SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-Q

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

                      FOR THE QUARTER ENDED MARCH 31, 1999


                         Commission file number 1-12584


                         SHEFFIELD PHARMACEUTICALS, INC.
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

        DELAWARE                                          13-3808303
(STATE OF INCORPORATION)                    (IRS EMPLOYEE IDENTIFICATION NUMBER)

425 SOUTH WOODSMILL ROAD                     63017             (314) 579-9899
ST. LOUIS, MISSOURI                       (ZIP CODE)    (REGISTRANT'S TELEPHONE,
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)                    INCLUDING AREA CODE)


          SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:

           TITLE OF CLASS            NAME OF EACH EXCHANGE ON WHICH REGISTERED
   Common Stock. $.01 par value                American Stock Exchange


          SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:

                                      None


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
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.
[X] Yes [ ] No

The number of shares outstanding of the Registrant's  Common Stock is 27,266,346
shares of Common Stock as of May 10, 1999.

<PAGE>

                 SHEFFIELD PHARMACEUICALS, INC. AND SUBSIDIARIES
                        (a development stage enterprise)


                                    FORM 10-Q
                      For the Quarter Ended March 31, 1999

                                Table of Contents


                                                                            PAGE
                                     PART I

Item 1.  Financial Statements

Consolidated Balance Sheets as of March 31, 1999
   and December 31, 1998.................................................      3

Consolidated Statements of Operations
  for the three months ended March 31, 1999 and 1998 and for 
  the period from October 17, 1986 (inception) to March 31, 1999.........      4

Consolidated Statements of Cash Flows
  for the three  months ended March 31, 1999 and 1998 and for 
  the period from October 17, 1986 (inception) to March 31, 1999.........      5

Consolidated Statements of Stockholders' Equity (Net Capital 
  Deficiency) for the period from October 17, 1986
  (inception) to March 31, 1999 .........................................      6

Notes to Consolidated Financial Statements ..............................      7


Item 2.  Management's Discussion and Analysis of Financial
  Condition and Results of Operations....................................      8

                                     PART II

Item 2.  Changes in Securities...........................................     11


Item 6.  Exhibits and Reports on Form 8-K................................     11

Signatures...............................................................     12



<PAGE>
PART I:  FINANCIAL INFORMATION

Item 1.  FINANCIAL STATEMENTS


                SHEFFIELD PHARMACEUTICALS, INC. AND SUBSIDIARIES
                        (a development stage enterprise)
                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>

                                     ASSETS
                                                                                      March 31,          December
                                                                                         1999              1998
                                                                                         ----              ----
                                                                                      (unaudited)
Current assets:
<S>                                                                                   <C>             <C>         
          Cash and cash equivalents                                                   $  1,908,615    $  2,456,290
          Marketable equity security                                                       138,880         127,774
          Prepaid expenses and other current assets                                         34,594          39,035
                                                                                                      ------------
                                                                                                      ------------
                    Total current assets                                                 2,082,089       2,623,099
                                                                                      ------------    ------------


Property and equipment:
          Laboratory equipment                                                             323,263         317,032
          Office equipment                                                                 146,478         175,062
          Leasehold improvements                                                             1,323           1,323
                                                                                      ------------    ------------
                    Total at cost                                                          471,064         493,417
          Less accumulated depreciation and amortization                                  (245,267)       (253,995)
                                                                                                      ------------
                                                                                                      ------------
                   Property and equipment, net                                             225,797         239,422
                                                                                      ------------    ------------

          Total assets                                                                $  2,307,886    $  2,862,521
                                                                                      ============    ============

          LIABILITIES AND STOCKHOLDERS' EQUITY (NET CAPITAL DEFICIENCY)

Current liabilities:
          Accounts payable and accrued liabilities                                    $    570,472    $    615,138
          Sponsored research payable                                                       449,805         449,805
          Note payable - related party                                                     104,145         101,323
                                                                                      ------------    ------------
                   Total current liabilities                                             1,124,422       1,166,266

Convertible promissory note                                                              1,500,000       1,000,000
Other long-term liabilities                                                                 65,237          41,050
Commitments and contingencies                                                                 --              --
                                                                                      ------------    ------------
          Total liabilities                                                              2,689,659       2,207,316

Stockholders' equity (net capital deficiency):
          Preferred stock, $.01 par value, authorized 3,000,0000 shares:
             Series C cumulative convertible preferred stock, authorized 23,000
               shares; 12,122 and 11,914 shares issued and outstanding at March 31,
               1999 and December 31, 1998, respectively                                        121             119
          Common stock, $.01 par value, authorized 50,000,000 shares;
               issued and outstanding 27,083,419 and 27,058,419 shares at March 31,
               1999 and December 31, 1998, respectively                                    270,834         270,584
          Notes receivable in connection with sale of stock                                 (7,500)        (10,000)
          Additional paid-in capital                                                    56,093,806      55,773,491
          Other comprehensive income (loss)                                               (211,120)       (222,226)
          Deficit accumulated during development stage                                 (56,527,914)    (55,156,763)
                                                                                      ------------    ------------
               Total stockholders' equity (net capital deficiency)                        (381,773)        655,205
                                                                                      ------------    ------------


