developed successfully.We develop and commercialize proprietary pharmaceutical products for the primary care and specialty markets. Most of our drug
candidates are still undergoing clinical trials or are in the early stages of development. Our drugs may not provide greater benefits or fewer side effects than the original versions of these drugs
and our research efforts may not lead to the discovery of new drugs with improved characteristics. All of our drugs under development will require significant additional research, development,
preclinical and/or clinical testing, regulatory approval and a commitment of significant additional resources prior to their commercialization. Our potential products may not:

| | be developed successfully;                                                   
|- | -----------------------------------------------------------------------------
| | be proven safe and efficacious in clinical trials;                           
| | offer therapeutic or other improvements over comparable drugs;               
| | meet applicable regulatory standards;                                        
| | be capable of being produced in commercial quantities at acceptable costs; or
| | be successfully marketed.                                                    

If we fail to adequately protect our intellectual property rights or face a claim of intellectual property infringement by a third party, then we could lose
valuable intellectual property rights, be liable for significant damages or be prevented from commercializing our products.Our success depends in part on our
ability to obtain and maintain patents, protect trade secrets and operate without infringing upon
the proprietary rights of others. In the absence of patent and trade secret protection, competitors may adversely affect our business by independently developing and marketing substantially equivalent
products and technology and preventing us from marketing our products. It is also possible that we could incur substantial costs in litigation if we are required to defend ourselves in patent suits
brought by third parties, or if we are required to initiate litigation against others to protect our intellectual property rights.

We
have filed patent applications covering the composition of, and the methods of using, single-isomer or active-metabolite forms of various compounds for specific applications. Our
revenues under collaboration agreements with pharmaceutical companies depend in part on the existence of issued patents. However, we may not be issued patents in respect of the patent applications
already filed or that we file in the future. Moreover, the patent position of companies in the pharmaceutical industry generally involves complex legal and factual questions, and recently has been the
subject of much litigation. Legal standards relating to the scope and validity of patent claims are evolving. Any patents we have obtained, or obtain in the future, may be challenged, invalidated or
circumvented. Moreover, the United States Patent and Trademark Office, which we refer to as the PTO, may commence interference proceedings involving our patents or patent applications. Any challenge
to, or invalidation or circumvention of, our patents or patent applications could have a material adverse effect on our business.

Our
ability to commercialize any drug successfully will largely depend upon our ability to obtain and maintain patents of sufficient scope to prevent third parties from developing
similar or competitive products. Third parties, typically drug companies, hold patents or patent applications covering the composition of matter for most of the drug candidates for which we have use
patents or patent applications. Third parties also hold patents relating to drug delivery technology that may be necessary for the development of some of our drug candidates. In each of these cases,
unless we have or obtain a

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license agreement, we generally may not commercialize the drug candidates until these third-party patents expire. Licenses may not be available to us on acceptable terms, if at all. In addition, it
would be costly for us to contest the validity of a third-party patent or defend any claim that we infringe a third-party patent. Moreover, litigation involving third-party patents may not be resolved
in our favor.

If our products do not receive government approval, then we will not be able to commercialize them.The FDA, and
similar foreign agencies, must approve the marketing and sale of pharmaceutical products developed by us or our development partners. These agencies impose substantial requirements on the manufacture
and marketing of drugs. Any unanticipated preclinical and clinical studies we are required to undertake could result in a significant increase in the funds we will require to advance our products to
commercialization. In addition, the failure by us or our collaborative development partners to obtain regulatory approval on a timely basis or, the attempt by us or our collaborative development
partners to receive regulatory approval to achieve labeling objectives, could adversely affect the timing of the commercial introduction of, or our ability to market and sell, our products. We are
entitled to receive royalties on sales, if any, of desloratadine under the DCL Agreement with Schering. In
February 2001, Schering announced that it had been advised by the FDA that current good manufacturing practices deficiencies cited by the FDA would need to be resolved prior to FDA approval of
desloratadine. We do not know if or when the product may be approved, or the timing of commercialization of desloratadine.

