<PAGE>   1

                       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 JUNE 30, 2000


                         Commission file number 1-12584


                         SHEFFIELD PHARMACEUTICALS, INC.
             (Exact name of registrant as specified in its Charter)


                DELAWARE                                  13-3808303
        (State of Incorporation)            (IRS Employer 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 28,105,293
shares as of August 11, 2000.



<PAGE>   2

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

                                    FORM 10-Q
                       For the Quarter Ended June 30, 2000

                                Table of Contents

<TABLE>
<CAPTION>
                                                                                               Page
                                                                                               ----
                                     PART I

<S>                                                                                            <C>
Item 1.  Financial Statements

Consolidated Balance Sheets as of June 30, 2000
  and December 31, 1999..........................................................................3

Consolidated Statements of Operations
  for the three and six months ended June 30, 2000 and 1999 and for the period
  from October 17, 1986 (inception) to June 30, 2000.............................................4

Consolidated Statements of Stockholders' Equity
  (Net Capital Deficiency) for the period from October 17, 1986
  (inception) to June 30, 2000 ..................................................................5

Consolidated Statements of Cash Flows
  for the six months ended June 30, 2000 and 1999 and for the period from
  October 17, 1986 (inception) to June 30, 2000..................................................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 4.  Submission of Matters to a Vote of Security Holders....................................12

Item 6.  Exhibits and Reports on Form 8-K.......................................................12

Signatures......................................................................................13

</TABLE>

                                       2


<PAGE>   3


PART I:           FINANCIAL INFORMATION
Item 1.           Financial Statements

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

                                      ASSETS
<TABLE>
<CAPTION>
                                                                                         June 30,                 December 31,
                                                                                           2000                       1999
                                                                                     ----------------           ---------------
                                                                                       (unaudited)
<S>                                                                                  <C>                        <C>
Current assets:
    Cash and cash equivalents ..................................................     $     1,846,056            $    3,874,437
    Marketable equity securities................................................           1,140,950                   519,387
    Prepaid expenses and other current assets ..................................             476,082                   145,237
                                                                                     ----------------           ---------------
       Total current assets ....................................................           3,463,088                 4,539,061
                                                                                     ----------------           ---------------

Property and equipment:
    Laboratory equipment .......................................................             415,704                   407,624
    Office equipment ...........................................................             208,347                   178,797
    Leasehold improvements .....................................................              18,320                    15,000
                                                                                     ----------------           ---------------
       Total at cost ...........................................................             642,371                   601,421
    Less accumulated depreciation and amortization .............................           (364,708)                 (311,752)
                                                                                     ----------------           ---------------
       Property and equipment, net .............................................             277,663                   289,669
                                                                                     ----------------           ---------------

Patent costs, net of accumulated amortization of $10,467 and $0, respectively ..             182,868                   204,283
Other assets....................................................................              15,830                    15,642
                                                                                     ----------------           ---------------
    Total assets ...............................................................     $     3,939,449            $    5,048,655
                                                                                     ================           ===============

           LIABILITIES AND STOCKHOLDERS' EQUITY (NET CAPITAL DEFICIENCY)

Current liabilities:
    Accounts payable and accrued liabilities ...................................     $       508,698            $      773,206
    Sponsored research payable .................................................             348,629                   421,681
                                                                                     ----------------           ---------------
       Total current liabilities ...............................................             857,327                 1,194,887

Convertible promissory note ....................................................           2,000,000                 2,000,000
Unearned revenue ...............................................................           1,000,000                 1,000,000
Other long-term liabilities ....................................................             283,287                   182,695
Commitments and contingencies ..................................................                  --                        --
                                                                                     ----------------           ---------------
    Total liabilities ..........................................................           4,140,614                 4,377,582

Minority interest in subsidiary.................................................                  --                        --

