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, 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 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 27,998,310
shares as of May 11, 2000.


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

                                    Form 10-Q
                      For the Quarter Ended March 31, 2000

                                Table of Contents


                                                                            Page
                                     PART I

Item 1.  Financial Statements

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

Consolidated Statements of Operations
  for the three months ended March 31, 2000 and 1999 and for the period from
  October 17, 1986 (inception) to March 31, 2000 .............................4

Consolidated Statements of Stockholders' Equity
  (Net Capital Deficiency) for the period from October 17, 1986
  (inception) to March 31, 2000 ..............................................5

Consolidated Statements of Cash Flows
  for the three  months ended March 31, 2000
  and 1999 and for the period from
  October 17, 1986 (inception) to March 31, 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 2.  Changes in Securities...............................................11

Item 4.  Submission of Matters to a Vote of Security Holders.................11

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

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


                                       2
<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, 2000      December 31, 1999
                                                                                               --------------      -----------------
                                                                                                 (unaudited)
Current assets:
<S>                                                                                              <C>                   <C>
  Cash and cash equivalents ............................................................         $  3,487,892          $  3,874,437
  Marketable equity security ...........................................................            2,004,709               519,387
  Prepaid expenses and other current assets ............................................              349,712               145,237
                                                                                                 -----------           ------------
      Total current assets .............................................................            5,842,313             4,539,061
                                                                                                 ------------          ------------

Property and equipment:
   Laboratory equipment ................................................................              415,704               407,624
   Office equipment ....................................................................              202,304               178,797
   Leasehold improvements ..............................................................               18,320                15,000
                                                                                                 ------------          ------------
      Total at cost ....................................................................              636,328               601,421
   Less accumulated depreciation and amortization ......................................             (337,530)             (311,752)
                                                                                                 ------------          ------------
      Property and equipment, net ......................................................              298,798               289,669
                                                                                                 ------------          ------------

Patent costs, net of accumulated amortization of $5,233
   and $0, respectively ................................................................              204,283               204,283
Other assets ...........................................................................               15,830                15,642
                                                                                                 ------------          ------------
      Total assets .....................................................................         $  6,361,042          $  5,048,655
                                                                                                 ============          ============

                      Liabilities and Stockholders' Equity

Current liabilities:
   Accounts payable and accrued liabilities ............................................         $    519,148          $    773,206
   Sponsored research payable ..........................................................              399,712               421,681
                                                                                                 ------------          ------------
      Total current liabilities ........................................................              918,860             1,194,887

Convertible promissory note ............................................................            2,000,000             2,000,000
Unearned revenue .......................................................................            1,000,000             1,000,000
Other long-term liabilities ............................................................              229,935               182,695
Commitments and contingencies ..........................................................                 --                    --
                                                                                                 ------------          ------------
      Total liabilities ................................................................            4,148,795             4,377,582

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

Stockholders' equity:
   Preferred stock, $.01 par value, authorized 3,000,0000 shares:
      Series C cumulative convertible preferred stock, authorized
        23,000 shares; 13,006 and 12,780 shares issued and
        outstanding at March 31, 2000 and December 31, 1999,
        respectively ...................................................................                  130                   128
      Series D cumulative convertible exchangeable preferred stock,
        authorized 21,000 shares; 12,015 issued and outstanding at
        March 31, 2000 and December 31, 1999 ...........................................                  120                   120
      Series F convertible non-exchangeable preferred stock,
        5,000 shares authorized; 5,000 shares issued and outstanding at
        March 31, 2000 and December 31, 1999
                                                                                                           50                    50
      Common stock, $.01 par value,  authorized 60,000,000 shares;
        Issued and outstanding 27,877,267 and 27,308,846 shares at
        March 31, 2000 and December 31, 1999, respectively .............................              278,772               273,088
Additional paid-in capital .............................................................           75,371,519            73,638,128
Other comprehensive income .............................................................            1,654,709               169,387
Deficit accumulated during development stage ...........................................          (75,093,053)          (73,409,828)
                                                                                                 ------------          ------------
        Total stockholders' equity .....................................................            2,212,247               671,073
                                                                                                 ------------          ------------

Total liabilities and stockholders' equity .............................................         $  6,361,042          $  5,048,655
                                                                                                 ============          ============
</TABLE>

                See notes to consolidated financial statements.

                                       3
<PAGE>

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


                     Consolidated Statements of Operations
                    For the Three Months Ended March 31, 2000
                          and 1999 and for the Period
               from October 17, 1986 (inception) to March 31, 2000
                                  (Unaudited)
<TABLE>
<CAPTION>

                                                                                                                       October 17,
                                                                                                                           1986
                                                                                      Three Months Ended            (inception) to
                                                                                          March 31                    March 31,
                                                                             ------------------------------------------------------
                                                                                 2000                  1999                 2000
                                                                             -------------        ----------        ---------------
Revenues:
<S>                                                                          <C>                  <C>                  <C>
   Contract research revenue ........................................        $    121,170         $     26,000         $    520,548
   Sublicense revenue ...............................................                --                   --              1,360,000
                                                                             ------------         ------------         ------------

