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<SEC-DOCUMENT>0000927016-01-000286.txt : 20010129
<SEC-HEADER>0000927016-01-000286.hdr.sgml : 20010129
ACCESSION NUMBER:		0000927016-01-000286
CONFORMED SUBMISSION TYPE:	S-3
PUBLIC DOCUMENT COUNT:		7
FILED AS OF DATE:		20010126

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			SHEFFIELD PHARMACEUTICALS INC
		CENTRAL INDEX KEY:			0000894158
		STANDARD INDUSTRIAL CLASSIFICATION:	PHARMACEUTICAL PREPARATIONS [2834]
		IRS NUMBER:				133808303
		STATE OF INCORPORATION:			DE
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		S-3
		SEC ACT:		
		SEC FILE NUMBER:	333-54446
		FILM NUMBER:		1516729

	BUSINESS ADDRESS:	
		STREET 1:		425 WOODSMILL RD
		CITY:			ST LOUIS
		STATE:			MO
		ZIP:			63017
		BUSINESS PHONE:		3145799899

	MAIL ADDRESS:	
		STREET 1:		425 WOODSMILL RD
		CITY:			ST LOUIS
		STATE:			MO
		ZIP:			63017

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	SHEFFIELD MEDICAL TECHNOLOGIES INC
		DATE OF NAME CHANGE:	19940606
</SEC-HEADER>
<DOCUMENT>
<TYPE>S-3
<SEQUENCE>1
<FILENAME>0001.txt
<DESCRIPTION>FORM S-3
<TEXT>

<PAGE>

                                     Registration Statement No. 333-____________
================================================================================
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                           __________________________

                           REGISTRATION STATEMENT ON
                                    FORM S-3
                                     UNDER
                           THE SECURITES ACT OF 1933
                           __________________________
                        SHEFFIELD PHARMACEUTICALS, INC.
             (Exact Name of Registrant as Specified in its Charter)
<TABLE>
<S>                                            <C>                                   <C>
Delaware                                                   2834                           13-3808303
(State or Other Jurisdiction                   (Primary Standard Industry            (I.R.S. Employer
of Incorporation or Organization)              Classification Code Number)            Identification No.)
</TABLE>
                           __________________________

                      425 South Woodsmill Road, Suite 270
                              St. Louis, MO 63017
                                 (314) 579-9899
   (Address, Including Zip Code and Telephone Number, Including Area Code, of
                   Registrant's Principal Executive Offices)
                           __________________________

                               Loren G. Peterson
                            Chief Executive Officer
                        Sheffield Pharmaceuticals, Inc.
                      425 South Woodsmill Road, Suite 270
                              St. Louis, MO 63017
                                 (314) 579-9899
(Name, Address, Including Zip Code and Telephone Number, Including Area Code, of
                               Agent For Service)
                           __________________________

                                    Copy to:
                             David A. Cifrino, P.C.
                            William O. Fabbri, Esq.
                            McDermott, Will & Emery
                                28 State Street
                             Boston, MA 02109-1775
                                 (617) 535-4034
                           __________________________

  Approximate date of commencement of proposed sale to the public:  As soon as
practicable after this Registration Statement becomes effective.

     If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [x]

     If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering.  [_]

     If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]

     If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]

     If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box.  [_]

                        CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
===================================================================================================================================
                                                               Proposed             Proposed
                                                                Maximum              Maximum
    Title of Each Class of           Securities to be      Offering Price Per       Aggregate
  Securities to be Registered           Registered             Share              Offering Price      Amount of Registration Fee
 ===================================================================================================================================
<S>                              <C>                       <C>                       <C>              <C>
Common Stock, $.01 par value
 per share.....................         913,258(1)              $3.9375(2)            $3,595,953.38              $899
===================================================================================================================================
</TABLE>

(1)  The shares being registered by this registration statement include,
pursuant to Rule 416 of the Securities Act, an indeterminate number of
additional shares that may be issued as a result of stock splits, stock
dividends or similar transactions.
(2)  Estimated solely for the purpose of determining the registration fee and
computed pursuant to Rule 457(c), based upon the average of the high and low
sale prices on January 23, 2001, as reported by the American Stock Exchange.

     The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933, as amended or until the Registration Statement shall
become effective on such date as the Securities and Exchange Commission, acting
pursuant to said Section 8(a), may determine.

================================================================================

<PAGE>

The information in this prospectus is not complete and may be changed. The
Selling Stockholders may not sell these securities until registration statement
filed the Securities and Exchange commission is effective. The prospectus is not
an offer to sell securities, and we are not soliciting offers to buy these
securities, in any state where the offer or sale is not permitted.

                 SUBJECT TO COMPLETION, DATED JANUARY 26, 2001


                                913,258 Shares

                        SHEFFIELD PHARMACEUTICALS, INC.

                                    [LOGO]

                                 Common Stock


     This prospectus relates to the offer and resale from time to time by the
selling stockholders of:

     .    626,950 shares of our common stock issued to The Tail Wind Fund Ltd.
          in a private placement by the Company completed in December 2000,
     .    112,500 shares of our common stock issuable upon exercise of a warrant
          issued to The Tail Wind Fund Ltd. in the December 2000 private
          placement,
     .    53,808 shares of our common stock issuable upon exercise of warrants
          issued to Gruntal & Co., and
     .    100,000 shares of our common stock issuable upon exercise of a warrant
          issued to Continental Capital & Equity Corporation.
     .    20,000 shares of our common stock issuable upon exercise of a warrant
          issued to The P. L. Thomas Group.

     The selling stockholders may sell the shares from time to time at fixed
prices, market prices or at negotiated prices, and may engage a broker or dealer
to sell the shares.  For additional information on the selling shareholders'
possible methods of sales, you should refer to the section of this prospectus
entitled "Plan of Distribution" on page 11.  We will not receive any proceeds
from the sale of the shares, but will bear the costs relating to the
registration of the shares.

     Selling stockholders identified in this prospectus are offering all of
these shares and will receive all of the proceeds of this offering.  Our common
stock presently trades on the American Stock Exchange, or AMEX, under the symbol
"SHM".  On January 25, 2001, the closing sale price of common stock on the AMEX
was $4.25.

                                _______________

     Investing in our common stock involves risks.  See "Risk Factors" beginning
on page 3.
                                _______________


     The Securities and Exchange Commission and state securities regulators have
not approved or disapproved these securities or determined if this Prospectus is
truthful or complete.  Any representation to the contrary is a criminal offense.

                                _______________

               The date of this Prospectus is __________, 2001.
<PAGE>

                               TABLE OF CONTENTS


                                                                         Page
                                                                         ----
Prospectus Summary.....................................................     1

Risk Factors...........................................................     3

Note on Forward Looking Statements.....................................     9

Use of Proceeds........................................................     9

Selling Stockholders...................................................    10

Plan of Distribution...................................................    11

Legal Matters..........................................................    12

Experts................................................................    12

Where You Can Find More Information....................................    12

                                          i
<PAGE>

                              PROSPECTUS SUMMARY


This is only a summary and may not contain all of the information that you
should consider before investing in our common stock. You should read the entire
prospectus carefully, including the "Risk Factors" section and our financial
statements and the notes thereto included elsewhere in this prospectus.


                        SHEFFIELD PHARMACEUTICALS, INC.


     We are a specialty pharmaceutical company focused on the development and
commercialization of later stage, lower risk pharmaceutical opportunities,
utilizing proprietary pulmonary delivery technologies over a range of
therapeutic areas. Through our alliances with Elan Corporation plc, Zambon Group
SpA, and Siemens AG, we are currently developing nine respiratory and systemic
therapies to be delivered through our Metered Solution Inhaler, or MSI and
Aerosol Drug Delivery System, or ADDS. We believe these pulmonary delivery
technologies will allow us to capitalize on the growing drug delivery market by
providing both advanced respiratory treatments and patient-friendly alternatives
for therapies that can currently be administered only by injection or other
inconvenient means.

     In 1997, we acquired the MSI through a worldwide exclusive license and
supply arrangement with Siemens AG. In June 1998, we sublicensed to Zambon Group
SpA worldwide marketing and development rights to respiratory products to be
delivered by the MSI. During the second half of 1998, we acquired the ADDS from
Aeroquip-Vickers, Inc. Additionally, during 1998, we licensed from Elan
Corporation, plc, the Ultrasonic Pulmonary Drug Absorption System, a novel
disposable unit dose nebulizer system, and Elan's Absorption Enhancing
Technology, a therapeutic agent to increase the systemic absorption of drugs. In
October 1999, we licensed Elan's NanoCrystal technology to be used in developing
certain steroid products.

     Our lead drug delivery technology, the MSI, is a patented, multi-dose
nebulizer delivery system. The pocket-sized inhaled drug delivery system
features an ultrasonic nebulizer that emits high-frequency sound waves that turn
liquid medication into a fine cloud or soft mist. Our MSI system combines the
therapeutic benefits of nebulization with the convenience of pressurized metered
dose inhalers, or MDIs, in one patient-friendly device. Our MSI is comprised of
a hand-held ultrasonic nebulizer and interchangeable, drug-filled cartridges
that are inserted into the inhaler unit. The interchangeable cartridges provide
patients who must take multiple respiratory medications with a single, easy-to-
use system. We believe the soft mist created by the MSI provides multiple drug
administration advantages over the high-velocity MDIs and dry powder inhalers.
Furthermore, our MSI system is fast and portable as compared to conventional
tabletop nebulizers, which are large, cumbersome and more time consuming to use.
The MSI system targets younger and older asthma patients, as well as older
chronic obstructive pulmonary disease patients who have difficulty using MDIs
and currently depend on tabletop nebulizers for delivery of their medications.

     Our ADDS is a patented, new generation MDI that we believe has significant
efficiency and performance advantages over standard MDIs. Our ADDS technology
utilizes a standard aerosol MDI canister, encased in a compact device that
provides an aerosol flow-control chamber and a synchronized triggering
mechanism. The aerosol flow-control chamber allows the patient to inhale through
the device at a normal breathing rate, instead of a forced breath. The
inspiratory breath establishes flow fields within the device that mix and
uniformly disperse the drug in the breath. At the mouthpiece, nearly all the
propellant is evaporated leaving only drug particles to be inspired, allowing a
significant increase in the amount of drug delivered to the lungs. Our ADDS
system, like our MSI system, is designed to reduce patient coordination problems
and enhance compliance with the prescribed treatment.

     Sheffield Pharmaceuticals, Inc. (formerly Sheffield Medical Technologies
Inc.) is a Delaware corporation. Our principal executive offices are located at
425 South Woodsmill Road, Suite 270, St. Louis, Missouri, 63017, and our
telephone number is (314) 579-9899. Our common stock trades on the American
Stock Exchange under the symbol "SHM". Our web site address is
www.sheffieldpharm.com. Information contained on our web site is not intended to
be part of this prospectus and is not incorporated by reference herein.
<PAGE>

                              Summary of Offering



Common stock offered by selling stockholders...........  913,258 shares/(1)/

Shares of common stock outstanding
after the offering.....................................  29,103,284 shares/(2)/

Use of proceeds........................................  All proceeds from the
                                                         sale of the shares of
                                                         common stock in this
                                                         offering will be
                                                         received by the selling
                                                         stockholders.

AMEX Ticker symbol.....................................  SHM


  (1) Consists of 626,950 shares of common stock and 286,308 shares of common
      stock issuable upon the exercise of outstanding warrants.