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; 13,236 and 12,780 shares issued and outstanding at June 30,
         2000 and December 31, 1999, respectively...............................                 132                       128
       Series D cumulative convertible exchangeable preferred stock, authorized
         21,000 shares; 12,435 and 12,015 issued and outstanding at June 30,
         2000 and December 31, 1999, respectively...............................                 124                       120
       Series F convertible non-exchangeable preferred stock, 5,000 shares
         authorized; 5,000 shares issued and outstanding at June 30, 2000 and
         December 31, 1999......................................................                  50                        50
    Common stock, $.01 par value, authorized 60,000,000 shares; issued and
      outstanding 28,080,293 and 27,308,846 shares at June 30, 2000 and
      December 31, 1999, respectively...........................................             280,803                   273,088
Additional paid-in capital .....................................................          75,836,293                73,638,128
Other comprehensive income .....................................................             808,955                   169,387
Deficit accumulated during development stage ...................................        (77,127,522)              (73,409,828)
                                                                                     ----------------           ---------------
          Total stockholders' equity (net capital deficiency) ..................           (201,165)                   671,073
                                                                                     ----------------           ---------------

Total liabilities and stockholders' equity (net capital deficiency).............     $     3,939,449            $    5,048,655
                                                                                     ================           ===============

</TABLE>


                 See notes to consolidated financial statements.


                                       3

<PAGE>   4

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

                    CONSOLIDATED STATEMENTS OF OPERATIONS
         For the Three and Six Months Ended June 30, 2000 and 1999 and
              for the Period from October 17, 1986 (inception) to
                                 June 30, 2000
                                  (Unaudited)
<TABLE>
<CAPTION>
                                                  Three Months Ended                 Six Months Ended         October 17, 1986
                                                       June 30,                           June 30,             (inception) to
                                             -----------------------------    -----------------------------        June 30,
                                                 2000             1999             2000             1999            2000
                                             -------------   -------------    -------------   -------------   ---------------
<S>                                          <C>             <C>              <C>             <C>             <C>
Revenues:
  Contract research revenue...............   $    124,505    $     67,709     $    245,675    $     93,709    $      645,053
  Sublicense revenue......................             --              --               --              --         1,360,000
                                             -------------   -------------    -------------   -------------   ---------------
     Total revenues.......................        124,505          67,709          245,675          93,709         2,005,053

Expenses:
  Acquisition of research and development
    in-process technology.................             --              --               --              --        29,975,000
  Research and development................        882,755         903,684        1,784,778       1,584,663        26,810,202
  General and administrative..............        691,421         632,693        1,386,145       1,132,356        22,903,695
                                             -------------   -------------    -------------   -------------   ---------------
     Total expenses.......................      1,574,176       1,536,377        3,170,923       2,717,019        79,688,897
                                             -------------   -------------    -------------   -------------   ---------------

Loss from operations......................     (1,449,671)     (1,468,668)      (2,925,248)     (2,623,310)      (77,683,844)

Interest income...........................         41,991          17,476           94,492          39,353           700,533
Interest expense..........................        (57,124)        (35,818)        (107,157)        (65,709)         (680,512)
Realized gain (loss) on sale of
    marketable securities.................         52,614              --           52,614              --          (272,301)
Minority interest in loss of subsidiary...         28,380              --           44,399              --         3,029,399
                                             -------------   -------------    -------------   -------------   ---------------

Loss before extraordinary item............     (1,383,810)     (1,487,010)      (2,840,900)     (2,649,666)      (74,906,725)

Extraordinary item........................             --              --               --              --            42,787
                                             -------------   -------------    -------------   -------------   ---------------

Net loss..................................   $ (1,383,810)   $ (1,487,010)    $ (2,840,900)   $ (2,649,666)   $  (74,863,938)
                                             =============   =============    =============   =============   ===============
Accretion of mandatorily redeemable
    preferred stock.......................             --              --               --              --          (103,400)
                                             -------------   -------------    -------------   -------------   ---------------

Net loss - attributable to common shares..   $ (1,383,810)   $ (1,487,010)    $ (2,840,900)   $ (2,649,666)   $  (74,967,338)
                                             =============   =============    =============   =============   ===============

Weighted average common shares
    outstanding-basic and diluted.........     27,975,234      27,276,405       27,781,815      27,175,887         8,640,140

Net loss per share of common stock -
   basic and diluted:
    Loss before extraordinary item........   $      (0.05)   $      (0.05)    $      (0.10)   $      (0.10)   $        (8.68)
    Extraordinary item....................             --              --               --              --                --
                                             -------------   -------------    -------------   -------------   ---------------
    Net loss per share....................   $      (0.05)   $      (0.05)    $      (0.10)   $      (0.10)   $        (8.68)
                                             =============   =============    ==============  =============   ===============

</TABLE>


                 See notes to consolidated financial statements.