Total liabilities and stockholders' equity (net capital deficiency)                   $  2,307,886    $  2,862,521
                                                                                      ============    ============
</TABLE>

                 See notes to consolidated financial statements

<PAGE>
                SHEFFIELD PHARMACEUTICALS, INC. AND SUBSIDIARIES

                        (a development stage enterprise)
                      CONSOLIDATED STATEMENTS OF OPERATIONS
     For the Three Months Ended March 31, 1999 and 1998 and for the Period
               from October 17, 1986 (inception) to March 31, 1999
                                   (Unaudited)

<TABLE>
<CAPTION>

                                                                                                            October 17,
                                                                        Three Months Ended                     1986
                                                                             March 31                     (inception) to
                                                                   1999                   1998            December 31,
                                                                   ----                   ----            ------------
Revenues:
<S>                                                            <C>                    <C>                   <C>       
   Sublicense revenue.......................................   $        --            $        --           $1,360,000
   Interest income..........................................        21,877                    953              535,977
                                                               -----------            -----------         ------------

        Total revenues......................................        21,877                    953            1,895,977

Expenses:
   Acquisition of research and development in-process
technology..............................................                --                     --           14,975,000
   Research and development..............................          654,979              1,609,041           22,258,669
   General and administrative..............................        499,663                612,490           20,064,992
   Interest.................................................        29,891                 42,470              441,009
                                                               -----------            -----------         ------------

        Total expenses......................................     1,184,533              2,264,001           57,739,670
                                                               -----------            -----------         ------------

Loss before extraordinary item............................     $(1,162,656)            (2,263,048)         (55,843,693)
Extraordinary item..........................................            --                     --               42,787
                                                               -----------            -----------         ------------
Net loss....................................................   $(1,162,656)           $(2,263,048)        $(55,800,906)
                                                               ===========            ===========         ============

Accretion of mandatorily redeemable preferred stock.                    --                (23,900)            (103,400)
                                                               -----------            -----------         ------------

Net loss - attributable to common shares...............        $(1,162,656)           $(2,286,948)        $(55,904,306)
                                                               ===========            ===========         ============

Weighted average common shares outstanding-
   basic and diluted........................................    27,074,252             13,655,722            6,746,866

Net loss per share of common stock-basic and
        diluted:
      Loss beforeextraordinary item........................         $(0.04)                $(0.17)              $(8.28)
      Extraordinary item....................................            --                     --                  .01
                                                               -----------           ------------         ------------
      Net loss per share....................................        $(0.04)                $(0.17)              $(8.27)
                                                               ===========           ============         ============
</TABLE>


                See notes to consolidated financial statements.
<PAGE>

                SHEFFIELD PHARMACEUTICALS, INC. AND SUBSIDIARIES
                        (a development stage enterprise)
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
         For the Three Months Ended March 31, 1999 and 1998 and for the
                   Period from October 17, 1986 (Inception) to
                                 March 31, 1999
                                   (Unaudited)

<TABLE>
<CAPTION>


                                                                                  Three Months Ended          October 17, 1986
                                                                                        March 31,              (inception) to
                                                                               1999                 1998       March 31, 1999
                                                                               ----                 ----       --------------

Cash outflows from development stage activities and
<S>                                                                        <C>                  <C>             <C>          
   extraordinary gain:  Loss before extraordinary item................     $(1,162,656)         $(2,263,048)    $(55,843,693)
         Extraordinary gain on extinguishment of debt.................              --                   --           42,787
                                                                           -----------          -----------     ------------
         Net loss.....................................................      (1,162,656)          (2,263,048)     (55,800,906)
                                                                           -----------          -----------     ------------
Adjustments to reconcile net loss to net cash used by
  development stage activities:
     Issuance of common stock, stock options/warrants for services.             62,567               16,389        2,344,540
     Non-cash acquisition of research and development in-process
       technology.....................................................              --                   --        1,650,000
     Depreciation and amortization....................................          19,856               13,482          413,075
     Other items......................................................          28,514               41,381          440,108
     Decrease (increase) in prepaid expenses & other current assets.             4,441                7,049          (93,635)
     Decrease in other assets.........................................              --               13,869           59,041
     Increase (decrease) in accounts payable and accrued liabilities..         (45,363)           1,721,374          (13,915)
     Increase (decrease) in sponsored research payable................              --                 (588)       1,026,875
                                                                           -----------          -----------     ------------
Net cash used by development stage activities.........................      (1,092,641)            (450,092)     (49,974,817)
                                                                           -----------          -----------     ------------