The
regulatory process to obtain marketing approval requires clinical trials of a product to establish its safety and efficacy. Problems that may arise during clinical trials include:

| | results of clinical trials may not be consistent with preclinical study results;                            
|- | ------------------------------------------------------------------------------------------------------------
| | results from later phases of clinical trials may not be consistent with the results from earlier phases; and
| | products may not be shown to be safe and efficacious.                                                       

Even if the FDA or similar foreign agencies grant us regulatory approval of a product, the approval may take longer than we anticipate and may be subject to
limitations on the indicated uses for which the product may be marketed or contain requirements for costly post-marketing follow-up studies. Moreover, if we fail to comply with
applicable regulatory requirements, we may be subject to fines, suspension or withdrawal of regulatory approvals, product recalls, seizure of products, operating restrictions and criminal prosecution.

The development and commercialization of our products could be delayed or terminated if our collaboration partners terminate, suspend activity or fail to
perform their obligations under their agreements with us or if any of our collaboration agreements is subject to lengthy government review.We have entered
into collaboration arrangements with pharmaceutical companies. Our revenues under these collaboration arrangements will consist primarily of royalties on sales of products. Any such payments and
royalties will depend in large part on the development and commercialization efforts of our collaboration partners, which we cannot control. If any of our collaboration partners does not devote
sufficient time and resources to, or suspends activity under its collaboration arrangement with us, we may not realize the potential commercial benefits of the arrangement, and our results of
operations may be adversely affected. In addition, if regulatory approval of any product candidate under development by our collaboration partners is delayed or limited, we may not realize or may be
delayed in realizing the potential commercial benefits of the arrangement. If any of our collaboration partners were to breach or terminate their agreements with us or fail to perform their
obligations to us in a timely manner, the development and commercialization of the products could be delayed or terminated. Any failure or inability by us to perform, or any breach by us in our
performance of, our obligations under a collaboration agreement could reduce or extinguish the benefits to which we are otherwise entitled under the agreement. Any delay or termination of this type
could have a material

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adverse effect on our financial condition and results of operations because we may be required to expend additional funds to bring our products to commercialization, we may lose technology rights and
milestone or royalty payments from collaboration partners or revenue from product sales, if any, could be delayed or terminated. In October 2000, we announced that Lilly had notified us that it
intended to terminate the (R)-fluoxetine agreement. As a result, we will not receive the royalties we would have received if (R)-fluoxetine had been successfully developed and commercialized or
milestone payments based upon achievement by Lilly of certain development objectives. We are entitled to receive royalties on sales, if any, of ticalopride under the Ticalopride Agreement with
Janssen, in countries where we have issued patents covering Janssen's intended use. In April 2001, Janssen announced that it had suspended clinical trials of ticalopride pending further
analysis of a small number of adverse events reported in patients.

Development
and commercialization of some of our product candidates may depend on our ability to enter into additional collaboration agreements with pharmaceutical companies to fund
all or part of the costs of development and commercialization of these product candidates. We may not be able to enter into collaboration agreements and the terms of the collaboration agreements, if
any, may not be favorable to us. The inability to enter into collaboration agreements could delay or preclude the development, manufacture and/or marketing of some of our drugs and could have a
material adverse effect on our financial condition and results of operations because:

| | we may be required to expend additional funds to advance the drugs to commercialization;
|- | ----------------------------------------------------------------------------------------
| | revenue from product sales could be delayed; or                                         
| | we may elect not to commercialize the drugs.                                            

We
are required to file a notice under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, for certain agreements containing exclusive license
grants and to delay the effectiveness of any such exclusive license until the expiration or earlier termination of the notice and waiting period under the HSR Act. If the expiration or termination of
the notice and waiting period under the HSR Act is delayed because of lengthy government review, or if the Federal Trade Commission or Department of Justice successfully challenges such a license,
development and commercialization could be delayed or precluded and our business could be adversely affected.

We have limited sales and marketing experience and expect to incur significant expenses in developing a sales force. We also rely on third parties for sales of
our products. In addition, our limited sales and marketing experience may restrict our success in commercializing our products.We currently have limited
marketing and sales experience. If we successfully develop and obtain regulatory approval for the products we are currently developing, we may license some of them to large pharmaceutical companies
and market and sell through our direct sales forces or through other arrangements, including co-promotion arrangements. We have established a direct sales force to market XOPENEX. We also
expect to use a direct sales force to market SOLTARA brand norastemizole, if approved. As we begin to enter into co-promotion arrangements or market and sell additional products directly,
we
will need to significantly expand our sales force. Our limited experience in developing, maintaining and expanding a direct sales force may restrict our success in commercializing our products. We
expect to incur significant expense in expanding our direct sales force. With respect to products under development, we may incur significant costs in developing a sales force before the product has
been approved for marketing.