        Total revenues ..............................................             121,170               26,000            1,880,548

Expenses:
   Acquisition of research and development
         in-process technology ......................................                --                   --             29,975,000
   Research and development .........................................             902,023              680,979           25,927,447
   General and administrative .......................................             694,724              499,663           22,537,189
                                                                             ------------         ------------         ------------

        Total expenses ..............................................           1,596,747            1,180,642           78,439,636
                                                                             ------------         ------------         ------------

Loss from operations ................................................          (1,475,577)          (1,154,642)         (76,559,088)

Interest income .....................................................              52,501               21,877              658,542
Interest expense ....................................................             (50,033)             (29,891)            (623,388)
Minority interest in loss of subsidiary .............................              16,019                 --              3,001,019
                                                                             ------------         ------------         ------------

Loss before extraordinary item ......................................          (1,457,090)          (1,162,656)         (73,522,915)

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

Net loss ............................................................        $ (1,457,090)        $ (1,162,656)        $(73,480,128)
                                                                             ============         ============         ============

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

Net loss - attributable to common shares ............................        $ (1,457,090)        $ (1,162,656)        $(73,583,528)
                                                                             ============         ============         ============

Weighted average common shares outstanding-
   basic and diluted ................................................          27,588,397           27,074,252            8,282,153

Net loss per share of common stock - basic and diluted:
      Loss before extraordinary item
                                                                             $      (0.05)        $      (0.04)        $      (8.88)
      Extraordinary item ............................................                --                   --                    .01
                                                                             ------------         ------------         ------------
      Net loss per share ............................................        $      (0.05)        $      (0.04)        $      (8.87)
                                                                             ============         ============         ============
</TABLE>


                See notes to consolidated financial statements.

                                       4
<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, 2000
                                   (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..........................................         --       11,340,864       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..........................................         --            5,684           --        1,474,891
Series C preferred stock dividends...........................          2               --           --          225,998
Common stock warrants issued.................................         --               --           --           32,502
Comprehensive income (loss):.................................
     Unrealized gain on marketable securities................         --               --           --               --
     Net loss................................................         --               --           --               --
     Comprehensive income (loss).............................         --               --           --               --
                                                                --------      -----------     --------      -----------

Balance at March 31, 2000....................................       $300         $278,772     $     --      $75,371,519
                                                                ========      ===========     ========      ===========
</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..........................................           --             --       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..........................................           --             --        1,480,575
Series C preferred stock dividends...........................           --       (226,135)            (135)
Common stock warrants issued.................................           --             --           32,502
Comprehensive income (loss):.................................
     Unrealized gain on marketable securities................    1,485,322             --               --
     Net loss................................................           --     (1,457,090)              --
     Comprehensive income (loss).............................           --             --           28,232
                                                                ----------   ------------     ------------
Balance at March 31, 2000....................................   $1,654,709   $(75,093,053)      $2,212,247
                                                                ==========   ============     ============
</TABLE>

See notes to consolidated financial statements.

                                       5
<PAGE>

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

                      Consolidated Statements of Cash Flows
           For the Three Months Ended March 31, 2000 and 1999 and for
                 the Period from October 17, 1986 (inception) to
                                 March 31, 2000
                                   (Unaudited)
<TABLE>
<CAPTION>


                                                                                             Three Months Ended     October 17, 1986
                                                                                                   March 31,          (inception) to
                                                                                       ----------------------------       March 31,
                                                                                          2000            1999              2000
                                                                                       ------------    ------------    -------------
Cash outflows from operating activities:
<S>                                                                                    <C>             <C>             <C>
    Net loss ......................................................................    $(1,457,090)    $(1,162,656)    $(73,480,128)
Adjustments to reconcile net loss to net cash used by
   development stage activities:
     Issuance of common stock, stock options/warrants for
         services .................................................................         44,502          62,567        2,529,927
     Non-cash acquisition of research and development in-process technology
                                                                                              --              --          1,650,000
     Depreciation and amortization ................................................         31,012          19,856          510,572
     (Increase) decrease in prepaid expenses & other current assets ...............       (204,475)          4,441         (408,753)
     Decrease in other assets .....................................................         (5,239)           --           (166,123)
     Decrease in accounts payable and accrued liabilities .........................       (238,409)        (45,363)         (52,543)
     (Decrease) increase in sponsored research payable ............................        (21,969)           --            976,782
     Increase in unearned revenue .................................................           --              --          1,000,000
     Other ........................................................................         32,978          28,514          595,968
                                                                                       -----------     -----------     ------------
Net cash used by development stage activities .....................................     (1,818,690)     (1,092,641)     (66,844,298)
                                                                                       -----------     -----------     ------------

Cash flows from investing activities:
     Acquisition of laboratory and office equipment, and leasehold
         improvements .............................................................        (34,907)         (6,231)        (620,619)
     Other ........................................................................           --             2,500          117,998
                                                                                       -----------     -----------     ------------
Net cash used by investing activities .............................................        (34,907)         (3,731)        (502,621)
                                                                                       -----------     -----------     ------------