Cash flows from investing activities:
     Proceeds on sale of marketable securities........................              --                   --          175,085
     Acquisition of laboratory and office equipment, and leasehold
         improvements.................................................          (6,231)                  --         (455,355)
     Disposition of office equipment..................................              --               33,560               --
     Increase in notes receivable in connection with sale of stock....              --                   --         (240,000)
     Decrease in loan receivable - former officer.....................              --                7,500               --
     Payments of notes receivable.....................................           2,500               23,300          222,100
     Purchase of Camelot Pharmacal, L.L.C., net cash acquired.......                --                   --          (46,687)
                                                                           -----------          -----------     ------------
Net cash provided (used) by investing activities.....................           (3,731)              64,360         (344,857)
                                                                           -----------          -----------     ------------

Cash flows from financing activities:
     Principal payments under capital lease...........................          (1,303)                  --         (77,776)
     Proceeds from notes payable - related party......................              --                   --         150,000
     Repayments of notes payable - related party......................              --                   --         (50,000)
     Proceeds from issuance of convertible securities.................         500,000                   --       3,800,000
     Conversion of convertible, subordinated notes....................              --                   --         749,976
     Proceeds from issuance of common and preferred stock..........                 --                   --      37,452,847
     Redemption of preferred stock....................................              --                   --      (1,250,000)
     Proceeds from exercise of warrants/stock options.................          50,000                   --      11,452,158
                                                                           -----------          -----------     ------------
Net cash provided by financing activities.............................         548,697                   --      52,227,205
                                                                           -----------          -----------     ------------

Net increase (decrease) in cash and cash equivalents..................        (547,675)            (385,732)      1,907,531
Cash and cash equivalents at beginning of period......................       2,456,290              393,608           1,084
                                                                           -----------          -----------     ------------
Cash and cash equivalents at end of period............................      $1,908,615               $7,876      $1,908,615
                                                                           ===========          ===========     ============

Noncash investing and financing activities:
     Common stock, stock options and warrants issued for services..            $62,567              $16,389      $2,344,540
     Common stock redeemed in payment of notes receivable.........                  --                   --          10,400
     Acquisition of research and development in-process
        technology....................................................              --                   --       1,655,216
     Common stock issued for intellectual property rights.............              --                   --         866,250
     Common stock issued to retire debt...............................              --                   --         600,000
     Common stock issued to redeem convertible securities............               --            2,136,784       5,353,368
     Securities acquired under sublicense agreement...................              --                   --         850,000
     Equipment acquired under capital lease...........................              --                   --         121,684
     Notes payable converted to common stock..........................              --                   --         749,976
     Stock dividends..................................................         208,495              104,281         987,042

Supplemental disclosure of cash flow information: Interest paid...              $1,377               $1,089        $268,778
</TABLE>


                See notes to consolidated financial statements.


<PAGE>

                SHEFFIELD PHARMACEUTICALS, INC. AND SUBSIDIARIES
                        (a development stage enterprise)
    CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (NET CAPITAL DEFICIENCY)
       For the Period from October 17, 1986 (Inception) to March 31, 1999
                                  (Unaudited)

<TABLE>
<CAPTION>

                                                                                                  Notes
                                                                                               receivable                
                                                                                                  in                     
                                                                                               connection     Additional 
                                                                Preferred        Common        with sale of    paid-in   
                                                                  Stock           Stock           Stock        capital   
                                                                  -----           -----           -----        -------   

<S>                                                             <C>            <C>             <C>           <C>         
Balance at October 17, 1986..................................   $      --      $        --     $       --    $        -- 
Common stock issued..........................................          --       11,334,252             --     17,024,469 
Reincorporation in Delaware at $.01 par value................          --      (11,220,369)            --     11,220,369 
Common stock options issued..................................          --               --             --         75,000 
Common stock subscribed......................................          --               --       (110,000)            -- 
Comprehensive income (loss):
       Unrealized loss on marketable securities..............          --               --             --             -- 
       Net loss..............................................          --               --             --             -- 
                                                               ----------      -----------     ----------    ----------- 
       Comprehensive income (loss)...........................                                                            
                                                                                                                         

Balance at December 31, 1996.................................          --          113,883       (110,000)    28,319,838 
Issuance of common stock in connection with
     acquisition of Camelot Pharmacal, L.L.C.................          --            6,000             --      1,644,000 
Common stock issued..........................................          --            6,612         37,400      1,041,750 
Common stock options and warrants issued.....................          --               --             --        165,868 
Common stock options extended................................          --               --             --        215,188 
Accretion of issuance costs for Series A preferred stock.....          --               --             --             -- 
Comprehensive income (loss):
     Unrealized gain on marketable securities................          --               --             --             -- 
     Net loss................................................          --               --             --             -- 
                                                               ----------      -----------     ----------    ----------- 