Our
ability to realize significant revenues from direct marketing and sales activities depends on our ability to attract and retain qualified sales personnel in the pharmaceutical
industry and competition for these persons is intense. If we are unable to attract and retain qualified sales personnel, we will not be able to successfully expand our marketing and direct sales force
on a timely or cost effective basis. We may also need to enter into additional co-promotion arrangements with third parties where our own

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direct sales force is neither well situated nor large enough to achieve maximum penetration in the market. We may not be successful in entering into any co-promotion arrangements, and the
terms of any co-promotion arrangements may not be favorable to us. We depend in large part on a third-party contract sales organization for sales of XOPENEX and we may contract with
third-party contract sales organizations in the future for other products if successfully developed, including SOLTARA brand norastemizole. We cannot control the level of effort and quality of service
provided by co-promoters or any third party sales force. If the level of effort and/or quality of service provided by these third parties is not adequate, our revenues would be adversely
affected.

If we do not maintain current good manufacturing practices, then the FDA could refuse to approve marketing applications. We do not have the capability to
manufacture in sufficient quantities all of the products which may be approved for sale, and developing and obtaining this capability will be time consuming and
expensive.The FDA and other regulatory authorities require that our products be manufactured according to their good manufacturing practices standards. The
failure by us, our collaborative development partners or third-party manufacturers to maintain current good manufacturing practices compliance and/or our failure to scale up our manufacturing
processes could lead to refusal by the FDA to approve marketing applications. Failure in either respect could also be the basis for action by the FDA to withdraw approvals previously granted and for
other regulatory action. We are entitled to receive royalties on sales, if any, of desloratadine under the DCL Agreement with Schering. In February 2001, Schering announced that it had been
advised by the FDA that current good manufacturing practices deficiencies cited by the FDA would need to be resolved prior to FDA approval of desloratadine. We do not know if or when desloratadine may
be approved or the timing of commercialization of this compound.

Failure
to increase our manufacturing capabilities may mean that even if we develop promising new products, we may not be able to produce them. We currently operate a manufacturing
plant that is compliant with current good manufacturing practices that we believe can produce commercial quantities of XOPENEX and support the production of our other possible products in amounts
needed for our clinical trials. However, we will not have the capability to manufacture in sufficient quantities all of the products which may be approved for sale. Accordingly, we will be required to
spend money to expand
our current manufacturing facility, build an additional manufacturing facility or contract the production of these drugs to third-party manufacturers.

Our reliance on third-party manufacturers could adversely affect our ability to meet our customers' demands.Automatic
Liquid Packaging, a division of Cardinal Health, Inc., is currently the sole finished goods manufacturer of our product XOPENEX. If Automatic Liquid Packaging experiences delays or difficulties
in producing, packaging or delivering XOPENEX, we could be unable to meet our customers' demands for XOPENEX, which could lead to customer dissatisfaction and damage to our reputation. Furthermore, if
we are required to change manufacturers, we will be required to verify that the new manufacturer maintains facilities and procedures that comply with quality standards and with all applicable
regulations and guidelines. The delays associated with the verification of a new manufacturer could negatively affect our ability to produce XOPENEX in a timely manner or within budget.

We
currently have a supply contract with ChiRex Inc. that commits us to purchase through December 31, 2001 all of our annual requirements of those drugs that we will
market directly through our sales force, provided ChiRex meets certain pricing, supply and quality control conditions. If ChiRex experiences delays or difficulties in producing, packaging or
delivering the drugs, market introduction and subsequent sales of the drugs that we market through our sales force could be adversely affected. Under this supply agreement, however, we retain the
right to manufacture limited quantities of our drugs in our Nova Scotia manufacturing plant.

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If we or our collaboration partners fail to obtain an adequate level of reimbursement for our future products or services by third party payors, there may be
no commercially viable markets for our products or services.The availability and amounts of reimbursement by governmental and other third party payors affects
the market for any pharmaceutical product or service. These third party payors continually attempt to contain or reduce the costs of healthcare by challenging the prices charged for medical products
and services. In certain foreign countries, including the countries of the European Union, the pricing of prescription pharmaceuticals is subject to governmental control. We may not be able to sell
our products profitably if reimbursement is unavailable or limited in scope or amount.