                                       4

<PAGE>   5


                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 June 30, 2000
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                                          Notes
                                                                                       receivable
                                                                                           in
                                                                                       connection      Additional
                                                       Preferred         Common        with sale         paid-in
                                                         stock            Stock         of stock         capital
                                                     -------------   -------------   -------------   -------------
<S>                                                  <C>             <C>             <C>             <C>
Balance at October 17, 1986 ......................   $         --    $         --    $         --    $         --
Common stock issued ..............................             --      11,340,864          37,400      18,066,219
Reincorporation in Delaware at $.01 par value ....             --     (11,220,369)             --      11,220,369
Issuance of common stock in connection with
     acquisition of Camelot Pharmacal, L.L.C .....             --           6,000              --       1,644,000
Common stock options issued ......................             --              --              --         240,868
Common stock options extended ....................             --              --              --         215,188
Accretion of issuance costs for Series A preferred
     stock .......................................             --              --              --              --
Common stock subscribed ..........................             --              --        (110,000)             --
Comprehensive income (loss):
     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 ..............................             --           2,504          10,000          89,059
Series C preferred stock dividends ...............              9              --              --         865,991
Series D preferred stock issued ..................            120              --              --      12,014,880
Series F preferred stock issued ..................             50              --              --       4,691,255
Common stock warrants issued .....................             --              --              --         203,452
Comprehensive income (loss):
     Unrealized gain on marketable securities ....             --              --              --              --
     Net loss ....................................             --              --              --              --
     Comprehensive income (loss) .................             --              --              --              --
                                                     -------------   -------------   -------------   -------------
Balance at December 31, 1999 .....................            298         273,088              --      73,638,128

Common stock issued ..............................             --           8,625              --       1,569,450
Repurchase and retirement of common stock ........             --            (910)             --        (312,279)
Series C preferred stock dividends ...............              4              --              --         455,996
Series D preferred stock dividends ...............              4              --              --         419,996
Common stock warrants issued .....................             --              --              --          65,002
Comprehensive income (loss):
     Unrealized gain on marketable securities ....             --              --              --              --
     Net loss ....................................             --              --              --              --
     Comprehensive income (loss) .................             --              --              --              --
                                                     -------------   -------------   -------------   -------------
Balance at June 30, 2000 .........................   $        306    $    280,803    $         --    $ 75,836,293
                                                     =============   =============   =============   =============

</TABLE>

<TABLE>
<CAPTION>
                                                                        Deficit           Total
                                                        Other         accumulated      stockholders'
                                                     comprehensive      during         equity (net
                                                        income        development        capital
                                                        (loss)           stage         deficiency)
                                                     -------------   -------------   -------------
<S>                                                  <C>             <C>             <C>
Balance at October 17, 1986 ......................   $         --    $         --    $         --
Common stock issued ..............................             --              --      29,444,483
Reincorporation in Delaware at $.01 par value ....             --              --              --
Issuance of common stock in connection with
     acquisition of Camelot Pharmacal, L.L.C .....             --              --       1,650,000
Common stock options issued ......................             --              --         240,868
Common stock options extended ....................             --              --         215,188
Accretion of issuance costs for Series A preferred
     stock .......................................             --         (79,500)        (79,500)
Common stock subscribed ..........................             --              --        (110,000)
Comprehensive income (loss):
     Net loss ....................................             --     (36,077,790)             --
     Comprehensive income (loss) .................             --              --     (36,077,790)
                                                     -------------   -------------   -------------
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)             --              --
     Net loss ...................................              --     (18,560,461)             --
     Comprehensive income (loss) .................             --              --     (18,782,687)
                                                     -------------   -------------   -------------
Balance at December 31, 1998 .....................       (222,226)    (55,156,763)        655,205