  (2) Based on the number of shares actually outstanding on January 25, 2001.
      Includes all the shares being offered pursuant to this prospectus and
      excludes, as of January 25, 2001:

      .  4,511,400 shares of common stock issuable on the exercise of
         outstanding options at a weighted average exercise price of $3.19 per
         share,

      .  2,146,361 shares of common stock issuable upon exercise of outstanding
         warrants at a weighted average exercise price of $2.62 per share,

      .  1,189,200 shares of common stock available for future issuance under
         our 1993 Stock Option Plan, 1993 Restricted Stock Plan and 1996
         Directors Stock Option Plan,

      .  15,464,235 shares of common stock issuable upon conversion of
         outstanding shares of preferred stock, and

      .  1,362,578 shares of common stock issuable upon conversion of
         outstanding convertible promissory notes.

                                       2
<PAGE>

                                 RISK FACTORS


     You should carefully consider the risk factors in addition to the remainder
of this prospectus before purchasing our common stock. The risks described below
are not the only risks we face. Additional risks of which we do not yet know or
that we currently think are immaterial may also impair our business operations.
If any of the following risks occur, our business, financial condition or
operating results could be adversely affected. In that case, the trading price
of our common stock could decline, and you may lose all or part of your
investment.

We have experienced significant operating losses throughout our history and
expect these losses to continue for the foreseeable future.

     Our operations to date have consumed substantial amounts of cash and we
have generated to date only limited revenues from contract research and
licensing activities. We have incurred approximately $79.1 million of operating
losses since our inception, including $4.3 million during the nine months ended
September 30, 2000. Our operating losses and negative cash flow from operations
are expected to continue in the foreseeable future.

We will need additional financing, which if not available, could prevent us from
funding or expanding our operations.

     Cash available for funding our operations as of September 30, 2000 was $1.6
million. As of such date, we had trade payables of $476,243 and current research
obligations of $348,629. In addition, committed and/or anticipated funding of
research and development after September 30, 2000 is estimated at approximately
$3.1 million, of which $3.0 million has been committed to be funded by Elan
through the issuance of our Series E cumulative convertible preferred stock.
Since September 30, 2000 we have raised $2,250,000 through the sale of our
securities and received $1.0 million as an interest-free advance against future
milestone payments, and anticipate that we have sufficient cash to meet our cash
requirements through December 31, 2001, assuming we do not incur unexpected
costs.

     We need to raise substantial additional capital to fund our operations. The
development of our technologies and proposed products will require a commitment
of substantial funds to conduct costly and time-consuming research, preclinical
and clinical testing, and to bring any such products to market. Our future
capital requirements will depend on many factors, including continued progress
in developing and out-licensing our pulmonary delivery technologies, our ability
to establish and maintain collaborative arrangements with others and to comply
with the terms thereof, receipt of payments due from partners under research and
development agreements, progress with preclinical and clinical trials, the time
and costs involved in obtaining regulatory approvals, the cost involved in
preparing, filing, prosecuting, maintaining and enforcing patent claims, the
need to acquire licenses to new technology and the status of competitive
products.

     We intend to seek such additional funding through collaborative or
partnering arrangements, the extension of existing arrangements, or through
public or private equity or debt financings. Additional financing may not be
available on acceptable terms or at all. If we raise additional funds by issuing
equity securities, stockholders may be further diluted and such equity
securities might have rights, preferences and privileges senior to those of our
current stockholders. If adequate funds are not available, we may be required to
delay, reduce the scope of, or eliminate one or more of our research or
development programs or obtain funds through arrangements with collaborative
partners or others that may require us to relinquish rights to certain of our
technologies, product candidates or products that we would otherwise seek to
develop or commercialize. If adequate funds are not available from operations or
additional sources of funding, our business will suffer a material adverse
effect.

Our products are still in development and we may be unable to bring our products
to market.

     We have not yet begun to generate revenues from the sale of products. Our
products will require significant additional development, clinical testing and
investment prior to their commercialization. We do not expect regulatory
approval for commercial sales of any of our products in the immediate future.
Potential products that appear to be promising at early stages of development
may not reach the market for a number of reasons. Such reasons include the
possibility that products will not be proven to be safe and efficacious in
clinical trials, that they

                                       3
<PAGE>

will not be able to meet applicable regulatory standards or obtain required
regulatory approvals, that they cannot be produced in commercial quantities at
reasonable costs or that they fail to be successfully commercialized or fail to
achieve market acceptance.

If our products are not accepted by the medical community, our business will
suffer.

     Commercial sales of our products will substantially depend upon the
products' efficacy and on their acceptance by the medical community. Widespread
acceptance of our products will require educating the medical community as to
the benefits and reliability of the products. Our products may not be accepted
and, even if accepted, we are unable to estimate the length of time it would
take to gain such acceptance.

We will be required to make royalty payments on products we may develop,
reducing the amount of revenues with which we could fund ongoing operations.

     The owners and licensors of the technology rights acquired by us are
entitled to receive a certain percentage of all revenues received by us from
commercialization, if any, of products in respect of which we hold licenses.
Accordingly, in addition to our substantial investment in product development,
we will be required to make substantial payments to others in connection with
revenues derived from commercialization of products, if any, developed under
licenses we hold. Consequently, we will not receive the full amount of any
revenues that may be derived from commercialization of products to fund ongoing
operations.

Our dependence on third parties for rights to technology and the development of
our products could harm our business.

     Under the terms of existing license agreements, we are obligated to make
certain payments to our licensors. In the event that we default on the payment
of an installment under the terms of an existing licensing agreement, our rights
thereunder could be forfeited. As a consequence, we could lose all rights under
a license agreement to the related licensed technology, notwithstanding the
total investment made through the date of the default. Unforeseen obligations or
contingencies may deplete our financial resources and, accordingly, sufficient
resources may not be available to fulfill our commitments. If we were to lose
our rights to technology, we may be unable to replace the licensed technology or
be unable to do so on commercially reasonable terms, which would materially
adversely affect our ability to bring products based on that technology to
market. In addition, we depend on our licensors for assistance in developing
products from licensed technology. If these licensors fail to perform or their
performance is not satisfactory, our ability to successfully bring products to
market may be delayed or impeded.

We face intense competition and rapid technological changes and our failure to
successfully compete or adapt to changing technology could make it difficult to
successfully bring products to market.

     The medical field is subject to rapid technological change and innovation.
Pharmaceutical and biomedical research and product development are rapidly
evolving fields in which developments are expected to continue at a rapid pace.
Reports of progress and potential breakthroughs are occurring with increasing
frequency. Our success will depend upon our ability to develop and maintain a
competitive position in the research, development and commercialization of
products and technologies in our areas of focus. Competition from
pharmaceutical, chemical, biomedical and medical companies, universities,
research and other institutions is intense and is expected to increase. All, or
substantially all, of these competitors have substantially greater research and
development capabilities, experience, and manufacturing, marketing, financial
and managerial resources. Further, acquisitions of competing companies by large
pharmaceutical or other companies could enhance such competitors' financial,
marketing and other capabilities. Developments by others may render our products
or technologies obsolete or not commercially viable and we may not be able to
keep pace with technological developments.

We have granted anti-dilutions rights to The Tail Wind Fund Ltd. which may
require us to issue additional shares to Tail Wind, make cash payments to Tail
Wind and may hinder our ability to raise additional funds.

     Pursuant to our December 2000 private placement with The Tail Wind Fund
Ltd., until at least August 29, 2002, if we sell shares of our common stock or
securities convertible into or exercisable for common stock for less

                                       4
<PAGE>

than $3.5888 per share, we are obligated to issue to Tail Wind additional shares
so that the number of shares purchased by Tail Wind in the December 2000 private
placement plus the additional shares issued to Tail Wind equals the number of
shares that Tail Wind could have purchased for $2,250,000 at the price per share
at which the new shares are sold. The presence of these anti-dilution rights may
negatively affect our ability to obtain additional financing. In addition, in
the event that we are required to issue additional shares to Tail Wind, we may
not issue an aggregate of over 5,630,122 shares of our common stock in total to
Tail Wind in connection with the December 2000 private placement. If we would
otherwise be required to issue more than 5,630,122 shares to Tail Wind, we must
instead pay Tail Wind 105% of the cash value of such shares we do not issue.

We are subject to significant government regulation and failure to achieve
regulatory approval for our products would severely harm our business.

     Our ongoing research and development projects are subject to rigorous FDA
approval procedures. The preclinical and clinical testing requirements to
demonstrate safety and efficacy in each clinical indication (the specific
condition intended to be treated) and regulatory approval processes of the FDA
can take a number of years and will require us to expend substantial resources.
We may be unable to obtain FDA approval for our products, and even if we do
obtain approval, delays in such approval would adversely affect the marketing of
products to which we have rights and our ability to receive product revenues or
royalties. Moreover, even if FDA approval is obtained, a marketed product, its
manufacturer and its manufacturing facilities are subject to continual review
and periodic inspections by the FDA, and a later discovery of previously unknown
problems with a product, manufacturer or facility may result in restrictions on
such product or manufacturer. Failure to comply with the applicable regulatory
requirements can, among other things, result in fines, suspensions of regulatory
approvals, product recalls, operating restrictions and criminal prosecution.
Additional government regulation may be established which could prevent or delay
regulatory approval of our products. Sales of pharmaceutical products outside
the United States are subject to foreign regulatory requirements that vary
widely from country to country. Even if FDA approval has been obtained, approval
of a product by comparable regulatory authorities of foreign countries must be
obtained prior to the commencement of marketing the product in those countries.
The time required to obtain such approval may be longer or shorter than that
required for FDA approval. We have no experience in manufacturing or marketing
in foreign countries nor in matters such as currency regulations, import-export
controls or other trade laws. To date, we have not received final regulatory
approval from the FDA or any other comparable foreign regulatory authority for
any of our products or technologies.

Our failure to meet product release schedules would make it difficult to predict
our quarterly results and may cause our operating results to vary significantly.

     Delays in the planned release of our products may adversely affect
forecasted revenues and create operational inefficiencies resulting from
staffing levels designed to support the forecasted revenues. Our failure to
introduce new products on a timely basis could delay or hinder market acceptance
and allow competitors to gain greater market share.

If our intellectual property and proprietary rights are infringed, or infringe
upon the rights of others, our business will suffer.

     Our success will depend in part on our ability to obtain patent protection
for our technologies, products and processes and to maintain trade secret
protection and operate without infringing the proprietary rights of others. The
degree of patent protection to be afforded to pharmaceutical, biomedical or
medical inventions is an uncertain area of the law. In addition, the laws of
foreign countries do not protect our proprietary rights to the same extent as do
the laws of the United States. We may not develop or receive sublicenses or
other rights related to proprietary technology that are patentable, patents that
are pending may be not issued, and any issued patents may not provide us with
any competitive advantages and may be challenged by third parties. Furthermore,
others may independently duplicate or develop similar products or technologies
to those developed by or licensed to us. If we are required to defend against
charges of patent infringement or to protect our own proprietary rights against
third parties, substantial costs will be incurred and we could lose rights to
certain products and technologies or be required to enter into costly royalty or
licensing agreements.

                                       5
<PAGE>

We do not have any marketing or manufacturing capabilities and will likely rely
on third parties for these capabilities in order to bring products to market.

     We do not currently have our own sales force or an agreement with another
pharmaceutical company to market all of our products that are in development.
When appropriate, we may build or otherwise acquire the necessary marketing
capabilities to promote our products. However, we may not have the resources
available to build or otherwise acquire our own marketing capabilities, and we
may be unable to reach agreements with other pharmaceutical companies to market
our products on terms acceptable to us, if at all.