     Comprehensive income (loss).............................                                                            
                                                                                                                         

Balance at December 31, 1997.................................          --          126,495        (72,600)    31,386,644 
Common stock issued..........................................          --          144,089         62,600     12,472,966 
Series C preferred stock issued..............................         115               --             --     11,499,885 
Series C preferred stock dividends...........................           4               --             --        413,996 
Accretion of issuance costs for Series A preferred stock.....          --               --             --             -- 
Comprehensive income (loss):
     Unrealized loss on marketable securities................          --               --             --             -- 
     Net loss................................................          --               --             --             -- 
                                                               ----------      -----------     ----------    ----------- 
     Comprehensive income (loss).............................                                                            
                                                                                                                         

Balance at December 31, 1998.................................         119          270,584        (10,000)    55,773,491 
Common stock issued..........................................          --              250          2,500         49,750 
Preferred stock dividends....................................           2               --             --        207,998 
Common stock warrants issued.................................          --               --             --         62,567 
Comprehensive income (loss):
     Unrealized gain on marketable securities................          --               --             --             -- 
     Net loss................................................          --               --             --             -- 
                                                               ----------      -----------     ----------    ----------- 
     Comprehensive income (loss).............................                                                            
                                                                                                                         
Balance at March 31, 1999....................................        $121         $270,834       $(7,500)    $56,093,806 
                                                               ==========      ===========     ==========    =========== 
</TABLE>


<TABLE>
<CAPTION>

                                                                                             Deficit                  Total
                                                                      Other               accumulated              stockholders
                                                                   comprehen-               during                  equity (net
                                                                   sive income            development                  capital
                                                                     (loss)                   stage                  deficiency
                                                                     ------                   -----                  ----------

<S>                                                                <C>                   <C>                       <C>          
Balance at October 17, 1986..................................      $      --             $          --             $          --
Common stock issued..........................................             --                        --                28,358,721
Reincorporation in Delaware at $.01 par value................             --                        --                        --
Common stock options issued..................................             --                        --                    75,000
Common stock subscribed......................................             --                        --                  (110,000)
Comprehensive income (loss):
       Unrealized loss on marketable securities..............        (39,232)                       --                   (39,232)
       Net loss..............................................             --               (26,588,652)              (26,588,652)
                                                                  ----------             -------------             -------------
       Comprehensive income (loss)...........................                                                        (26,627,884)
                                                                                                                   -------------

Balance at December 31, 1996.................................        (39,232)              (26,588,652)                1,695,837
Issuance of common stock in connection with
     acquisition of Camelot Pharmacal, L.L.C.................             --                        --                 1,650,000
Common stock issued..........................................             --                        --                 1,085,762
Common stock options and warrants issued.....................             --                        --                   165,868
Common stock options extended................................             --                        --                   215,188
Accretion of issuance costs for Series A preferred stock.....             --                   (79,500)                  (79,500)
Comprehensive income (loss):
     Unrealized gain on marketable securities................         39,232                        --                    39,232
     Net loss................................................             --                (9,489,138)               (9,489,138)
                                                                  ----------             -------------             -------------

     Comprehensive income (loss).............................                                                         (9,449,906)
                                                                                                                      ----------

Balance at December 31, 1997.................................             --               (36,157,290)               (4,716,751)
Common stock issued..........................................             --                        --                12,679,655
Series C preferred stock issued..............................             --                        --                11,500,000
Series C preferred stock dividends...........................             --                  (415,112)                   (1,112)
Accretion of issuance costs for Series A preferred stock.....             --                   (23,900)                  (23,900)
Comprehensive income (loss):
     Unrealized loss on marketable securities................       (222,226)                       --                  (222,226)
     Net loss................................................             --               (18,560,461)              (18,560,461)
                                                                  ----------             -------------             -------------
     Comprehensive income (loss).............................                                                        (18,786,782)
                                                                                                                     -----------

Balance at December 31, 1998.................................       (222,226)              (55,156,763)                  655,205
Common stock issued..........................................             --                        --                    52,500
Preferred stock dividends....................................             --                  (208,495)                     (495)
Common stock warrants issued.................................             --                        --                    62,567
Comprehensive income (loss):
     Unrealized gain on marketable securities................         11,106                        --                    11,106
     Net loss................................................             --                (1,162,656)               (1,162,656)
                                                                  ----------             -------------             -------------
     Comprehensive income (loss).............................                                                         (1,151,550)
                                                                                                                      ----------
Balance at March 31, 1999....................................      $(211,120)             $(56,527,914)                $(381,773)
                                                                  ==========             =============             =============
</TABLE>

                See notes to consolidated financial statements.