Common stock issued ..............................             --              --         101,563
Series C preferred stock dividends ...............             --        (868,277)         (2,277)
Series D preferred stock issued ..................             --              --      12,015,000
Series F preferred stock issued ..................             --              --       4,691,305
Common stock warrants issued .....................             --              --         203,452
Comprehensive income (loss):
     Unrealized gain on marketable securities ....        391,613              --              --
     Net loss ....................................             --     (17,384,788)             --
     Comprehensive income (loss) .................             --              --     (16,993,175)
                                                     -------------   -------------   -------------
Balance at December 31, 1999 .....................        169,387     (73,409,828)        671,073

Common stock issued ..............................             --              --       1,578,075
Repurchase and retirement of common stock ........             --              --        (313,189)
Series C preferred stock dividends ...............             --        (456,269)           (269)
Series D preferred stock dividends ...............             --        (420,525)           (525)
Common stock warrants issued .....................             --              --          65,002
Comprehensive income (loss):
     Unrealized gain on marketable securities ....        639,568              --              --
     Net loss ....................................             --      (2,840,900)             --
     Comprehensive income (loss) .................             --              --      (2,201,332)
                                                     -------------   -------------   -------------
Balance at June 30, 2000 .........................   $    808,955    $(77,127,522)   $   (201,165)
                                                     =============   =============   =============

</TABLE>


                 See notes to consolidated financial statements.

                                       5


<PAGE>   6


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

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
     For the Six Months Ended June 30, 2000 and 1999 and for the Period from
                        October 17, 1986 (inception) to
                                  June 30, 2000
                                   (Unaudited)
<TABLE>
<CAPTION>
                                                                                                        October 17,
                                                                        Six Months Ended                   1986
                                                                            June 30,                  (inception) to
                                                                ---------------------------------       June 30,
                                                                     2000              1999                2000
                                                                ---------------    --------------    ----------------
<S>                                                             <C>                <C>               <C>
Cash outflows from operating activities:
    Net loss................................................    $   (2,840,900)    $  (2,649,666)    $   (74,863,938)
Adjustments to reconcile net loss to net cash used by
   development stage activities:
     Issuance of common stock, stock options/warrants for
     services...............................................            77,002           105,642           2,562,427
     Non-cash acquisition of research and development
       in-process technology................................                --                --           1,650,000
     Depreciation and amortization..........................            63,423            42,143             542,983
     (Gain) loss realized on sale of marketable securities..           (52,614)               --             272,301
     Increase in prepaid expenses & other current assets....          (330,845)          (85,779)           (535,123)
     Decrease (increase) in other assets....................            10,760           (15,642)           (150,124)
     Decrease in accounts payable and accrued liabilities...          (220,723)          (83,991)            (34,857)
     (Decrease) increase in sponsored research payable......           (73,052)               --             925,699
     Increase in unearned revenue...........................                --         1,000,000           1,000,000
     Other..................................................            59,116            60,457             297,191
                                                                ---------------    --------------    ----------------
Net cash used by development stage activities...............        (3,307,833)       (1,626,836)        (68,333,441)
                                                                ---------------    --------------    ----------------
Cash flows from investing activities:
     Proceeds on sale of marketable securities..............            70,618                --             245,703
     Acquisition of laboratory and office equipment, and
       leasehold improvements...............................           (40,950)          (47,992)           (626,662)
     Other..................................................                --            10,000             (57,087)
                                                                ---------------    --------------    ----------------
Net cash provided (used) by investing activities............            29,668           (37,992)           (438,046)
                                                                ---------------    --------------    ----------------

Cash flows from financing activities:
     Payments on debt and capital leases....................            (3,102)           (2,670)           (839,276)
     Net proceeds from issuance of:
        Debt................................................                --           500,000           5,050,000
        Common stock........................................                --                --          21,418,035
        Preferred stock.....................................                --                --          32,741,117
     Proceeds from exercise of warrants/stock options.......         1,566,075            74,375          13,059,796
     Repurchase and retirement of common stock..............          (313,189)               --            (313,189)
     Other..................................................                --          (104,145)           (500,024)
                                                                ---------------    --------------    ----------------
Net cash provided by financing activities...................    $    1,249,784           467,560          70,616,459
                                                                ---------------    --------------    ----------------

Net (decrease) increase in cash and cash equivalents........        (2,028,381)       (1,197,268)          1,844,972
Cash and cash equivalents at beginning of period............         3,874,437         2,456,290               1,084
                                                                ---------------    --------------    ----------------
Cash and cash equivalents at end of period..................    $    1,846,056     $   1,259,022     $     1,846,056
                                                                ===============    ==============    ================

Noncash investing and financing activities:
     Common stock, stock options/warrants issued for
         services...........................................    $       77,002     $     105,642     $     2,562,427
     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...                --                --           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........................................           876,000           422,987           2,522,824

Supplemental disclosure of cash flow information:
  Interest paid.............................................    $        1,070     $       4,152     $       277,390

</TABLE>

                 See notes to consolidated financial statements.