     In addition, we do not intend to manufacture our own products.  While we
have already entered into two manufacturing and supply agreements related to the
MSI system and one related to the ADDS, these manufacturing and supply
agreements may not be adequate and we may not be able to enter into future
manufacturing and supply agreements on acceptable terms, if at all. Our reliance
on independent manufacturers involves a number of risks, including the absence
of adequate capacity, the unavailability of, or interruptions in, access to
necessary manufacturing processes and reduced control over product quality and
delivery schedules.  If our manufacturers are unable or unwilling to continue
manufacturing our products in required volumes, we will have to identify
acceptable alternative manufacturers.  The use of a new manufacturer may cause
significant interruptions in supply if the new manufacturer has difficulty
manufacturing products to our specifications.  Further, the introduction of a
new manufacturer may increase the variation in the quality of our products.

Healthcare reimbursement policies are uncertain and may adversely impact the
sale of our products.

     Our ability to commercialize human therapeutic and diagnostic products may
depend in part on the extent to which costs for such products and technologies
are reimbursed by private health insurance or government health programs. The
uncertainty regarding reimbursement may be especially significant in the case of
newly approved products. Reimbursement price levels may be insufficient to
provide a return to us on our investment in new products and technologies. In
the United States, government and other third-party payers have sought to
contain healthcare costs by limiting both coverage and the level of
reimbursement for new pharmaceutical products approved for marketing by the FDA,
including some cases refusal to cover such approved products. Healthcare reform
may increase these cost containment efforts. We believe that managed care
organizations may seek to restrict the use of new products, delay authorization
to use new products or limit coverage and the level of reimbursement for new
products. Internationally, where national healthcare systems are prevalent,
little if any funding may be available for new products, and cost containment
and cost reduction efforts can be more pronounced than in the United States.

We may become subject to product liability claims and our product liability
insurance may be inadequate.

     The use of our proposed products and processes during testing, and after
approval, may entail inherent risks of adverse effects that could expose us to
product liability claims and associated adverse publicity. Although we currently
maintain general liability insurance, the coverage limits of our insurance
policies may not be adequate. We currently maintain clinical trial product
liability insurance of $2.0 million per event for certain clinical trials and
intend to obtain insurance for future clinical trials of products under
development. However, we may be unable to obtain or maintain insurance for any
future clinical trials. Such insurance is expensive, difficult to obtain and may
not be available in the future on acceptable terms, or at all. A successful
claim brought against us in excess of our insurance coverage would have a
material adverse effect upon us and our financial condition. We intend to
require our licensees to obtain adequate product liability insurance. However,
licensees may be unable to maintain or obtain adequate product liability
insurance on acceptable terms and such insurance may not provide adequate
coverage against all potential claims.

If our common stock is delisted from the American Stock Exchange, the price of
our common stock and its liquidity could decline.

     Our common stock is listed for trading on the American Stock Exchange, or
AMEX, under the symbol "SHM". We do not satisfy discretionary AMEX guidelines
for continued listing, including a guideline that a listed company that has
sustained losses from operations and/or net losses in three of its four most
recent fiscal years, have

                                       6
<PAGE>

stockholders' equity of at least $4,000,000. We had net capital deficiency of
$695,000 at September 30, 2000. We also do not satisfy a guideline against
continued losses for each of the issuer's five most recent fiscal years. Our
continued failure to meet the listing guidelines has been regularly reviewed by
AMEX and may ultimately result in our common stock being delisted from AMEX. If
our common stock were delisted from AMEX, trading of our common stock, if any,
would thereafter likely be conducted in the over-the-counter market, unless we
were able to list our common stock on The Nasdaq Stock Market or another
national securities exchange, which cannot be assured. If our common stock were
to trade in the over-the-counter market it may be more difficult for investors
to dispose of, or to obtain accurate quotations as to the market value of our
common stock. In addition, it may become more difficult for us to raise funds
through the sale of our securities.

     In the event of the delisting of our common stock from the AMEX and our
inability to list our common stock on The Nasdaq Stock Market or another
national securities exchange, the regulations of the SEC under the Securities
Exchange Act of 1934, as amended, require additional disclosure relating to the
market for penny stocks. SEC regulations generally define a penny stock to be an
equity security that has a market price of less than $5.00 per share, subject to
certain exceptions. A disclosure schedule explaining the penny stock market and
the risks associated therewith is required to be delivered to a purchaser and
various sales practice requirements are imposed on broker-dealers who sell penny
stocks to persons other than established customers and accredited investors
(generally institutions). In addition, the broker-dealer must provide the
customer with current bid and offer quotations for the penny stock, the
compensation of the broker-dealer and its salesperson in the transaction and
monthly account statements showing the market value of each penny stock held in
the customer's account. If our securities become subject to the regulations
applicable to penny stocks, the market liquidity for our securities could be
severely affected. In such an event, the regulations on penny stocks could limit
the ability of broker-dealers to sell our securities.

The price of biotechnology/pharmaceutical company stocks has been volatile which
could result in substantial losses to our stockholders.

     The market price of securities of companies in the
biotechnology/pharmaceutical industries has tended to be volatile. Announcements
of technological innovations by us or our competitors, developments concerning
proprietary rights and concerns about safety and other factors may have a
material effect on our business or financial condition. The market price of our
common stock may be significantly affected by announcements of developments in
the medical field generally or our research areas specifically. The stock market
has experienced volatility in market prices of companies similar to us that has
been unrelated to the operating results of such companies. This volatility may
have a material adverse effect on the market price of our common stock.

Our ability to issue "blank check" preferred stock may make it more difficult
for a change in our control.

     Our certificate of incorporation authorizes the issuance of "blank check"
preferred stock with such designations, rights and preferences as may be
determined from time to time by the Board of Directors, without shareholder
approval. In the event of issuance, such preferred stock could be utilized,
under certain circumstances, as a method of discouraging, delaying or preventing
a change in our control and preventing shareholders from receiving a premium for
their shares in connection with a change of control. We issued Series A and
Series B cumulative convertible redeemable preferred stock in connection with
private placements in February 1997 and April 1998, respectively. All of the
Series A preferred stock was converted into common stock during 1998. On July
31, 1998, all of the Series B Preferred stock was redeemed for cash. We also
issued shares of our Series C cumulative convertible preferred stock in
connection with the consummation of an agreement with Elan International
Services, Ltd. ("Elan") in June 1998. In October 1999, in conjunction with a
licensing agreement with Elan, we issued shares of our Series D cumulative
convertible exchangeable preferred stock and Series F cumulative convertible
preferred stock. In addition, we also have a commitment from Elan to purchase
shares of Series E cumulative convertible non-exchangeable preferred stock at
our option (subject to satisfaction of certain conditions). Except for the
previously mentioned purchase commitment for Series E preferred stock, and
additional shares of Series C, D and E preferred stock that may be payable as
dividends to Elan, as holder of the outstanding Series C, D and E preferred
stock, we have no present intention to issue any additional shares of our
preferred stock; however, we may issue additional shares of our preferred stock
in the future.

                                       7
<PAGE>

We are obligated to issue additional securities in the future diluting our
stockholders.

     As of September 30, 2000, we had reserved approximately 6,801,513 shares of
our common stock for issuance upon exercise of outstanding options and warrants
convertible into shares of our common stock, including by our officers and
directors. In addition, as of September 30, 2000, we had $2,000,000 principal
amount of a convertible promissory note, 13,472 shares of our Series C preferred
stock, 12,435 shares of our Series D preferred stock, 1,000 shares of our Series
E preferred stock and 5,000 shares of our Series F preferred stock outstanding.
Each of the convertible securities provides for conversion into shares of our
common stock at a discount to the market price at September 30, 2000. Our Series
C, D, E and F preferred stock are convertible into 9,554,610 shares, 2,558,642
shares, 257,069 shares and 1,470,588 shares, respectively, of common stock. The
convertible promissory note is convertible into 1,328,796 shares of common
stock. The exercise of options and outstanding warrants, the conversion of such
other securities and sales of common stock issuable thereunder could have a
significant dilutive effect on the market price of our common stock and could
materially impair our ability to raise capital through the future sale of our
equity securities.

                                       8
<PAGE>

                      NOTE ON FORWARD-LOOKING STATEMENTS

     This prospectus contains forward-looking statements made pursuant to the
safe harbor provisions of the Private Securities Litigation Reform Act of 1995.
Forward-looking statements typically are identified by use of terms such as
"may", "should", "plan", "expect", "anticipate", "estimate" and similar words
although some forward-looking statements are expressed differently. Forward-
looking statements represent our management's judgment regarding future events.
Although we believe that the expectations reflected in such forward-looking
statements are reasonable, such expectations may prove to be incorrect. All
statements other than statements of historical fact included in this prospectus
and the exhibits hereto regarding our financial position, business strategy,
products, products under development and clinical trials, markets, budgets,
plans, or objectives for future operations are forward-looking statements. We
cannot guarantee the accuracy of the forward-looking statements, and you should
be aware that our actual results could differ materially from those contained in
the forward-looking statements due to a number of factors, including those
identified under the heading "Risk Factors" and other sections of this
prospectus and in the exhibits hereto.

                                USE OF PROCEEDS

     All of the proceeds from the sale of the shares of common stock in this
offering will be received by the selling stockholders.

                                       9
<PAGE>

                             SELLING STOCKHOLDERS

      The following table sets forth information regarding beneficial ownership
of our common stock by the selling stockholders as of January 25, 2001. For
purposes of presentation, we have assumed that the selling stockholders will
sell all shares offered hereby including the shares issuable on exercise of
warrants and options.

<TABLE>
<CAPTION>
                          Shares Beneficially Owned       Shares to be      Shares Beneficially Owned
                            Prior to Offering (1)            Offered              After Offering
                            ---------------------            -------              --------------
Name                      Number             Percent                       Number               Percent
- ----                      ------             -------                       ------               -------
<S>                       <C>                <C>          <C>              <C>                  <C>
The Tail Wind Fund Ltd.   739,450/(2)/        2.6%           739,450          -                    -
Gruntal & Co.              53,808/(3)/          *             53,808          -                    -
Continental Capital &     100,000/(4)/          *            100,000          -                    -
 Equity Corporation
The P. L. Thomas Group     20,000/(5)/          *             20,000          -                    -
</TABLE>
_______________
* Less than 1%

  (1) The persons named in the table, to our knowledge, have sole voting and
      investment power with respect to all shares shown as beneficially owned by
      them, subject to community property laws where applicable.

  (2) Consists of (i) 626,950 shares issued to The Tail Wind Fund Ltd. in a
      private placement, and (ii) 112,500 shares of common stock issuable upon
      exercise of an outstanding warrant held by The Tail Wind Fund Ltd.

  (3) Consists of 53,808 shares of common stock issuable upon exercise of
      warrants issued to Gruntal & Co. in consideration of services provided to
      us.

  (4) Consists of 100,000 shares of common stock issuable upon exercise of a
      warrant issued to Continental Capital & Equity Corporation in
      consideration of services provided to us.

  (5) Consists of 20,000 shares of common stock issuable upon exercise of a
      warrant issued to The P. L. Thomas Group in consideration of services
      provided to us.


      On December 29, 2000 we entered into a purchase agreement with The Tail
Wind Fund Ltd. Under that agreement, we issued and sold 626,950 shares of our
common stock and a warrant to purchase 112,500 shares of common stock at an
exercise price of $4.9844 per share for a total cash consideration of $2.25
million.