<PAGE>
                SHEFFIELD PHARMACEUTICALS, INC. AND SUBSIDIARIES
                        (a development stage enterprise)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 1999
                                   (Unaudited)

1.    CONSOLIDATED FINANCIAL STATEMENTS

      The accompanying  consolidated  balance sheet as of March 31, 1999 and the
      accompanying  consolidated statements of operations,  stockholders' equity
      and cash flows for the three  months ended March 31, 1999 and 1998 and for
      the period from October 17, 1986  (inception) to March 31, 1999, have been
      prepared by Sheffield Pharmaceuticals,  Inc. without audit. In the opinion
      of  management,  all  adjustments  (consisting  only of  normal  recurring
      accruals) necessary to present fairly the financial  position,  results of
      operations,  stockholders' equity and cash flows at March 31, 1999 and for
      all periods presented have been made.

      Certain  information  and  footnote   disclosures   normally  included  in
      financial  statements  prepared  in  accordance  with  generally  accepted
      accounting principles have been condensed or omitted. It is suggested that
      these  consolidated  financial  statements be read in conjunction with the
      financial  statements and notes thereto  included in the Company's  annual
      report on Form 10-K for the year ended  December 31, 1998.  The results of
      operations  for the three  months  ended  March 31,  1999 and 1998 are not
      necessarily indicative of the operating results for the full years.

      Sheffield Medical  Technologies Inc.  ("Sheffield") was incorporated under
      Canadian law in October 1986. In May 1992, the Company became domesticated
      as a Wyoming  Corporation  pursuant  to a  "continuance"  procedure  under
      Wyoming law. In January  1995,  the  Company's  shareholders  approved the
      proposal to  reincorporate  Sheffield in  Delaware,  which was effected on
      June 13, 1995. On January 10, 1996, Ion Pharmaceuticals, Inc. ("Ion"), was
      formed as a wholly  owned  subsidiary  of the Company.  At that time,  Ion
      acquired  the   Company's   rights  to  certain   early-stage   biomedical
      technologies.  On April 17,  1997,  CP  Pharmaceuticals,  Inc.  ("CP") was
      formed for the purpose of acquiring Camelot Pharmacal, L.L.C., a privately
      held pharmaceutical development company, which acquisition was consummated
      on April 25, 1997. In June 1997, the Company's  shareholders  approved the
      proposal to change  Sheffield's name from Sheffield  Medical  Technologies
      Inc. to Sheffield Pharmaceuticals,  Inc. As part of an agreement with Elan
      Corporation,  plc, on June 30, 1998,  Systemic  Pulmonary  Delivery,  Ltd.
      ("SPD") was formed as a wholly owned  subsidiary  of the Company.  At that
      time, SPD acquired the Company's  rights to the systemic  applications  of
      the  Metered  Solution  Inhaler  and  acquired  Elan's  rights to  certain
      pulmonary delivery  technologies.  Unless the context requires  otherwise,
      Sheffield,  Ion, CP and SPD are referred  herein to as "the  Company." All
      significant intercompany transactions are eliminated in consolidation.

      The accompanying consolidated financial statements have been prepared on a
      going  concern  basis which  contemplates  the  realization  of assets and
      satisfaction  of  liabilities  and  commitments  in the  normal  course of
      business.  The  Company is in the  development  stage and to date has been
      principally  engaged in research,  development and licensing efforts.  The
      Company has generated minimal operating revenue, sustained significant net
      operating losses, and requires additional capital that the Company intends
      to  obtain  through  out-licensing  as well as  through  equity  and  debt
      offerings to continue to operate its business.  The  Company's  ability to
      meet its obligations as they become due and to continue as a going concern
      must be  considered  in light of the  expenses,  difficulties  and  delays
      frequently  encountered in developing a new business,  particularly  since
      the Company will focus on product  development  that may require a lengthy
      period  of time and  substantial  expenditures  to  complete.  Even if the
      Company is able to  successfully  develop  new  products,  there can be no
      assurance that the Company will generate sufficient revenues from the sale
      or licensing of such products to be profitable.  Management  believes that
      the Company's  ability to meet its  obligations  as they become due and to
      continue  as a going  concern  through  December  1999 is  dependent  upon
      obtaining  additional  funding.   However,   the  accompanying   financial
      statements  do not  include  any  adjustments  that might  result from the
      outcome of this uncertainty.


2.    BASIC LOSS PER COMMON SHARE

      Basic net loss per share is  calculated in  accordance  with  Statement of
      Financial Accounting Standards No. 128, EARNINGS PER SHARE. Basic net loss
      per share is based upon the  weighted  average  common  stock  outstanding
      during each year.  Potentially  dilutive securities such as stock options,
      warrants,  convertible debt and preferred stock, have not been included in
      any years presented as their effect is antidilutive.