                                       6

<PAGE>   7


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

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 2000
                                   (Unaudited)

1.       BASIS OF PRESENTATION

         The accompanying unaudited consolidated financial statements have been
         prepared in accordance with the instructions to Form 10-Q of the
         Securities and Exchange Commission and should 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,
         1999. 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
         June 30, 2000 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. The results of operations
         for the three and six months ended June 30, 2000 and 1999 are not
         necessarily indicative of the operating results for the full years.

         The consolidated financial statements include the accounts of
         Sheffield Pharmaceuticals, Inc. and its wholly owned subsidiaries,
         Systemic Pulmonary Delivery, Ltd., Ion Pharmaceuticals, Inc., and CP
         Pharmaceuticals, Inc., and its 80.1% owned subsidiary, Respiratory
         Steroid Delivery, Ltd., and are herein referred to as "Sheffield" or
         the "Company." All significant intercompany transactions are
         eliminated in consolidation.

         The Company is focused on the development and commercialization of
         later stage, lower risk pharmaceutical products that utilize the
         Company's unique proprietary pulmonary delivery technologies. 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. 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.

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 period. Potentially dilutive securities such as
         stock options, warrants, convertible debt and preferred stock, have not
         been included in any periods presented as their effect is antidilutive.

3.       RECLASSIFICATIONS

         Certain amounts in the prior year financial statements and notes have
         been reclassified to conform to the current year presentation.



                                       7

<PAGE>   8



Item 2.

Management's Discussion and Analysis of Financial Condition and Results of
Operations

The following 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 thereby. All forward-looking statements involve risks
and uncertainty. 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. The Company's actual results may differ materially from the results
anticipated in the forward-looking statements. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations - Important Factors
that May Affect Future Results" included herein for a discussion of factors that
could contribute to such material differences. 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 development and
commercialization of later stage, lower risk pharmaceutical products that
utilize the Company's unique proprietary pulmonary delivery technologies. The
Company is in the development stage and, as such, has been principally engaged
in the development of its pulmonary delivery systems. The Company and its
development partners currently have nine products in various stages of
development.

In 1997, the Company acquired the Metered Solution Inhaler ("MSI"), a portable
nebulizer-based pulmonary delivery system, through a worldwide exclusive license
and supply arrangement with Siemens AG ("Siemens"). 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. Additionally, during
1998, Sheffield licensed from Elan Corporation, plc ("Elan"), the Ultrasonic
Pulmonary Drug Absorption System ("UPDAS"), a novel disposable unit dose
nebulizer system, and Elan's Absorption Enhancing Technology, ("Enhancing
Technology") a therapeutic agent to increase the systemic absorption of drugs.
In October 1999, the Company licensed Elan's Nanocrystal(TM) technology to be
used in developing certain inhaled steroid products.

Using the above pulmonary delivery systems and technologies as platforms, the
Company has established strategic alliances for developing its initial products
with Elan, Siemens and Zambon Group SpA ("Zambon").

In a collaboration with Zambon, the Company is developing a range of
pharmaceutical products delivered by the MSI to treat respiratory diseases.
Under its agreement with Zambon, MSI commercial rights for respiratory products
have been sublicensed to Zambon in return for an equity investment in the
Company (approximately 10%). The Company has maintained co-marketing rights for
the U.S. The Company's ability to co-market MSI respiratory products in the U.S.
requires no additional payment by the Company. Zambon has committed to fund the
development costs for respiratory compounds delivered by the MSI, as well as
make certain milestone payments and pay royalties on net sales to the Company
resulting from these MSI products. Initial products for respiratory disease
therapy delivered through the MSI include albuterol, ipratropium, cromolyn and
inhaled steroids.