      Pursuant to a registration rights agreement with Tail Wind, we filed a
registration statement, of which this prospectus forms a part, in order to
permit Tail Wind to resell to the public the shares of common stock that it
purchased pursuant to the securities purchase agreement and that it may acquire
upon any exercise of the warrant.

      In the purchase agreement, we granted Tail Wind anti-dilution rights. If
we sell common stock or securities exercisable for or convertible into shares of
our common stock for less than $3.5888 per share, we must issue additional
shares to Tail Wind so that the 626,950 shares purchased by Tail Wind in the
December 2000 private placement plus the additional shares issued to Tail Wind
equals the number of shares that Tail Wind could have purchased for $2,250,000
at the new per share purchase price. We have agreed to register for resale any
additional shares issued pursuant to these anti-dilution rights on a future
registration statement. In addition, under the terms of the purchase agreement,
we may not issue more than a total of 5,630,122 shares of common stock to Tail
Wind in connection with the December 2000 private placement and the anti-
dilution provisions. If we would otherwise be required to issue more than
5,630,122 shares to Tail Wind, we must instead pay 105% of the cash value of the
shares we do not issue to Tail Wind.

      We granted a warrant to Gruntal & Co. to purchase 35,000 shares at $6.125
per share on October 2, 2000, in connection with investment banking services
provided to us. We also granted a warrant to Gruntal & Co. to purchase 18,808
shares at $4.9844 per share on December 29, 2000, in connection with investment
banking services

                                       10
<PAGE>

provided to us. The shares issuable under these warrants have
been included in this prospectus in order to permit Gruntal & Co. to resell the
shares.

     We granted a warrant to Continental Capital & Equity Corporation to
purchase 100,000 shares at $2.25 per share on September 17, 1998, in connection
with investor relation services provided to us. The shares issuable under that
warrant have been included in this prospectus in order to permit Continental
Capital & Equity Corporation to resell the shares.

     We granted a warrant to The P. L. Thomas Group to purchase 20,000 shares at
$3.00 per share on September 30, 1997. The shares issuable under that warrant
have been included in this prospectus in order to permit The P. L. Thomas Group
to resell the shares.


                             PLAN OF DISTRIBUTION

     The selling stockholders and any of their pledgees, assignees and
successors-in-interest may, from time to time, sell any or all of their shares
of common stock on any stock exchange, market or trading facility on which the
shares are traded or in private transactions. These sales may be at fixed or
negotiated prices. The selling stockholders may use any one or more of the
following methods when selling shares:

     .  ordinary brokerage transactions and transactions in which the broker-
        dealer solicits purchasers;

     .  block trades in which the broker-dealer will attempt to sell the shares
        as agent but may position and resell a portion of the block as principal
        to facilitate the transaction;

     .  purchases by a broker-dealer as principal and resale by the broker-
        dealer for its account;

     .  an exchange distribution in accordance with the rules of the applicable
        exchange;

     .  privately negotiated transactions;

     .  broker-dealers may agree with the selling stockholders to sell a
        specified number of such shares at a stipulated price per share;

     .  a combination of any such methods of sale; and

     .  any other method permitted pursuant to applicable law.

     The selling stockholders may also sell shares under Rule 144 under the
Securities Act, if available, rather than under this prospectus.

     Broker-dealers engaged by the selling stockholders may arrange for other
brokers-dealers to participate in sales. Broker-dealers may receive commissions
or discounts from the selling stockholders (or, if any broker-dealer acts as
agent for the purchaser of shares, from the purchaser) in amounts to be
negotiated. The selling stockholders do not expect these commissions and
discounts to exceed what is customary in the types of transactions involved.

     The selling stockholders and any broker-dealers or agents that are involved
in selling the shares may be deemed to be "underwriters" within the meaning of
the Securities Act in connection with such sales. In such event, any commissions
received by such broker-dealers or agents and any profit on the resale of the
shares purchased by them may be deemed to be underwriting commissions or
discounts under the Securities Act. We have agreed to indemnify The Tail Wind
Fund Ltd. against certain losses, claims, damages and liabilities, including
liabilities under the Securities Act.

                                       11
<PAGE>

                                 LEGAL MATTERS

     The validity of the issuance of the securities being offered hereby has
been passed upon for us by McDermott, Will & Emery.

                                    EXPERTS

     The consolidated financial statements of Sheffield Pharmaceuticals, Inc.
and subsidiaries (a development stage enterprise) as of and for the year ended
December 31, 1999 appearing in Sheffield Pharmaceuticals, Inc.'s Annual Report
(Form 10-K) for the year ended December 31, 1999, have been audited by Ernst &
Young LLP, independent auditors, as set forth in their report thereon included
therein and incorporated herein by reference. Such consolidated financial
statements are incorporated herein by reference in reliance upon the report of
Ernst & Young LLP pertaining to such financial statements given upon the
authority of such firm as experts in accounting and auditing.

                      WHERE YOU CAN FIND MORE INFORMATION

     We file annual, quarterly and special reports, proxy statements and other
information with the SEC. You may read and copy any document we file at the
SEC's Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549.
Please call the SEC at 1-800-SEC-0330 for further information about the Public
Reference Room. Our SEC filings are also available to the public from the SEC's
web site at http://www.sec.gov.

     The SEC allows us to incorporate by reference the information we file with
them into this prospectus, which mean that we can disclose important information
to you by referring you to those documents. The information incorporated by
reference is an important part of this prospectus, and information that we file
later with the SEC will automatically update and supersede the information
already incorporated by reference. We are incorporating by reference the
documents listed below, which we have already filed with the SEC, and any future
filings we make with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the
Securities Exchange Act of 1934, until the selling stockholders sell all of the
shares that are being offered in this prospectus.

     We incorporate by reference the following documents heretofore filed with
the Commission pursuant to the Exchange Act:

     1.  Our Annual Report on Form 10-K for the year ended December 31, 1999.

     2.  Our Quarterly Reports on Form 10-Q for the quarters ended March 31,
         2000, June 30, 2000 and September 30, 2000.

     3.  Current Report of the Company on Form 8-K filed with the Commission on
         November 14, 2000.

     4.  Our Definitive Proxy Statement filed with the Commission on April 5,
         2000.

     5.  The description of our common stock set forth in our registration
         statement on Form 8-B filed with the Commission on July 6, 1995.

     We hereby undertake to provide without charge to each person to whom a copy
of this prospectus has been delivered, on the written or oral request of any
such person, a copy of any or all of the documents referred to above which have
been or may be incorporated in this prospectus by reference, other than exhibits
to such documents. Written requests for such copies should be directed to
Sheffield Pharmaceuticals, Inc., 425 South Woodsmill Road, Suite 270, St. Louis,
Missouri 63017, Attention: Scott A. Hoffmann, Chief Financial Officer. Oral
requests should be directed to Mr. Hoffmann at (314) 579-9899.

     You should rely only on the information incorporated by reference or
provided in this prospectus or any prospectus supplement. We have not authorized
anyone to provide you with different information. The selling stockholders are
not making an offer of these securities in any state where the offer is not
permitted. You should not assume that the information in this prospectus or the
documents incorporated by reference is accurate as of any date other than the
date on the front of this prospectus or those documents.

                                       12
<PAGE>

                        SHEFFIELD PHARMACEUTICALS, INC.

                                    PART II
                    INFORMATION NOT REQUIRED IN PROSPECTUS

Item 14. Other Expenses of Issuance and Distribution.

         The following table sets forth an itemized statement of all estimated
expenses in connection with the issuance and distribution of the securities
being registered:
                                                               Amount
                                                               ------
          SEC Registration Fees........................         $   899
          AMEX Listing Fees............................          17,500
          Legal Expenses...............................          12,500
          Accounting Fees and Expenses.................           5,000
          Miscellaneous................................          10,101
                                                              ---------
               Total...................................         $46,000

          The amounts set forth above, except for the Securities and Exchange
Commission registration and AMEX listing fees, are in each case estimated.

Item 15. Indemnification of Directors and Officers.

         Except as hereinafter set forth, there is no statute, charter
provision, by-law, contract or other arrangement under which any controlling
person, director or officer of the Corporation is insured or indemnified in any
manner against liability which he may incur in his capacity as such.

         Article TENTH of the Corporation's Certificate of Incorporation
provides as follows:

         The Corporation shall, to the fullest extent permitted by (S)145 of
the General Corporation Law of the State of Delaware, as the same may be amended
and supplemented, indemnify any and all persons whom it shall have power to
indemnify under said section from and against any and all of the expenses,
liabilities or other matters referred to in or covered by said section, and the
indemnification provided for herein shall not be deemed exclusive of any other
rights to which those indemnified may be entitled under any By-Law, agreement,
vote of stockholders or disinterested directors or otherwise, both as to action
in his official capacity and as to action in another capacity while holding such
office, and shall continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such a person.

         Section 5.1 of the By-laws of the Corporation provides as follows:

         (a)  The Corporation shall indemnify, subject to the requirements of
subsection (d) of this Section, any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the Corporation), by reason of the
fact that he is or was a director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner her reasonably believed to be in or not opposed to
the best interests of the Corporation and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was unlawful.  The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction or upon a plea of nolo contendere or its equivalent, shall not, of
itself, create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the Corporation and, with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.

         (b)  The Corporation shall indemnify, subject to the requirements of
subsection (d) of this Section, any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in

                                     II-1
<PAGE>

the right of the Corporation to procure a judgment in its favor by reason of the
fact that he is or was a director, officer, employee or agent of the Corporation
or is or was serving at the request of the Corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise, against expenses (including attorneys' fees) actually and
reasonable incurred by him in connection with the defense or settlement of such
action or suit if he acted in good faith and in a manner he reasonable believed
to be in or not opposed to the best interest of the Corporation and except that
no indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the Corporation
unless and only to the extent that the Court of Chancery of the State of
Delaware or the court in which such action or suit was brought shall determine
upon application that, despite the adjudication of liability buy in view of all
the circumstances of the case, such person is fairly and reasonable entitled to
indemnity for such expense which the Court of Chancery of the State of Delaware
or such other court shall deem proper.

         (c)  To the extent that a director, officer, employee or agent of the
Corporation, or a person serving in any other enterprise at the request of the
Corporation, has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in subsection (a) and (b) of this
Section, or in defense of any claim, issue or matter therein, the Corporation
shall indemnify him against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection therewith.

         (d)  Any indemnification under subsections (a) and (b) of this Section
(unless ordered by a court) shall be made by the Corporation only as authorized
in the specific case upon a determination that indemnification of the director,
officer, employee or agent is proper in the circumstances because he has met the
applicable standard of conduct set forth in subsections (a) and (b) of this
Section.  Such determination shall be made (1) by the Board of Directors by a
majority vote of a quorum consisting of directors who were not parties to such
action, suit or proceeding, or (2) if such a quorum is not obtainable, or, even
if obtainable a quorum of disinterested directors, or (3) by independent legal
counsel in a written opinion, or (4) by the stockholders.

         (e)  Expenses incurred by a directors, officer, employee or agent in
defending a civil or criminal action, suit or proceeding may be paid by the
Corporation in advance of the final disposition of such action, suite or
proceeding as authorized by the Board of Directors upon receipt of an
undertaking by or on behalf of the director, officer, employee or agent to repay
such amount if it shall ultimately be determined that he is not entitled to be
indemnified by the Corporation as authorized in this Section.