In
both the United States and certain foreign jurisdictions, there have been a number of legislative and regulatory proposals to change the healthcare system. Further proposals are
likely. The potential for adoption of these proposals affects or will affect our ability to raise capital, obtain additional collaboration partners and market our products. We expect to experience
pricing pressure for our existing products and any future products for which marketing approval is obtained due to the trend toward managed healthcare, the increasing influence of health maintenance
organizations and additional legislative proposals.

We could be exposed to significant liability claims that could prevent or interfere with our product commercialization
efforts.We may be subjected to product liability claims that arise through the testing, manufacturing, marketing and sale of human health care products. These
claims could expose us to significant liabilities that could prevent or interfere with our product commercialization efforts. Product liability claims could require us to spend significant time and
money in litigation or to pay significant damages. Although we maintain product liability insurance coverage for both the clinical trials and commercialization of our products, it is possible that we
will not be able to obtain further product liability insurance on acceptable terms, if at all, and that our insurance coverage may not provide adequate coverage against all potential claims.

We have significant long-term debt and we may not be able to make interest or principal payments when
due.As of June 30, 2001, our total long-term debt was approximately $761.8 million and our stockholders' equity (deficit) was
($197.9) million. Neither the 7% convertible subordinated debentures due 2005 nor the 5% convertible subordinated debentures due 2007 restricts our ability or our subsidiaries ability to incur
additional indebtedness, including debt that ranks senior to the 7% debentures or the 5% debentures. Additional indebtedness that we incur may rank senior to or on parity with these debentures in
certain circumstances. Our ability to satisfy our obligations will depend upon our future performance, which is subject to many factors, including factors beyond our control. The conversion price for
the 7% debentures is $62.4375 and the conversion price for the 5% debentures is $92.38. If the market price for our common stock does not exceed the conversion price the holders of the debentures may
not convert their debentures into common stock. It is possible that we will be unable to meet our debt service requirements on any of our outstanding debentures. Moreover, we may be unable to repay
any of our outstanding debentures at maturity or otherwise in accordance with the debt instruments.

If sufficient funds to finance our business are not available to us when needed or on acceptable terms, then we may be required to delay, scale back, eliminate
or alter our strategy for our programs.We may require additional funds for our research and product development programs, operating expenses, the pursuit of
regulatory approvals, license or acquisition opportunities and the expansion of our production, sales and marketing capabilities. Historically, we have satisfied our funding needs through
collaboration arrangements with corporate partners and equity and debt financings. These funding sources may not be available to us when needed in the future, and, if available, they may not be on
terms acceptable to us. Insufficient funds could require us to delay, scale back or eliminate certain of our research and product development programs or to license third parties to commercialize

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products or technologies that we would otherwise develop or commercialize ourselves. Our cash requirements may vary materially from those now planned because of factors including:

| | increased research and development expenses;                                                   
|- | -----------------------------------------------------------------------------------------------
| | patent developments;                                                                           
| | licensing or acquisition opportunities;                                                        
| | relationships with collaboration partners;                                                     
| | the FDA regulatory process;                                                                    
| | our capital requirements; and                                                                  
| | selling, marketing and manufacturing expenses in connection with commercialization of products.

We expect to face intense competition and our competitors have greater resources and capabilities than we have. Developments by others may render our products
or technologies obsolete or noncompetitive.We expect to encounter intense competition in the sale of our current and future products. If we are unable to
compete effectively, our financial condition and results of operations could be materially adversely affected because we may use our financial resources to seek to differentiate ourselves from our
competition and because we may not achieve our product revenue objectives. Many of our competitors and potential competitors, which include pharmaceutical companies, biotechnology firms, universities
and other research institutions, have substantially greater resources, manufacturing and marketing capabilities, research and development staff and production facilities than we have. The fields in
which we compete are subject to rapid and substantial technological change. Our competitors may be able to respond more quickly to new or emerging technologies or to devote greater resources to the
development, manufacture and marketing of new products and/or technologies than we can. As a result, any products and/or technologies that we develop may become obsolete or noncompetitive before we
can recover expenses incurred in connection with their development.