As part of a strategic alliance with Elan, the Company is developing therapies
for non-respiratory diseases to be delivered to the lungs using both the ADDS
and MSI. In 1998, the systemic applications of the MSI and ADDS were licensed to
Systemic Pulmonary Delivery, Ltd. ("SPD"), a wholly owned subsidiary of the
Company. In addition, two Elan technologies, UPDAS(TM) and the Enhancing
Technology, were also licensed to SPD. The Company retained exclusive rights
outside of the strategic alliance to respiratory disease applications utilizing
the ADDS technology and the two Elan technologies. Two systemic compounds for
pulmonary delivery are currently under development. For the treatment of
breakthrough pain, the Company is developing morphine delivered through the MSI.
Ergotamine, a therapy for the treatment of migraine headaches, is currently
being developed for use in the ADDS.

In addition to the above alliance with Elan, in 1999, the Company and Elan
formed a joint venture, Respiratory Steroid Delivery, Ltd. ("RSD"), to develop
certain inhaled steroid products to treat respiratory diseases using Elan's
NanoCrystal technology. The inhaled steroid products to be developed include a
propellant-based steroid formulation for delivery through the ADDS, a
solution-based unit-dose-packaged steroid formulation for delivery using a
conventional tabletop nebulizer, and a solution-based steroid formulation for
delivery using the MSI system, subject to further agreement with Zambon.



                                       8


<PAGE>   9


Outside of these alliances, the Company owns the worldwide rights to respiratory
disease applications of all of its technologies, subject only to the MSI
respiratory rights sublicensed to Zambon.

RESULTS OF OPERATIONS

Revenue

Contract research revenues primarily represent revenue earned from a
collaborative research agreement with Zambon relating to the development of
respiratory applications of the MSI. Contract research revenue for the second
quarter of 2000 and 1999 were $124,505 and $67,709, respectively. For the first
six months of 2000 and 1999, contract research revenues were $245,675 and
$93,709, respectively. The increase for both the second quarter and first half
of 2000 relates to three additional respiratory programs in development in 2000
as compared to 1999. Costs of contract research revenue approximate such revenue
and are included in research and development expenses. Future contract research
revenues and expenses are anticipated to fluctuate depending, in part, upon the
success of current clinical studies, and obtaining additional collaborative
agreements.

The Company's ability to generate material revenues is contingent on the
successful commercialization of 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.

Research and Development

Research and development ("R&D") expenses were $882,755 and $903,684 for the
second quarter of 2000 and 1999, respectively. For the six months ended June 30,
2000 and 1999, R&D costs were $1,784,778 and $1,584,663, respectively. The
decrease of $20,929 in the second quarter of 2000 was primarily due to lower
development costs on the Company's two systemic programs, partially offset by
higher expenses related to (1) the development by RSD of three steroid products
initiated during the fourth quarter of 1999, (2) costs associated with increased
contract research revenue as discussed above, and (3) formulation work begun
during 2000 on an undisclosed respiratory product to be delivered via the ADDS.
The increase for the first half of 2000 was $200,115 primarily reflecting costs
associated with modifications being made to the MSI to enhance its commercial
appeal prior to the start of Phase III MSI-albuterol clinical trials. In
addition, the increase reflects higher costs associated with the above-mentioned
steroid programs and higher contract research costs, partially offset by lower
development costs on the Company's two systemic programs and lower engineering
costs related to the ADDS device.

General and Administrative

General and administrative expenses were $691,421 and 632,693 for the quarters
ended June 30, 2000, and 1999, respectively, and $1,386,145 and $1,132,356 for
the first half of 2000 and 1999, respectively. The increase for both the second
quarter and the first six months of 2000 was primarily due to higher consulting
costs and legal fees associated with expanded business development activity.

Interest

Interest income was $41,991 and $17,476 for the quarter ended June 30, 2000 and
1999, respectively, and $94,492 and $39,353 for the first six months of 2000 and
1999, respectively. The increase in interest income for both the second quarter
and first six months of 2000 was primarily due to larger balances of cash
available for investment and higher average yields on those investments.