<PAGE>

Item 2.

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

THIS REPORT CONTAINS CERTAIN  FORWARD-LOOKING  STATEMENTS  WITHIN THE MEANING OF
SECTION 27A OF THE  SECURITIES  ACT OF 1933, AS AMENDED,  AND SECTION 21E OF THE
SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, WHICH ARE INTENDED TO BE COVERED BY
THE SAFE HARBORS CREATED HEREBY.  ALL  FORWARD-LOOKING  STATEMENTS INVOLVE RISKS
AND UNCERTAINTY,  INCLUDING WITHOUT LIMITATION,  THE SUCCESSFUL  DEVELOPMENT AND
LICENSING OF THE COMPANY'S TECHNOLOGIES AND THE SUCCESSFUL COMPLETION OF PLANNED
FINANCINGS.  ALTHOUGH THE COMPANY  BELIEVES THAT THE ASSUMPTIONS  UNDERLYING THE
FORWARD-LOOKING   STATEMENTS  CONTAINED  HEREIN  ARE  REASONABLE,   ANY  OF  THE
ASSUMPTIONS COULD BE INACCURATE,  AND THEREFORE,  THERE CAN BE NO ASSURANCE THAT
THE  FORWARD-LOOKING  STATEMENTS  INCLUDED  IN  THIS  REPORT  WILL  PROVE  TO BE
ACCURATE.   IN  LIGHT  OF  THE   SIGNIFICANT   UNCERTAINTIES   INHERENT  IN  THE
FORWARD-LOOKING  STATEMENTS  INCLUDED HEREIN,  THE INCLUSION OF SUCH INFORMATION
SHOULD NOT BE REGARDED AS A  REPRESENTATION  BY THE COMPANY OR ANY OTHER  PERSON
THAT THE OBJECTIVES AND PLANS OF THE COMPANY WILL BE ACHIEVED.

OVERVIEW

The Company is a specialty pharmaceutical company focused on the development and
commercialization  of later  stage,  lower  risk  pharmaceutical  products  that
utilize the Company's delivery  technologies.  In 1997, the Company acquired the
Metered Solution Inhaler ("MSI")  pulmonary  delivery system through a worldwide
exclusive license and supply arrangement with Siemens AG. During the second half
of 1998,  the Company  acquired the rights to an additional  pulmonary  delivery
technology,  the Aerosol Drug  Delivery  System  ("ADDS")  from a subsidiary  of
Aeroquip-Vickers,  Inc.  ("Aeroquip-Vickers").  The  ADDS  technology  is a  new
generation propellant-based pulmonary delivery system.

Using these pulmonary delivery systems as platforms, the Company has established
strategic alliances with Elan Corporation,  plc ("Elan"), Siemens AG ("Siemens")
and Zambon  Group SpA  ("Zambon")  for  developing  the initial  products.  In a
collaboration  with Zambon,  the Company is developing a range of pharmaceutical
products  delivered  by the MSI to treat  respiratory  diseases.  As part of the
strategic  alliance  with  Elan,  a  world  leader  in  pharmaceutical  delivery
technology,  the Company is  developing  therapies  for systemic  diseases to be
delivered to the lungs. The initial  systemic  programs are for therapies in the
breakthrough pain and migraine  headache  markets.  Elan licensed two of its own
delivery   technologies  to  the  Company  that  complement  the  MSI  and  ADDS
technologies. Outside of its alliances, the Company owns the worldwide rights to
respiratory disease applications of all of its technologies, subject only to the
MSI  respiratory  rights  licensed to Zambon.  The Company  will seek to acquire
additional novel platform drug delivery systems and technologies.

RESULTS OF OPERATIONS

REVENUE

From  inception  through the period ended March 31, 1999, the Company has earned
sublicense  revenue of $1,360,000  related to the  sublicensing of various early
stage technologies. As part of the Company's focus on later stage opportunities,
the Company  continues  seeking to outlicense  its remaining  portfolio of early
stage  technologies.  There can be no  assurance  that the Company  will receive
license  fees or other  payments  related  to these  technologies.  The  Company
believes  these early  stage  technologies  will have no material  impact on the
financial position of the Company.

Interest  income was $21,877 for the  quarter  ended March 31, 1999  compared to
$953 for the same quarter of 1998. The increase between years is attributable to
an increase in cash available for  investment  during the period ended March 31,
1999.  From inception  through the period March 31, 1999, the Company has earned
interest income of $535,977.

The  Company's  ability to  generate  material  revenues  is  contingent  on the
successful   commercialization  its  technologies  and  other  technologies  and
products  that  it  may  acquire,  followed  by  the  successful  marketing  and
commercialization  of such  technologies  through  licenses,  joint ventures and
other arrangements.