         (f)  The indemnification and advancement of expenses provided by or
granted pursuant to, the other subsections of this Section shall not limit the
Corporation from providing any other indemnification or advancement of expenses
permitted by law nor shall it be deemed exclusive of any other rights to which
those seeking indemnification may be entitled under any by-law, agreement, vote
of stockholders or disinterested directors or otherwise, both as to action in
his official capacity and as to action in another capacity while holding such
office.

         (g)  The Corporation may purchase and maintain insurance on behalf of
any person who is or was a director, officer, employee or agent of the
Corporation, or who is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted against him
and incurred by him in any such capacity, or arising out of his status as such,
whether or not the corporation would have the power to indemnify him against
such liability under the provisions of this section.

         (h)  The indemnification and advancement of expenses provided by, or
granted pursuant to this section shall, unless otherwise provided when
authorized or ratified, continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such a person.

         (i)  For the purposes of this Section, references to "the Corporation"
shall include, in addition to the resulting corporation, any constituent
corporation (including any constituent of a constituent) absorbed in a
consolidation or merger which, if its separate existence had continued, would
have had power and authority to indemnify its directors, officers, employees or
agents, so that any person who is or was a director, officer, employee or agent
f such constituent corporation, or is or was serving at the request of such
constituent corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, shall stand
in the same position under the provisions of this Section with respect to the
resulting or surviving corporation as he would have with respect to such
constituent corporation of its separate existence had continued.

                                     II-2
<PAGE>

         (j)  This Section 5.1 shall be construed to give the Corporation the
broadest power permissible by the Delaware General Corporation Law, as it now
stands and as heretofore amended.

         Section 145 of the General Corporation Law of the State of Delaware
provides as follows:

         (a)  A corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the corporation) by reason of the
fact that he is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was unlawful.  The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, shall not, of
itself, create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.

         (b)  A corporation may indemnify any person who was or is party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the corporation to procure a judgment in its favor by
reason of the fact that he is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against expenses (including attorneys' fees)
actually and reasonable incurred by him in connection with the defense or
settlement of such action or suit if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation and except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable to the corporation unless and only to the extent that the Court of
Chancery or the court in which such action or suit was brought shall determine
upon application that, despite the adjudication of liability but in view of all
the circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the Court of Chancery or such other court
shall deem proper.

         (c)  To the extent that a director, officer, employee or agent of a
corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in subsections (a) and (b) of this
section, or in defense of any claim, issue or matter therein, he shall be
indemnified against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection therewith.

         (d)  Any indemnification under subsections (a) and (b) of this section
(unless ordered by a court) shall be made by the corporation only as authorized
in the specific case upon a determination that indemnification of the director,
officer, employee or agent is proper in the circumstances because he has met the
applicable standard of conduct set forth in subsections (a) and (b) of this
section.  Such determination shall be made (1) by the board of directors by a
majority vote of a quorum consisting of directors who were not parties to such
action, suit or proceeding, or (2) if such a quorum is not obtainable, or, even
if obtainable a quorum of disinterested directors so directs, by independent
legal counsel in a written opinion, or (3) by the stockholders.

         (e)  Expenses (including attorneys' fees) incurred by an officer or
director in defending any civil criminal administrative or investigative action,
suit or proceeding may be paid by the corporation in advance of the final
disposition of such action, suit or proceeding upon receipt of an undertaking by
or on behalf of such director of officer to repay such amount if it shall
ultimately be determined that he is not entitled to be indemnified by the
corporation as authorized in this section. Such expenses (including attorneys'
fees) incurred by other employees and agents may be so paid upon such terms and
conditions, if any, as the board of directors deems appropriate.

         (f)  The indemnification and advancement of expenses provided by, or
granted pursuant to, the other subsections of this section shall not be deemed
exclusive of any other rights to which those seeking indemnification or

                                     II-3
<PAGE>

advancement of expenses may be entitles under any bylaw, agreement, vote of
stockholders or disinterested directors or otherwise, both as to action in his
official capacity and as to action in another capacity while holding such
office.

         (g)  A corporation shall have power to purchase and maintain insurance
on behalf of any person who is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted against him
and incurred by him in any such capacity, or arising out of his status as such,
whether or not the corporation would have the power to indemnify him against
such liability under this section.

         (h)  For purposes of this section, references to "the corporation"
shall include, in addition to the resulting corporation, any constituent
corporation (including any constituent of a constituent) absorbed in a
consolidation or merger which, if its separate existence had continued, would
have had power and authority to indemnify its directors, officers, and employees
or agents, so that any person who is or was a director, officer, employee or
agent of such constituent corporation, or is or was serving at the request of
such constituent corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
shall stand in the same position under this section with respect to the
resulting or surviving corporation as he would have with respect to such
constituent corporation if its separate existence had continued.

         (i)  For purposes of this section, references to "other enterprises"
shall include employee benefit plans; references to "fines" shall include any
excise taxes assessed on a person with respect to any employee benefit plan; and
references to "serving at the request of the corporation" shall include any
service s a director, officer, employee or agent of the corporation which
imposes duties on, or involves services by, such director, officer, employee or
agent with respect to an employee benefit plan, its participants or
beneficiaries; and a person who acted in good faith and in a manner he
reasonably believed to be in the interest of the participants and beneficiaries
of an employee benefit plan shall be deemed to have acted in a manner "no
opposed to the best interests of the corporation" as referred to in this
section.

         (j)  The indemnification and advancement of expenses provided by, or
granted pursuant to, this section shall, unless otherwise provided when
authorized or ratified, continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such a person.

         The Company has purchased a Directors and Officer Liability Insurance
policy for coverage of up to $5,000,000.

  Item 16.  Exhibits.

            The following Exhibits are included pursuant to regulation S-K.


<TABLE>
<CAPTION>
      No.    Description                                                                  Reference
     ----    -----------                                                                  ---------
     <S>     <C>                                                                          <C>
      4.1    Purchase Agreement dated December 29, 2000 by and between Sheffield             (1)
             Pharmaceuticals, Inc. and The Tail Wind Fund Ltd.
      4.2    Registration Rights Agreement dated December 29, 2000 by and between            (1)
             Sheffield Pharmaceuticals, Inc. and The Tail Wind Fund, Ltd.
      4.3    Warrant dated December 29, 2000 issued to The Tail Wind Fund, Ltd.              (1)
      4.4    Warrant dated October 2, 2000 issued to Gruntal & Co.                           (2)
      4.5    Warrant dated December 29, 2000 issued to Gruntal & Co.                         (2)
      4.6    Warrant dated September 17, 1998 issued to Continental Capital & Equity         (1)
             Corporation
      4.7    Warrant dated September 30, 1997 issued to The P.L. Thomas Group                (1)
      5.1    Opinion of McDermott, Will & Emery (includes Consent)                           (2)
     23.1    Consent of McDermott, Will & Emery included in Exhibit 5.1                      (2)
     23.2    Consent of Ernst & Young LLP relating to the use of Financial Statements        (1)
     24.1    Power of Attorney, included in Part II of the Registration Statement            (1)
</TABLE>


                                     II-4
<PAGE>

- ---------------

       (1)  Filed herewith.
       (2)  To be filed.

Item 17. Undertakings.


The undersigned registrant hereby undertakes:

     (1)  To file, during any period in which offers or sales are being made, a
          post-effective amendment to this registration statement to include any
          material information with respect to the plan of distribution not
          previously disclosed in the registration statement or any material
          change to such information in the registration statement;

     (2)  That, for the purpose of determining any liability under the
          Securities Act of 1933, each such post-effective amendment shall be
          deemed to be a new registration statement relating to the securities
          offered therein, and the offering of such securities at that time
          shall be deemed to be the initial bona fide offering thereof;

     (3)  To remove from registration by means of a post-effective amendment any
          of the securities being registered which remain unsold at the
          termination of the offering;

     (4)  That, for purposes of determining any liability under the Securities
          Act of 1933, each filing of the registrant's annual report pursuant to
          Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (and,
          where applicable, each filing of an employee benefit plan's annual
          report pursuant to Section 15(d) of the Securities Exchange Act of
          1934) that is incorporated by reference in the registration statement
          shall be deemed to be a new registration statement relating to the
          securities offered therein, and the offering of such securities at
          that time shall be deemed to be the initial bona fide offering
          thereof; and

       Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.

                                     II-5
<PAGE>

                                   SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the County of St. Louis, State of Missouri on January 26, 2001.


                                      Sheffield Pharmaceuticals, Inc.

                                      By:  /s/ Loren G. Peterson
                                           ---------------------------------
                                           Loren G. Peterson
                                           President and Chief Executive Officer


                               POWER OF ATTORNEY

     KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Loren G. Peterson his true and lawful attorney-
in-fact, each acting alone, with full power of substitution and resubstitution
for him and in his name, place and stead, in any and all capacities to sign any
and all amendments including post-effective amendments to this Registration
Statement, and to file the same, with all exhibits thereto, and other documents
in connection therewith, with the Securities and Exchange Commission, hereby
ratifying and confirming all that said attorneys-in-fact or their substitutes,
each acting alone, may lawfully do or cause to be done by virtue thereof.

     Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.


<TABLE>
<CAPTION>
            Signature                             Title                                          Date
            ---------                             -----                                          ----
<S>                                      <C>                                     <C>
/s/ Thomas M. Fitzgerald                 Director and Chairman                              January 26, 2001
- --------------------------------
Thomas M. Fitzgerald

/s/ Loren G. Peterson                    Director, President and Chief                      January 26, 2001
- --------------------------------
Loren G. Peterson                        Executive Officer

/s/ John M. Bailey                       Director                                           January 26, 2001
- --------------------------------
John M. Bailey

/s/ Digby W. Barrios                     Director                                           January 26, 2001
- --------------------------------
Digby W. Barrios

/s/ Todd C. Davis                        Director                                           January 26, 2001
- --------------------------------
Todd C. Davis

/s/ Roberto Rettani                      Director                                           January 26, 2001
- --------------------------------
Roberto Rettani

/s/ Scott A. Hoffmann                    Vice President Finance and                         January 26, 2001
- --------------------------------
Scott A. Hoffmann                        Administration
                                         Secretary and Treasurer
</TABLE>

                                     II-6
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-4.1
<SEQUENCE>2
<FILENAME>0002.txt
<DESCRIPTION>PURCHASE AGREEMENT DATED 12/29/2000
<TEXT>

<PAGE>

                                                                     EXHIBIT 4.1

                              PURCHASE AGREEMENT
                              ------------------


          THIS PURCHASE AGREEMENT ("Agreement") is made as of the 29th day of
December, 2000 by and between Sheffield Pharmaceuticals, Inc. a Delaware
corporation (the "Company"), and the Investors set forth on the signature page
affixed hereto (each an "Investor" and collectively the "Investors").

                                   Recitals

          A.  The Company and the Investors are executing and delivering this
Agreement in reliance upon the exemption from securities registration afforded
by the provisions of Regulation D ("Regulation D"), as promulgated by the U.S.
Securities and Exchange Commission (the "SEC") under the Securities Act of 1933,
as amended;

          B.  The Investors wish to purchase, and the Company wishes to sell and
issue to the Investors, upon the terms and conditions stated in this Agreement,
shares of the common stock of the Company, par value $0.01 per share (the
"Common Stock") and warrants to purchase Common Stock in the form attached
hereto as Exhibit A (the "Warrants") for an aggregate purchase price of
          ---------
$2,250,000; and

          C.  Contemporaneous with the execution and delivery of this Agreement,
the parties hereto are executing and delivering a Registration Rights Agreement,
in the form attached hereto as Exhibit B (the "Registration Rights Agreement"),
                               ---------
pursuant to which the Company has agreed to provide certain registration rights
under the Securities Act of 1933, as amended and the rules and regulations
promulgated thereunder, and applicable state securities laws;

          In consideration of the mutual promises made herein and for other good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:

     1.   Definitions. In addition to those terms defined above and elsewhere in
          -----------
this Agreement, for the purposes of this Agreement, the following terms shall
have the meanings here set forth:

          1.1 "Affiliate" means, with respect to any Person, any other Person
               ---------
which directly or indirectly controls, is controlled by, or is under common
control with, such Person.