Cash flows from financing activities:
     Payments on debt and capital leases ..........................................         (1,523)         (1,303)        (837,697)
     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 .............................      1,468,575          50,000       12,962,296
     Other ........................................................................           --              --           (500,024)
                                                                                       -----------     -----------     ------------
Net cash provided by financing activities .........................................      1,467,052         548,697       70,833,727
                                                                                       -----------     -----------     ------------

Net (decrease) increase in cash and cash equivalents ..............................       (386,545)       (547,675)       3,486,808
Cash and cash equivalents at beginning of period ..................................      3,874,437       2,456,290            1,084
                                                                                       -----------     -----------     ------------
Cash and cash equivalents at end of period ........................................    $ 3,487,892     $ 1,908,615     $  3,487,892
                                                                                       ===========     ===========     ============

Noncash investing and financing activities:
     Common stock, stock options/warrants issued for services .....................    $    44,502     $    62,567     $  2,529,927
     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 ..............................................................        226,000         208,495        1,872,824

Supplemental disclosure of cash flow information:  Interest paid ..................    $       821     $     1,377     $    277,141
</TABLE>

See notes to consolidated financial statements.

                                       6
<PAGE>

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

                   Notes to Consolidated Financial Statements
                                 March 31, 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
         March 31, 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 months ended March 31, 2000 and 1999 are not  necessarily
         indicative of the operating results for the full years.

         These  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>

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. Important factors that could cause actual results to differ materially
from  the  forward-looking  statements  include  the  Company's  need to  obtain
substantial  additional  capital  (through  financings or otherwise) to fund its
operations and the progress of development  and  licensing/commercialization  of
the Company's technologies.  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(TM)"),  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 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,  a world  leader in  pharmaceutical
delivery  technology,  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>

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 quarters
ended March 31,  2000 and 1999 were  $121,170  and  $26,000,  respectively.  The
increase relates to three additional  respiratory programs in development in the
first quarter of 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 expenses were $902,023 for the first quarter of 2000 as
compared to $680,979  for the first  quarter of 1999.  The  increase of $221,044
from 1999 primarily reflects 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,  partially  offset  by  lower  development  and
engineering costs related to the ADDS device.

General and Administrative

General and  administrative  expenses  were $694,724 for the quarter ended March
31, 2000, compared with $499,663 for the same quarter of 1999. The increase from
the first  quarter of 1999 of $195,061 was  primarily  due to higher  consulting
costs and legal fees associated with expanded business development activity.

Interest

Interest  income was $52,501 for the quarter ended March 31, 2000 as compared to
$21,877 for the same quarter of 1999.  The $30,624  increase in interest  income
was primarily due to larger balances of cash available for investment and higher
average yields on those investments.

Interest  expense  was  $50,033  for the first  quarter of 2000,  compared  with
$29,891  for the first  quarter  of 1999.  The  increase  of  $20,142 in 2000 as
compared to 1999  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.

Liquidity and Capital Resources

At March 31,  2000,  the Company  had  $3,487,892  in cash and cash  equivalents
compared to $3,874,437 at December 31, 1999. The decrease of $386,545  primarily
reflects  $1,818,690  of cash  disbursements  used  primarily to fund  operating
activities,  partially offset by $1,468,575 in net proceeds from the exercise of
common stock options and warrants.

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 March 31, 2000,
no purchases of Series E Preferred Stock have been made.

                                       9
<PAGE>


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  $72.2  million  through  March 31,  2000,  of which
approximately  $30.0  million  has been  spent  to  acquire  certain  in-process
research and  development  technologies,  and $25.9 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.




                                       10

<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, 2000:
<TABLE>
<CAPTION>

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

<S>                              <C>                    <C>                 <C>           <C>
              January 2000       Common stock           21,524              $5.00         Advisor in lieu of cash
                                 warrants.                                                consideration.

              January 2000       Common stock           45,000              $5.00         Issuance to certain
                                 options.                                                   Directors pursuant to
                                                                                            the 1996 Directors
                                                                                            Stock Option Plan.

              March 2000         Common stock            4,465              $2.69         Advisor in lieu of cash
                                                                                            consideration.
</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 4.      Submission of Matters to a Vote of Security Holders

             A special  meeting of  stockholders  was held on January 20,  2000.
             Listed  below  are the  matters  voted on by  stockholders  and the
             number of votes cast at the meeting.

       (a)   Approval  of  issuance  of  the   Company's   Series  D  Cumulative
             Convertible  Exchangeable  Preferred Stock and the Company's Common
             Stock issuable upon conversion of such Preferred Stock.

             Voted For                           14,535,522
             Voted Against                          765,533
             Votes Withheld                         161,450

       (b)   Approval   of   issuance   of  Series  E   Cumulative   Convertible
             Non-Exchangeable  Preferred  Stock and the  Company's  Common Stock
             issuable upon conversion of such Preferred Stock.

             Voted For                           14,516,258
             Voted Again                            784,198
             Votes Withheld                         162,549


Item 6.      Exhibits and Reports on Form 8-K.
             No reports on Form 8-K were filed  during the  quarter  ended March
             31, 2000.

             Exhibits

             No.          Description

             27           Financial Data Schedule.


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


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


                                       12