ACQUISITION OF RESEARCH & DEVELOPMENT IN-PROCESS TECHNOLOGY

The acquisition of research and development in-process technology from inception
to March 31, 1999 was attributable to the acquisition of Camelot Pharmacal,  LLC
in 1997 for $1,650,000 and the 1998 acquisitions of certain  pulmonary  delivery
technologies  from  Elan for  $12,500,000  and ADDS  from  Aeroquip-Vickers  for
$825,000.



<PAGE>

RESEARCH AND DEVELOPMENT

Research and development expenses were $654,979 for the first quarter of 1999 as
compared to $1,609,041  for the first quarter of 1998.  The decrease of $954,062
from 1998  primarily  reflects the shifting of  responsibility  for  development
expenses of the respiratory  applications  of the MSI to the Company's  partner,
Zambon. The Company's direct research and development expenses for its pulmonary
delivery systems were $483,273 and $1,514,832 for the first quarters of 1999 and
1998,  respectively,  and $4,275,773 from inception  through March 31, 1999. The
Company  incurred $894 of R&D costs in 1999 versus $244 in 1998  associated with
its early stage technologies, which include RBC-CD4 Electroinsertion technology,
Liposome-CD4 technology,  HIV/AIDS vaccine, UGIF technology-prostate cancer, and
anti-proliferative  technologies. Since the Company is focused on development of
its pulmonary  delivery  systems,  it does not anticipate  incurring  additional
research and development costs for these early stage projects.

GENERAL AND ADMINISTRATIVE

General and  administrative  expenses  were $499,663 for the quarter ended March
31, 1999,  compared with the $612,490  same quarter of 1998.  This decrease from
1998 to  1999 of  $112,827  was  primarily  due to  lower  compensation  expense
reflecting  fewer employees  during the first quarter of 1999 as compared to the
same quarter of 1998.

INTEREST EXPENSE

Interest  expense  was  $29,891  for the first  quarter of 1999,  compared  with
$42,470  for the first  quarter  of 1998.  The  decrease  of  $12,579 in 1999 as
compared to 1998 resulted from interest  associated with the Company's  Series A
Cumulative   Convertible   Preferred  Stock  and  6%  Convertible   Subordinated
Debentures which were both converted into Common Stock during 1998.

LIQUIDITY AND CAPITAL RESOURCES

The Company's cash available as of March 31, 1999 for funding its operations was
$1,908,615. As of such date, the Company had trade payables of $570,472, current
research obligations of $449,805 and a note payable due in May 1999 of $104,145.
In addition,  the Company has  committed to fund an  additional  $1,729,000  for
development of pulmonary delivery systems subsequent to March 31, 1999.

As part of an agreement with Elan,  Elan agreed to make available to the Company
a convertible  promissory  note that provides the Company the right to borrow up
to $2,000,000,  subject to satisfying certain conditions.  No more than $500,000
may be drawn under the note in any calendar quarter and at least one-half of the
proceeds  must be used to fund  SPD's  development  activities.  As of March 31,
1999,  the Company had remaining  $500,000  available  for borrowing  under this
note.

In May 1999, in conjunction with the completion of its Phase I/II  MSI-albuterol
trial,  Zambon  provided  the Company  with a $1 million  interest  free advance
against  future  milestone  payments.  The advance  will be repaid in  quarterly
installments  of $250,000  commencing  on January 1, 2002 or upon the receipt of
certain future milestones,  whichever is earlier. The proceeds from this advance
are not restricted as to its use by the Company. Upon the achievement of certain
other early  milestones,  Zambon will provide an additional  $1,000,000  advance
under the terms of the agreement.

The  Company  expects to incur  additional  costs in the future to fund  certain
ongoing technology  research  projects,  including costs relating to its ongoing
research and development activities, and preclinical and clinical testing of its
product  candidates.  The Company may also bear considerable costs in connection
with  filing,  prosecuting,  defending  and/or  enforcing  its  patent and other
intellectual  property  claims.  There  can  be no  assurance  that  any  of the
technologies to which the Company  currently has or may acquire rights to can or
will  be   commercialized   or   that   any   revenues   generated   from   such
commercialization  will be sufficient  to fund existing and future  research and
development activities.

Because the  Company  does not expect to  generate  significant  cash flows from
operations for at least the next few years, the Company believes it will require
additional  funds to meet future  costs.  The Company  will  attempt to meet its
capital  requirements with existing cash balances and through  additional public
or private  offerings of its securities,  debt financing and  collaboration  and
licensing arrangements with other companies.  There can be no assurance that the
Company  will be able to  obtain  such  additional  funds  or  enter  into  such
collaborative and licensing  arrangements on terms favorable to the Company,  if
at all. The Company's development programs may be curtailed if future financings
are not completed.