          1.2 "Agreements" means this Agreement, the Registration Rights
               ----------
Agreement, and the Warrants.

          1.3 "Closing" means the consummation of the initial purchase and sale
               -------
transactions contemplated by this Agreement, and "Closing Date" means the date
                                                  ------------
of such Closing.
<PAGE>

          1.4   "Control" means the possession, direct or indirect, of the power
                 -------
to direct or cause the direction of the management and policies of a Person,
whether through the ownership of voting securities, by contract or otherwise.

          1.5   "Market Price" means the average of the closing prices of the
                 ------------
Common Stock over the thirty (30) consecutive trading days immediately preceding
a specified date.

          1.6   "Material Adverse Effect" means a material adverse effect on the
                 -----------------------
condition (financial or otherwise), business, assets, or results of operations
of the Company as a whole.

          1.7   "Person" means an individual, corporation, partnership, trust,
                 ------
business trust, association, joint stock company, joint venture, pool,
syndicate, sole proprietorship, unincorporated organization, governmental
authority or any other form of entity not specifically listed herein.

          1.8   "SEC Filings" has the meaning set forth in Section 4.6.
                 -----------

          1.9   "Securities" means the Shares, the Warrants and the Warrant
                 ----------
Shares (defined below).

          1.10  "Shares" means the shares of Common Stock being purchased by the
                 ------
Investors hereunder.

          1.11  "Warrant Shares" means the shares of Common Stock issuable upon
                 --------------
exercise of or otherwise pursuant to the Warrants.

          1.12  "1933 Act" means the Securities Act of 1933, as amended, and the
                 --------
rules and regulations promulgated thereunder.

          1.13  "1934 Act" means the Securities Exchange Act of 1934, as
                 --------
amended, and the rules and regulations promulgated thereunder.

     2.   Purchase and Sale of the Shares and Warrants. Subject to the terms and
          --------------------------------------------
conditions of this Agreement, the Investors hereby severally, and not jointly,
agrees to purchase, and the Company hereby agrees to sell and issue to the
Investors the number of Shares and Warrants to purchase the number of shares of
Common Stock set forth on such Investor's signature page attached hereto. The
number of Shares to be purchased by each Investor at the Closing shall be
determined by dividing such Investor's Closing aggregate purchase price (as such
aggregate purchase price is set forth on such Investor's signature page attached
hereto) by the lesser of ninety percent (90%) of the Market Price on the date of
this Agreement or the per share closing price of the Common Stock on the trading
day immediately preceding the date of this Agreement (the "Purchase Price"). The
number of shares of Common Stock purchasable by the Investors upon exercise of
the Warrants to be issued on the Closing Date shall be as set forth

                                       2
<PAGE>

on such Investor's signature page attached hereto and the exercise price of the
Warrants shall be 125% of the Market Price measured as of the date of this
Agreement (the "Exercise Price").

     3.   Closing. The Company shall promptly deliver to Investors' counsel, in
          -------
trust, a certificate or certificates, registered in such name or names as the
Investors may designate, representing all of the Shares and all of the Warrants
to be purchased hereunder, with instructions that such certificates are to be
held for release to the Investors only upon payment of the aggregate Purchase
Price to the Company.  Upon receipt by counsel to the Investors of the
certificates, each Investor shall promptly cause a wire transfer in same day
funds to be sent to the account of the Company as instructed in writing by the
Company, in an amount representing such Investor's aggregate Purchase Price.  On
the date the Company receives such funds, the certificates evidencing the Shares
and the Warrants shall be released to the Investors (and such date shall be
deemed the "Closing Date").

     4.   Representations and Warranties of the Company.  The Company hereby
          ---------------------------------------------
represents and warrants to the Investors:

          4.1  Organization, Good Standing and Qualification. Each of the
               ---------------------------------------------
Company and its subsidiaries is a corporation duly incorporated, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation and has all requisite corporate power and authority to carry on
its business as now conducted and own its properties. Each of the Company and
its subsidiaries is duly qualified to do business as a foreign corporation and
is in good standing in each jurisdiction in which the conduct of its business or
its ownership or leasing of property makes such qualification or licensing
necessary unless the failure to so qualify would not have a Material Adverse
Effect. The Company's subsidiaries are reflected on Schedule 4.1 hereto.
                                                    ------------

          4.2  Authorization. The Company has full power and authority and has
               -------------
taken all requisite action on the part of the Company, its officers, directors
and stockholders necessary for (i) the authorization, execution and delivery of
the Agreements, (ii) authorization of the performance of all obligations of the
Company hereunder or thereunder, and (iii) the authorization, issuance (or
reservation for issuance) and delivery of the Securities. The Agreements
constitute the legal, valid and binding obligations of the Company, enforceable
against the Company in accordance with their terms, subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and similar laws of
general applicability, relating to or affecting creditors' rights generally.

          4.3  Capitalization. Set forth on Schedule 4.3 hereto is (a) the
               --------------               ------------
authorized capital stock of the Company on the date hereof; (b) the number of
shares of capital stock issued and outstanding; (c) the number of shares of
capital stock issuable pursuant to the Company's stock plans; and (d) the number
of shares of capital stock issuable and reserved for issuance pursuant to
securities (other than the Shares and the Warrants) exercisable for, or
convertible into or exchangeable for any shares of capital stock. Except as set
forth on Schedule 4.3, all of the issued and outstanding shares of the Company's
capital stock have been duly authorized and validly issued and are fully paid,
nonassessable and free of preemptive rights. Except as set forth on Schedule
                                                                    --------
4.3, no Person is entitled to preemptive or similar statutory or contractual
- ---
rights with

                                       3
<PAGE>

respect to any securities of the Company.  Except as set forth on Schedule 4.3,
                                                                  ------------
there are no outstanding warrants, options, convertible securities or other
rights, agreements or arrangements of any character under which the Company or
any of its subsidiaries is or may be obligated to issue any equity securities of
any kind and except as contemplated by this Agreement, neither the Company nor
any of its subsidiaries is currently in negotiations for the issuance of any
equity securities of any kind.  Except as set forth on Schedule 4.3, the Company
                                                       ------------
has no knowledge of any voting agreements, buy-sell agreements, option or right
of first purchase agreements or other agreements of any kind among any of the
security holders of the Company relating to the securities of the Company held
by them.  Except as set forth on Schedule 4.3, the Company has not granted any
                                 ------------
Person the right to require the Company to register any securities of the
Company under the 1933 Act, whether on a demand basis or in connection with the
registration of securities of the Company for its own account or for the account
of any other Person.

     4.4  Valid Issuance.  The Company has reserved a sufficient number of
          --------------
shares of Common Stock for the issuance of the Shares pursuant to this Agreement
and upon exercise of the Warrants. The Company will take such steps as may be
necessary to reserve sufficient shares for issuance pursuant to Section 7 below
when such issuance is determinable. The Shares and Warrants are duly authorized,
and such Securities, along with the Warrant Shares when issued in accordance
herewith and with the terms of the Warrants, will be duly authorized, validly
issued, fully paid, non-assessable and free and clear of all encumbrances and
restrictions, except for restrictions on transfer imposed by applicable
securities laws.

     4.5  Consents.  The execution, delivery and performance by the Company of
          --------
the Agreements and the offer, issuance and sale of the Securities require no
consent of, action by or in respect of, or filing with, any Person, governmental
body, agency, or official other than filings or consents that have been made
pursuant to applicable state securities laws and post-sale filings or consents
pursuant to applicable state and federal securities laws and the requirements of
the American Stock Exchange, which the Company undertakes to file within the
applicable time periods.

     4.6  Delivery of SEC Filings; Business.  The Company has provided the
          ---------------------------------
Investors with copies of the Company's most recent Annual Report on Form 10-K
for the fiscal year ended December 31, 1999, and all other reports filed by the
Company pursuant to the 1934 Act since the filing of the Annual Report on Form
10-K and prior to the date hereof (collectively, the "SEC Filings"); which the
Company hereby represents and warrants are all filings required of the Company
pursuant to the 1934 Act for such period.  The Company is engaged only in the
business described in the SEC Filings and the SEC Filings contain a materially
complete and accurate description of the business of the Company.

     4.7  Use of Proceeds.  The proceeds of the sale of the Common Stock and the
          ---------------
Warrants hereunder shall be used by the Company for working capital and general
corporate purposes.

     4.8  No Material Adverse Change.  Since the filing of the Company's most
          --------------------------
recent Annual Report on Form 10-K or as otherwise identified and described in
subsequent

                                       4
<PAGE>

reports filed by the Company pursuant to the 1934 Act or as set forth on
Schedule 4.8 hereto, there has not been:
- ------------

               (i)    any change in the consolidated assets, liabilities,
financial condition or operating results of the Company from that reflected in
the financial statements included in the Company's most recent Quarterly Report
on Form 10-Q, except changes in the ordinary course of business which have not
had, in the aggregate, a Material Adverse Effect;

               (ii)   any declaration or payment of any dividend, or any
authorization or payment of any distribution, on any of the capital stock of the
Company, or any redemption or repurchase of any securities of the Company;

               (iii)  any material damage, destruction or loss, whether or not
covered by insurance to any assets or properties of the Company;

               (iv)   any waiver by the Company of a valuable right or of a
material debt owed to it not in the ordinary course of business;

               (v)    any satisfaction or discharge of any lien, claim or
encumbrance or payment of any obligation by the Company, except in the ordinary
course of business and which is not material to the assets, properties,
financial condition, operating results or business of the Company taken as a
whole (as such business is presently conducted and as it is proposed to be
conducted);

               (vi)   any material change or amendment to a material contract or
arrangement by which the Company or any of its assets or properties is bound or
subject;

               (vii)  any material labor difficulties or labor union organizing
activities with respect to employees of the Company;

               (viii) any transaction entered into by the Company other than in
the ordinary course of business; or

               (ix)   any other event or condition of any character that might
have a Material Adverse Effect.

                                       5
<PAGE>

          4.9  SEC Filings.
               -----------

               (a)  The SEC Filings complied as to form in all material respects
with the requirements of the 1934 Act and did not contain any untrue statement
of a material fact or omit to state any material fact necessary in order to make
the statements made therein, in the light of the circumstances under which they
were made, not misleading.

               (b)  During the preceding two years, each registration statement
and any amendment thereto filed by the Company pursuant to the 1933 Act and the
rules and regulations thereunder, as of the date such statement or amendment
became effective, complied as to form in all material respects with the 1933 Act
and did not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements made therein, in light of the circumstances under which they were
made, not misleading; and each prospectus filed pursuant to Rule 424(b) under
the 1933 Act, as of its issue date and as of the closing of any sale of
securities pursuant thereto did not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements made therein, in the light of the
circumstances under which they were made, not misleading.

          4.10 Form S-3 Eligibility.  The Company is currently eligible to
               --------------------
register the resale of its Common Stock on a registration statement on Form S-3
under the 1933 Act.