Fluctuations in the demand for products, the timing of collaboration arrangements and regulatory approval, any termination of development efforts, expenses and
the results of operations of our subsidiaries will cause fluctuations in our quarterly operating results, which could cause volatility in our stock price.Our
quarterly operating results are likely to fluctuate significantly, which could cause our stock price to be volatile. These fluctuations will depend on factors which include:

| | the timing of receipt of up front, milestone or royalty payments under collaboration agreements;                                               
|- | -----------------------------------------------------------------------------------------------------------------------------------------------
| | the success and timing of regulatory approvals for products developed by us or our collaboration partners or for collaborative agreements;     
| | the timing of collaboration agreements for development of our pharmaceutical candidates and development costs for those pharmaceuticals;       
| | the termination of development efforts of any product under development or any collaboration agreement;                                        
| | the timing of product sales and market penetration;                                                                                            
| | the timing of operating expenses, including selling and marketing expenses and the costs of expanding and maintaining a direct sales force; and
| | the timing of expenses we may incur with respect to any license or acquisitions of products or technologies.                                   

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Our stock price could be highly volatile, which could cause you to lose part or all of your investment.The market
price of our common stock, like that of the common stock of many other pharmaceutical and biotechnology companies, may be highly volatile. In addition, the stock market has experienced extreme price
and volume fluctuations. This volatility has significantly affected the market prices of securities of many pharmaceutical and biotechnology companies for reasons frequently unrelated to or
disproportionate to the operating performance of the specific companies. These broad market fluctuations may adversely affect the market price of our common stock. Prices for our common stock will be
determined in the market place and may be influenced by many factors, including variations in our financial results and investors' perceptions of us, changes in recommendations by securities analysts
as well as their perceptions of general economic, industry and market conditions.

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ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market Risk

The Company is exposed to market risk from changes in interest rates and equity prices, which could affect its future results of operations and financial
condition. These risks are described in the Company's Annual Report on Form 10-K for the year ended December 31, 2000. As of August 10, 2001, there have been no
material changes to the market risks described in the Company's Annual Report on Form 10-K for the year ended December 31, 2000. Additionally, the Company does not anticipate
any near-term changes in the nature of its market risk exposures or in management's objectives and strategies with respect to managing such exposures.

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PART II  OTHER INFORMATION

Item 1. Legal Proceedings

Currently, Sepracor is not a party to any material legal proceedings.

On
February 7, 2001, Artes Medical USA, Inc. filed a complaint in the United States District Court for the Central District of California (Los Angeles), alleging that
BioSphere was liable for infringement, inducement of infringement, and contributory infringement of U.S. Patent No. 5,344,452, which BioSphere refers to as the '452 patent. The '452 patent
relates to "...implant[s] based on a biocompatible solid in powder form, in particular a plastic." Artes sought monetary damages as compensation for the alleged infringement
and a permanent injunction against the alleged infringing activity. Artes alleged that all of BioSphere's microsphere-related products, including its Embosphere Microspheres, HepaSphere SAP
Microspheres and MatrX Microspheres infringe the '452 patent. In addition, BioSphere filed a complaint for declaratory judgment in the United States District Court for the District of Delaware against
Artes. The complaint sought a declaration that the '452 patent is invalid and not infringed by BioSphere and BSMD Ventures, a wholly-owned subsidiary of BioSphere.

On
May 16, 2001, representatives of Artes, BSMD Ventures, and BioSphere executed an agreement to settle the Delaware and California actions. On May 24, 2001, the parties
submitted joint stipulations and orders of dismissal in both the Delaware and California courts. The California action was dismissed by the court on May 25, 2001. The Delaware action was
dismissed by the court on May 29, 2001.

The
impact of this settlement did not and will not have a material impact on Sepracor's operating results.

Items 2-3. None

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

The Company's Annual Meeting of Stockholders was held on May 23, 2001 (the "Annual Meeting"). The proposals approved at the Annual Meeting are further
specified below:

1.  The
following persons were elected directors (Class III) to serve subject to the By-laws of the Company until the annual meeting of stockholders
in 2004 and thereafter until his successor is duly elected and qualified:

For

Withheld AuthorityDigby W. Barrios

70,980,957

319,388Alan A. Steigrod

70,982,938

317,407


The
terms of office of the following directors continued after the Annual Meeting:

Timothy J. BarberichJames G. AndressRobert J. CresciKeith Mansford, Ph.D.James F. Mrazek


Items 5-6. None

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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 13, 2001 |  | By:          
|Date: August 13, 2001 |  | By:          

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