Interest expense was $57,124 and $35,818 for the second quarter of 2000, and
1999, respectively, and $107,157 and $65,709 for the first half of 2000 and
1999, respectively. The increase in both the second quarter and first half of
2000 resulted from higher outstanding balances on the Company's convertible
promissory note with Elan, as well as a higher average interest rate on the
note.

                                       9

<PAGE>   10



LIQUIDITY AND CAPITAL RESOURCES

At June 30, 2000, the Company had $1,846,056 in cash and cash equivalents
compared to $3,874,437 at December 31, 1999. The decrease of $2,028,381
primarily reflects $3,307,833 of cash disbursements used primarily to fund
operating activities and $313,189 to repurchase and retire 91,043 shares of the
Company's common stock, partially offset by $1,566,075 in net proceeds from the
exercise of common stock options and warrants.

During the second quarter of 2000, the Company sold 30,000 shares of its
investment in Lorus Therapeutics, Inc. ("Lorus") for proceeds of $70,618,
resulting in a gain of $52,614. At June 30, 2000, the value of the Company's
remaining Lorus investment of 553,188 shares was $1,140,950.

In October 1999, as part of a licensing agreement with Elan, the Company
received gross proceeds of $17,000,000 related to the issuance to Elan of 12,015
shares of Series D Cumulative Convertible Exchangeable Preferred Stock and 5,000
shares of Series F Convertible Non-Exchangeable Preferred Stock. In turn, the
Company made an equity investment of $12,015,000 in a joint venture, RSD,
representing an initial 80.1% ownership. The remaining proceeds from the
above-mentioned preferred stock issuance will be utilized for general operating
purposes. As part of the agreement, Elan also committed to purchase, on a
drawdown basis, up to an additional $4,000,000 of the Company's Series E
Cumulative Convertible Preferred Stock ("Series E Preferred Stock"). The
proceeds from the Series E Preferred Stock will be utilized by the Company to
fund its portion of RSD's operating and development costs. As of June 30, 2000,
no purchases of Series E Preferred Stock have been made.

In May 1999, in conjunction with the completion of its Phase I/II MSI-albuterol
trial, Zambon provided the Company with a $1,000,000 interest-free advance
against future milestone payments. Upon the attainment of certain future
milestones, the Company will recognize this advance as revenue. If the Company
does not achieve these future milestones, the advance must be repaid in
quarterly installments of $250,000 commencing January 1, 2002. The proceeds from
this advance are not restricted as to their use by the Company. Upon the
achievement of certain other technical milestones, Zambon will provide an
additional $1,000,000 advance under the terms of the agreement.

Since its inception, the Company has financed its operations primarily through
the sale of securities and convertible debentures, from which it has raised an
aggregate of approximately $72.3 million through June 30, 2000, of which
approximately $30.0 million has been spent to acquire certain in-process
research and development technologies, and $26.8 million has been incurred to
fund certain ongoing technology research projects. The Company expects to incur
additional costs in the future, 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. Therefore, the Company will need substantial
additional capital before it will recognize significant cash flow from
operations, which is contingent on the successful commercialization of the
Company's technologies. There can be no assurance that any of the technologies
to which the Company currently has or may acquire rights 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.

IMPORTANT FACTORS THAT MAY AFFECT FUTURE RESULTS

The following are some of the factors that could affect the Company's future
results. They should be considered in connection with evaluating forward-looking
statements contained in this report and otherwise made by the Company or on the
Company's behalf, because these factors could cause actual results and
conditions to differ materially from those projected in forward-looking
statements.

The Company's future results are subject to risks and uncertainties including,
but not limited to, the risks that (1) to continue to fund its operations, the
Company may not be able to obtain additional financing on acceptable terms, or
at all, and may be required to delay, reduce the scope of, or eliminate one or
more of its research and development programs, or obtain funds through
arrangements with collaborative partners or others that may require the Company
to relinquish rights to certain of its technologies, product candidates or
products that the Company would otherwise seek to develop; (2) the Company's
product opportunities may