          4.11 No Conflict, Breach, Violation or Default.  The execution,
               -----------------------------------------
delivery and performance of the Agreements by the Company and the issuance and
sale of the Securities will not conflict with or result in a breach or violation
of any of the terms and provisions of, or constitute a default under (i) the
Company's Certificate of Incorporation or the Company's Bylaws, both as in
effect on the date hereof (copies of which have been provided to the Investors
before the date hereof), or (ii) except where it would not have a Material
Adverse Effect, (a) any statute, rule, regulation or order of any governmental
agency or body or any court, domestic or foreign, having jurisdiction over the
Company or any of its properties, or (b) except as set forth on Schedule 4.11,
                                                                -------------
any agreement or instrument to which the Company is a party or by which the
Company is bound or to which any of the properties of the Company is subject.

          4.12 Tax Matters.  The Company has timely prepared and filed all tax
               ------------
returns required to have been filed by the Company with all appropriate
governmental agencies or has timely filed extensions therefor and timely paid
all taxes owed by it. The charges, accruals and reserves on the books of the
Company in respect of taxes for all fiscal periods are adequate in all material
respects, and there are no material unpaid assessments against the Company nor,
to the knowledge of the Company, any basis for the assessment of any additional
taxes, penalties or interest for any fiscal period or audits by any federal,
state or local taxing authority except such as which are not material. All
material taxes and other assessments and levies that the Company is required to
withhold or to collect for payment have been duly withheld and collected and
paid to the proper governmental entity or third party when due. There are no tax
liens or claims pending or threatened against the Company or any of its
respective assets or property. There are no outstanding tax sharing agreements
or other such arrangements between the Company and any other corporation or
entity.

                                       6
<PAGE>

          4.13 Title to Properties.  Except as disclosed in the SEC Filings or
               -------------------
Schedule 4.13, the Company has good and marketable title to all real properties
- -------------
and all other material properties and assets owned by it, in each case free from
liens, encumbrances and defects that would materially affect the value thereof
or materially interfere with the use made or currently planned to be made
thereof by them; and except as disclosed in the SEC Filings, the Company holds
any leased real or personal property under valid and enforceable leases with no
exceptions that would materially interfere with the use made or currently
planned to be made thereof by them.

          4.14 Certificates, Authorities and Permits.  The Company possesses all
               -------------------------------------
material certificates, authorities or permits issued by appropriate governmental
agencies or bodies necessary to conduct the business now operated by it and has
not received any notice of proceedings relating to the revocation or
modification of any such certificate, authority or permit that, if determined
adversely to the Company, would individually or in the aggregate have a Material
Adverse Effect.

          4.15 No Labor Disputes.  No material labor dispute with the employees
               -----------------
of the Company exists or, to the knowledge of the Company, is imminent.

          4.16 Intellectual Property.  The Company has sufficient title or
               ---------------------
adequate rights or licenses to the inventions, know-how, patents, copyrights,
trademarks, trade names, confidential information and other intellectual
property (collectively, "Intellectual Property Rights"), free and clear of any
material liens, security interests, charges, encumbrances, equities and other
adverse claims, necessary to conduct the business now operated by it, or
presently employed by it, and presently contemplated to be operated by it, and
the Company has not received any notice of infringement of or conflict with
asserted rights of others with respect to any Intellectual Property Rights. To
the knowledge of the Company, the Company's patents and other Intellectual
Property Rights and the present activities of the Company do not infringe any
patent, copyright, trademark, trade name or other proprietary rights of any
third party.

          4.17 Environmental Matters.  The Company is not in violation of any
               ---------------------
statute, rule, regulation, decision or order of any governmental agency or body
or any court, domestic or foreign, relating to the use, disposal or release of
hazardous or toxic substances or relating to the protection or restoration of
the environment or human exposure to hazardous or toxic substances
(collectively, "Environmental Laws"), does not own or operate any real property
contaminated with any substance that is subject to any Environmental Laws, is
not liable for any off-site disposal or contamination pursuant to any
Environmental Laws, and is not subject to any claim relating to any
Environmental Laws, which violation, contamination, liability or claim would
individually or in the aggregate have a Material Adverse Effect; and the Company
is not aware of any pending investigation that might lead to such a claim.

          4.18 Litigation.  Except as disclosed in the SEC Filings or on
               ----------
Schedule 4.18 hereto, there are no pending actions, suits or proceedings against
- -------------
or affecting the Company, its subsidiaries or any of its or their properties
that, if determined adversely to the Company or such subsidiary, would
individually or in the aggregate have a Material Adverse Effect or would

                                       7
<PAGE>

materially and adversely affect the ability of the Company to perform its
obligations under this Agreement, or which are otherwise material in the context
of the sale of the Securities; and to the Company's knowledge, no such actions,
suits or proceedings are threatened or contemplated.

          4.19  Financial Statements.  The financial statements included in
                --------------------
each SEC Filing present fairly and accurately in all material respects the
consolidated financial position of the Company as of the dates shown and its
consolidated results of operations and cash flows for the periods shown, and
such financial statements have been prepared in conformity with generally
accepted accounting principles applied on a consistent basis. Except as set
forth in the financial statements of the Company included in the SEC Filings
filed prior to the date hereof, to the best of the Company's knowledge, the
Company has no liabilities, contingent or otherwise, except those which
individually or in the aggregate would not have a Material Adverse Effect.

          4.20  Insurance Coverage.  The Company maintains in full force and
                ------------------
effect insurance coverage that is customary for comparably situated companies
for the business being conducted and properties owned or leased by the Company,
and the Company reasonably believes such insurance coverage to be adequate
against all liabilities, claims and risks against which it is customary for
comparably situated companies to insure.

          4.21  Compliance with AMEX Continued Listing Requirements.  Except as
                ---------------------------------------------------
set forth on Schedule 4.21, the Company is in compliance with all applicable
American Stock Exchange continued listing guidelines. Except as set forth on
Schedule 4.21, there are no proceedings pending or to the Company's knowledge
threatened against the Company relating to the continued listing of the
Company's Common Stock on the American Stock Exchange and the Company has not
received any notice of the delisting of the Common Stock from the American Stock
Exchange.

          4.22  Acknowledgement of Dilution.  The number of shares of Common
                ---------------------------
Stock issuable pursuant to this Agreement may increase substantially. The
Company's executive officers and directors have studied and fully understand the
nature of the transactions being contemplated hereunder and recognize that they
have a potential dilutive effect.

          4.23  Brokers and Finders.  The Investors shall have no liability or
                -------------------
responsibility for the payment of any commission or finder's fee to any third
party in connection with or resulting from this agreement or the transactions
contemplated by this Agreement by reason of any agreement of or action taken by
the Company.

          4.24  No Directed Selling Efforts or General Solicitation.  Neither
                ---------------------------------------------------
the Company nor any Person acting on its behalf has conducted any general
solicitation or general advertising (as those terms are used in Regulation D) in
connection with the offer or sale of any of the Securities.

          4.25  No Integrated Offering.  Neither the Company nor any of its
                ----------------------
Affiliates, nor any Person acting on its or their behalf has, directly or
indirectly, made any offers or sales of any security or solicited any offers to
buy any security, under circumstances that would adversely affect reliance by
the Company on Section 4(2) for the exemption from registration for the

                                       8
<PAGE>

transactions contemplated hereby or would require registration of the Securities
under the 1933 Act.

          4.26 Disclosures. No representation or warranty made under any Section
               -----------
hereof contains any untrue statement of a material fact or omits to state a
material fact necessary to make the statements contained herein, in light of the
circumstances under which the statements were made, not misleading.

     5    Representations and Warranties of the Investors. Each of the Investors
          -----------------------------------------------
hereby severally, and not jointly, represents, warrants and covenants to the
Company that:

          5.1  Organization and Existence.  The Investor is a validly existing
               --------------------------
corporation or limited liability company and has all requisite corporate or
limited liability company power and authority to invest in the Securities
pursuant to this Agreement.

          5.2  Authorization. The execution, delivery and performance by the
               -------------
Investor of the Agreements have been duly authorized and the Agreements will
each constitute the valid and legally binding obligation of the Investor,
enforceable against the Investor in accordance with their terms.

          5.3  Purchase Entirely for Own Account. The Securities to be received
               ---------------------------------
by the Investor hereunder will be acquired for the Investor's own account, not
as nominee or agent, and not with a view to the resale or distribution of any
part thereof, and the Investor has no present intention of selling, granting any
participation in, or otherwise distributing the same. The Investor is not a
registered broker dealer or an entity engaged in the business of being a broker
dealer.

          5.4  Investment Experience. The Investor acknowledges that it can bear
               ---------------------
the economic risk and complete loss of its investment in the Securities and has
such knowledge and experience in financial or business matters that it is
capable of evaluating the merits and risks of the investment contemplated
hereby.

          5.5  Disclosure of Information. The Investor has had an opportunity to
               -------------------------
receive documents related to the Company and to ask questions of and receive
answers from the Company regarding the Company, its business and the terms and
conditions of the offering of the Securities. The Investor acknowledges receipt
of the SEC Filings and any other filings which it requested be made by the
Company with the SEC. Neither such inquiries nor any other due diligence
investigation conducted by the Investor shall modify, amend or affect the
Investor's right to rely on the Company's representations and warranties
contained in this Agreement.

          5.6  Restricted Securities. The Investor understands that the
               ---------------------
Securities are characterized as "restricted securities" under the U.S. federal
securities laws inasmuch as they are being acquired from the Company in a
transaction not involving a public offering and that under such laws and
applicable regulations such securities may be resold without registration under
the 1933 Act only in certain limited circumstances.

                                       9
<PAGE>

          5.7  Legends. (a) It is understood that, until registration for resale
               -------
pursuant to the Registration Rights Agreement, certificates evidencing the
Securities may bear one or all of the following legends:

               (i)  "The shares represented by this certificate may not be
transferred without (i) the opinion of counsel satisfactory to the corporation
that such transfer may lawfully be made without registration under the
Securities Act of 1933 or qualification under applicable state securities laws;
or (ii) such registration or qualification."

               (ii) If required by the authorities of any state in connection
with the issuance of sale of the Securities, the legend required by such state
authority.

               (b)  Upon registration for resale pursuant to the Registration
Rights Agreement or upon Rule 144(k) becoming available, the Company shall
promptly cause certificates evidencing the Shares previously issued hereunder
(including Shares issued pursuant to Section 7.1 below) to be replaced with
certificates which do not bear such restrictive legends, and all other Shares or
Warrant Shares subsequently issued shall not bear such restrictive legends. When
the Company is required to cause unlegended certificates to replace previously
issued legended certificates, if unlegended certificates are not delivered to an
Investor within ten (10) business days of submission by that Investor of
legended stock certificate(s) to the Company's transfer agent, the Company shall
be liable to the Investor for a penalty equal to 2% of the aggregate purchase
price of the Shares evidenced by such certificate(s) for each thirty day period
(or portion thereof) beyond such ten days that the unlegended certificates have
not been so delivered.

          5.8  Accredited Investor. The Investor is an accredited investor as
               -------------------
defined in Rule 501(a) of Regulation D, as amended, under the 1933 Act.

          5.9  No General Solicitation. The Investor did not learn of the
               -----------------------
investment in the Securities as a result of any public advertising or general
solicitation.

          5.10 Short Position. The Investor does not currently have a short
               --------------
position in the securities of the Company and during the MFN Period will not
engage in any market transactions in the Company's securities which are designed
to and have the effect of manipulating the market price of the Company's common
stock.