<PAGE>

YEAR 2000 COMPLIANCE

The   inability   of   computers,   software  and  other   equipment   utilizing
microprocessors  to recognize and properly process data fields  containing a two
digit year is  commonly  referred  to as the Year 2000  compliance  issue.  Such
systems that are not Year 2000  compliant may not be able to properly  interpret
dates beyond the Year 1999, which could lead to business disruptions in the U.S.
and internationally.  The potential costs and uncertainties  associated with the
Year 2000 issue will depend on a number of factors, including software, hardware
and the  nature  of the  industry  in which a  company  operates.  Additionally,
companies must  coordinate  with other  entities with which they  electronically
interact, such as customers, creditors and borrowers.

During 1998,  the Company  conducted an  assessment  of its computer  systems to
identify  systems  that could be affected by the Year 2000 issue.  Substantially
all software  programs used by the Company have been  determined to be Year 2000
compliant.  In  addition,  the  Company  believes  that with  readily  available
upgrades to  existing  hardware,  the Year 2000 issue will not pose  significant
operational  problems  for its  computer  system.  The  completion  of  hardware
modifications  to assure  Year 2000  compliance  is  expected  by the end of the
second quarter of 1999.

The Company relies on various  universities  and  laboratories  for conducting a
significant portion of the research and development of its products. The Company
is currently in the process of communicating with the parties with which it does
significant  business to determine their Year 2000 compliance  readiness and the
extent to which the Company is  vulnerable  to any third party Year 2000 issues.
The Company  expects to complete its assessment of Year 2000 compliance of these
third parties by July 1999. However,  there can be no guarantee that the systems
of other companies on which the Company relies will be timely  converted or that
a failure to convert by another  company,  or a conversion  that is incompatible
with the  Company's  systems,  would  not have  material  adverse  effect on the
Company.

The total  cost to the  Company  of these  Year 2000  compliance  activities  is
estimated to be less than $25,000,  and is not anticipated to be material to its
financial  position or results of operations.  These costs and the date on which
the Company plans to complete the Year 2000  modification and testing  processes
are based on management's best estimates,  which were derived utilizing numerous
assumptions  of future events  including the continued  availability  of certain
resources,  third party modification plans and other factors. However, there can
be no assurance  that these  estimates will be achieved and actual results could
differ from those plans.








<PAGE>
PART II:    OTHER INFORMATION

Item 2.     CHANGES IN SECURITIES.

            The  following  unregistered  securities  were issued by the Company
during the quarter ended March 31, 1999:


<TABLE>
<CAPTION>
                                                   Number of
                                                     Shares                                       Number of Shares
                                                   Sold/Issued                                Sold/Issued /Subject to
                                 Description       /Subject to
               Date of          of Securities      Options or      Offering/Exercise
             Sale/Issuance         Issued           Warrants       Price per Share($)          Purchase or Class
             -------------         ------           --------       ------------------          -----------------

            <S>                 <C>                  <C>                 <C>                   <C>
            January 1999        Common stock         19,640              $2.3125               Advisor in lieu of cash
                                warrants.                                                      consideration.

            January 1999        Common stock         45,000               2.3125               Issuance to certain
                                options.                                                       Directors pursuant to
                                                                                               the 1996 Directors
                                                                                               Stock Option Plan.

            January 1999        Common stock         50,000               2.3125               Holder of short-term
                                warrants.                                                      note.

            January 1999        Common stock        150,000               0.8125               Advisor under terms of
                                warrants.                                                      engagement agreement.

            February 1999       Common stock         16,000                2.750               Issuance to employees
                                options.                                                       pursuant to 1993
                                                                                               Stock Option Plan.
</TABLE>


            The  issuance  of these  securities  is  claimed  to be exempt  from
            registration  pursuant  to  Section 4 (2) of the  Securities  Act of
            1933,  as  amended,  as  transactions  by an issuer not  involving a
            public offering. There were no underwriting discounts or commissions
            paid in connection with the issuance of any of these securities.



ITEM 6.     EXHIBITS AND REPORTS ON FORM 8-K.
            No reports on Form 8-K were filed during the quarter ended March 31,
            1999.

            EXHIBITS

            NO.         DESCRIPTION

            27          Financial Data Schedule.


<PAGE>
                                   SIGNATURES

In accordance with the  requirements of the Exchange Act, the registrant  caused
this  report to be  signed on its  behalf  by the  undersigned,  thereunto  duly
authorized.


                                   SHEFFIELD PHARMACEUTICALS, INC.

Dated: May 10, 1999                /S/ LOREN G. PETERSON
                                   ---------------------
                                   Loren G. Peterson
                                   President & Chief Executive Officer


Dated: May 10, 1999                /S/ SCOTT A. HOFFMANN
                                   ---------------------
                                   Scott A. Hoffmann
                                   Vice President & Chief Financial Officer
                                   (Principal Financial and Accounting Officer)