                                       10

<PAGE>   11



not be successfully developed, proven to be safe and efficacious in clinical
trials, may not meet applicable regulatory standards, may not receive the
required regulatory approvals, or may not be produced in commercial quantities
at reasonable costs or be successfully commercialized and marketed; (3) the
Company may default in payments required under certain licensing agreements,
thereby potentially forfeiting its rights under those agreements; (4) due to
rapid technological change and innovation, the Company may not have a
competitive advantage in its fields of technology or in any of the fields in
which the Company may concentrate its efforts; (5) government regulation may
prevent or delay regulatory approval of the Company's products; (6) the Company
may not develop or receive sublicenses or other rights related to proprietary
technology that are patentable, one or more of the Company's pending patents may
not issue, or that any issued patents may not provide the Company with any
competitive advantages, or that the patents may be challenged by third parties;
(7) the Company may not have the resources available to build or otherwise
acquire its own marketing capabilities, or that agreements with other
pharmaceutical companies to market the Company's products may not be reached on
terms acceptable to the Company; (8) manufacturing and supply agreements entered
into by the Company will not be adequate or that the Company will not be able to
enter into future manufacturing and supply agreements on terms acceptable to the
Company; (9) private health insurance and government health program
reimbursement price levels may not be sufficient to provide a return to the
Company on its investment in new products and technologies; (10) the Company may
not be able to maintain or will be able to obtain product liability insurance
for any future clinical trials; (11) the failure to meet the American Stock
Exchange's ("AMEX") listing guidelines may result in the Common Stock of the
Company no longer being eligible for listing on the AMEX, which would make it
more difficult for investors to dispose of, or to obtain accurate quotations as
to the market value of the Company's Common Stock; (12) announcements of
developments in the medical field generally, or in the Company's research areas
or by the Company's competitors specifically, may result in having a materially
adverse effect on the market price of the Company's Common Stock; (13) the
exercise of options and outstanding warrants, the conversion of the Company's
currently outstanding convertible securities, or conversion of convertible
securities issuable in the future, may significantly dilute the market price of
shares of the Company's Common Stock, and could impair the Company's ability to
raise capital through the future sale of its equity securities.

Readers are also directed to other risks and uncertainties discussed, as well as
to further discussion of the risks described above, in other documents filed by
the Company with the Securities and Exchange Commission. The Company
specifically disclaims any obligation to update or revise any forward-looking
information, whether as a result of new information, future developments, or
otherwise.


                                       11

<PAGE>   12



PART II: OTHER INFORMATION


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

            An annual Meeting of Stockholders was held on May 9, 2000. All
            management's nominees for director, as listed in the Proxy Statement
            for the Annual Meeting, were elected. Listed below are the matters
            voted on by Stockholders and the number of votes cast at the Annual
            Meeting.

       (a)  Election of members of the Board of Directors.
<TABLE>
<CAPTION>
                                                                                      Broker Non-Votes
                  Name                Voted for    Voted Against    Votes Withheld    and Abstentions
                  ----                ----------   -------------    --------------    ---------------
<S>                                   <C>          <C>              <C>               <C>
            Thomas M. Fitzgerald      23,878,371         --             43,725               --
            Loren G. Peterson         23,863,371         --             58,725               --
            John M. Bailey            23,878,371         --             43,725               --
            Digby W. Barrios          23,878,371         --             43,725               --
            Todd C. Davis             23,878,371         --             43,725               --
            Roberto Rettani           23,878,371         --             43,725               --

</TABLE>


       (b)  Ratification of Ernst & Young LLP as independent public
            accountant for fiscal year ending December 31, 2000.
<TABLE>
<S>                                   <C>

             Voted For:               23,210,678
             Voted Against:              506,300
             Votes Abstained:            205,118
             Broker Non-Votes:                --
</TABLE>


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

             No reports on Form 8-K were filed during the quarter ended June 30,
             2000.

             Exhibits

             No.         Description

             27          Financial Data Schedule.





                                       12



<PAGE>   13





                                   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:  August 11, 2000             /s/ Loren G. Peterson
                                    ---------------------
                                    Loren G. Peterson
                                    President & Chief Executive Officer


Dated:  August 11, 2000             /s/ Scott A. Hoffmann
                                    ---------------------
                                    Scott A. Hoffmann
                                    Vice President & Chief Financial Officer
                                    (Principal Financial and Accounting Officer)






                                       13