     6.   Registration Rights Agreement. The parties acknowledge and agree that
          -----------------------------
part of the inducement for the Investors to enter into this Agreement is the
Company's execution and delivery of the Registration Rights Agreement. The
parties acknowledge and agree that simultaneously with the execution hereof, the
Registration Rights Agreement is being duly executed and delivered by the
parties thereto.

                                       10
<PAGE>

     7.   Covenants and Agreements of the Company.
          ---------------------------------------

          7.1  Purchase Price Adjustments.
               --------------------------

                    (a)  Required Adjustments.  Subject to the exclusions
                         --------------------
contained in Section 7.1(f) below, if during the MFN Period (defined below) the
Company issues or sells any shares of its Common Stock at a Per Share Selling
Price (as defined below) lower than the Purchase Price set forth in Section 2.1
hereof, the Purchase Price of the Shares sold pursuant to Section 2.1 shall be
adjusted downward to equal such lower Per Share Selling Price and Investors
shall be entitled to receive the additional shares as provided by Section
7.1(c); provided, however, that in the event an Investor then owns less than 70%
of the Shares previously acquired by it hereunder on the Closing Date, such
Investor shall be entitled to additional shares only with respect to the number
of Shares then owned by such Investor from the Closing. The Company shall give
to the Investors written notice of any such sale within 24 hours of the closing
of any such issuance or sale. For so long as an Investor owns 70% or more of the
Shares originally acquired by such Investor hereunder in the Closing, such
Investor shall be entitled to the full benefit of the Purchase Price adjustment
required by this Section 7.1. The term "Shares" as used in this Agreement shall
include shares issued to the Investors pursuant to this Section 7.1.

                    (b)  Definitions.
                         -----------

                         (i)  For the purposes of this Section 7.1, the term
"Per Share Selling Price" as used in this Section 7.1 shall include the amount
actually paid by third parties for each share of Common Stock. In the event a
fee in excess of five percent (5%) of the gross sale price is paid by the
Company in connection with such transaction, any such excess amount shall be
deducted from the selling price pro rata to all shares sold in the transaction
to arrive at the Per Share Selling Price. A sale of shares of Common Stock shall
include the sale or issuance of rights, options, warrants or convertible
securities under which the Company is or may become obligated to issue shares of
Common Stock (either in the first instance or upon conversion or exercise of any
other convertible securities, rights, options or warrants), and in such
circumstances the Per Share Selling Price of the Common Stock covered thereby
shall also include the exercise or conversion price thereof (in addition to the
consideration received by the Company upon such sale or issuance less the excess
fee amount as provided above). In case of any such security issued within the
MFN Period in a "Variable Rate Transaction" or an "MFN Transaction" (each as
defined below), the Per Share Selling Price shall be deemed to be the lowest
conversion or exercise price at which such securities are converted or exercised
or might have been converted or exercised in the case of a Variable Rate
Transaction, or the lowest adjustment price in the case of an MFN Transaction,
over the life of such securities. If shares are issued for a consideration other
than cash, the Per Share Selling Price shall be the lower of (i) the value of
such consideration as determined in good faith by independent certified public
accountants mutually acceptable to the Company and the Investors; or (ii) the
Market Price upon the closing of such transaction giving rise to the adjustment
hereunder.

                         (ii) The term "Variable Rate Transaction" shall mean a
transaction in which the Company issues or sells (a) any debt or equity
securities that are convertible into, exchangeable or exercisable for, or
include the right to receive other convertible securities or additional shares
of Common Stock either (x) at a conversion, exercise or exchange

                                       11
<PAGE>

rate or other price that is based upon and/or varies with the trading prices of
or quotations for the Common Stock at any time after the initial issuance of
such debt or equity securities, or (y) with a fixed conversion, exercise or
exchange price that is subject to being reset at some future date after the
initial issuance of such debt or equity security or upon the occurrence of
specified or contingent events directly or indirectly related to the business of
the Company or the market for the Common Stock (but excluding standard stock
split anti-dilution provisions), or (b) any securities of the Company pursuant
to an "equity line" structure which provides for the sale, from time to time, of
securities of the Company which are registered for resale pursuant to the 1933
Act.

                         (iii) The term "MFN Transaction" shall mean a
transaction in which the Company issues or sells any securities in a capital
raising transaction or series of related transactions (the "New Offering") which
grants to the investor (the "New Investor") the right to receive additional
securities based upon future capital raising transactions of the Company on
terms more favorable than those granted to the New Investor in the New Offering.

                         (iv)  The term "MFN Period" shall mean the period
ending twenty (20) months following the Closing Date.

                    (c)  Adjustment Mechanism. If an adjustment of the Purchase
                         --------------------
Price is required pursuant to Section 7.1(a), the Company shall deliver to the
Investors within ten (10) calendar days of the closing of the transaction giving
rise to the adjustment ("Delivery Date") each Investor's pro-rata share of such
number of additional shares of Common Stock equal to (i) the aggregate Purchase
Price paid by the Investor pursuant to Sections 2.1, divided by the Per Share
Selling Price as required under Section 7.1(a), minus (ii) the total number of
shares of Common Stock previously delivered to that Investor hereunder; provided
however, that the Company shall effect such adjustment in cash, in whole or in
part, to the extent required by Section 7.1(d). In the event the Company fails
to deliver the additional shares (or cash, as the case may be) by the Delivery
Date, the Company shall be liable to the Investors for a penalty equal to 2% of
the aggregate Purchase Price adjustment per month (in each instance to such
Investor pro rata in accordance with its participation in this offering),
payable in Common Stock or cash, at each Investor's election.

                    (d)  Limitation on Number of Shares.
                         ------------------------------

                         (i)  If by way of any adjustment required by this
Section 7.1, an Investor would receive a number of shares of Common Stock such
that the total number of such shares held by the Investor as of the date of such
adjustment would be greater than 9.99% of the total outstanding Common Stock of
the Company, then the Company shall not effect the adjustment required by this
Section to the extent necessary to avoid causing the aforesaid limitation to be
exceeded and shall agree to effect such adjustment at the earliest possible time
when such adjustment would not exceed the aforementioned limitation.

                         (ii) In the event that the Company would be obligated
to issue an amount of shares of Common Stock which, when aggregated with all
shares of Common Stock issued to an Investor, would constitute a breach of the
Company's obligations

                                       12
<PAGE>

under the rules or regulations of the American Stock Exchange as they apply to
the Company, or any other principal securities exchange or market upon which the
Common Stock is or becomes traded (the "Cap Regulations"), the Company shall not
be obligated to issue any such shares of Common Stock. Instead, the Company
shall promptly pay to the Investor at an amount equal to 105% of the cash value
of the adjustment with respect to such shares which would have exceeded the Cap
Regulations. Only shares acquired pursuant to this Agreement will be included in
determining whether the limitations would be exceeded for purposes of this
Section 7.1(d)(ii).

                         (iii) Notwithstanding anything to the contrary in this
Agreement, in no event will the total aggregate number of Shares and Warrant
Shares issuable pursuant to this Agreement exceed 19.99% (i.e., 5,630,122 shares
                                                          ----
of Common Stock) of the outstanding Common Stock of the Company on the date
hereof.

                    (e)  Capital Adjustments.  In case of any stock split or
                         -------------------
reverse stock split, stock dividend, reclassification of the common stock,
recapitalization, merger or consolidation, or like capital adjustment affecting
the Common Stock of the Company, the provisions of Section 7.1 shall be applied
in a fair, equitable and reasonable manner so as to give effect, as nearly as
may be, to the purposes hereof.

                    (f)  Exclusions.  Section 7.1(a) shall not apply to:
                         ----------

                         (i)   issuances of options to acquire shares or shares
of Common Stock by the Company pursuant to the provisions of any existing
shareholder-approved option or similar employee benefit plan heretofore adopted
by the Company;

                         (ii)  sales of shares of Common Stock by the Company
upon conversion or exercise of any convertible securities, options or warrants
outstanding prior to the date hereof;

                         (iii) issuances by the Company of options or warrants
exercisable for a total of up to 250,000 shares of Common Stock to consultants
and advisors and the issuance of shares of Common Stock upon exercise of such
options and/or warrants;

                         (iv)  issuances of securities convertible or
exercisable into shares of Common Stock by the Company pursuant to written
agreements existing as of the date hereof; or

                         (v)   issuances by the Company of additional Securities
pursuant to Section 7.1 hereof.


          7.2  Limitation on Transactions.
               --------------------------

                    (a)  From the Closing Date until the date of effectiveness
of the Registration Statement covering the Shares issued pursuant to Section 2.1
and the Warrant Shares, the Company will cause all of its directors and
executive officers to refrain from making sales of shares of Common Stock into
the public market and in addition, without the prior written

                                       13
<PAGE>

consent of the Investors (which consent may be withheld in the Investors'
discretion), the Company shall not issue or sell or agree to issue or sell for
cash any securities in a capital raising transaction other than (i) to existing
stockholders of the Company who are both corporate and strategic stockholders of
the Company; (ii) in connection with sales described in Section 7.1(f); or (iii)
in connection with a bona fide licensing transaction, the primary purpose of
which is not to raise capital.

                    (b)  Until the expiration of the MFN Period, without the
prior written consent of the Investors (which consent may be withheld in the
Investors' discretion), the Company shall not (i) issue or sell or agree to
issue or sell for cash any securities in a MFN Transaction; or (ii) issue or
sell, or agree to issue or sell, for cash any securities in a Variable Rate
Transaction, provided, however, that the foregoing limitation on MFN
Transactions and Variable Rate Transactions shall not apply to any such
securities in total with an aggregate face value outstanding equal to or less
than eight percent (8%) of the market value of the Company's issued and
outstanding Common Stock.

          7.3  Right of the Investors to Participate in Future Transactions.
               ------------------------------------------------------------
Until the expiration of the MFN Period, the Investors will have a right to
participate in future capital raising transactions (which shall not include bona
fide licensing transactions, the primary purpose of which is not to raise
capital) on the terms and conditions set forth in this Section 7.3.  During such
period, the Company shall give seven (7) business days advance written notice to
the Investor prior to any non-public sale of any of the Company's equity
securities or any securities convertible into or exchangeable or exercisable for
such securities by providing to the Investors a comprehensive term sheet
containing all significant business terms of such a proposed transaction.  The
Investors shall have the right (pro rata in accordance with the Investors'
participation in this offering) to purchase up to twenty-five percent (25%) of
the securities which are the subject of such a proposed transaction for the same
consideration and on the same terms and conditions as contemplated for such
third-party sale.  The Investor(s)' rights hereunder must be exercised in
writing by the Investor(s) within five (5) business days following receipt of
the notice from the Company.  If, subsequent to the Company giving notice to an
Investor hereunder but prior to the Investor exercising its right to participate
(or the expiration of the five-day period without response from the Investor),
the terms and conditions of the proposed third-party sale are changed from that
disclosed in the comprehensive term sheet provided to such Investor, the Company
shall be required to provide a new notice to the Investors hereunder and the
Investors shall have the right, which must be exercised within five (5) business
days of such new notice, to exercise their rights to purchase the securities on
such changed terms and conditions as provided hereunder.  In the event the
Investors do not exercise their rights hereunder, or affirmatively decline to
engage in the proposed transaction with the Company, then the Company may
proceed with such proposed transaction on the same (or substantially similar,
provided that the Investor is given at least 24 hours notice of any change and
the opportunity within that 24 hour period to exercise its right to participate
in accordance herewith) terms and conditions as noticed to the Investors
(assuming the Investors have consented to the transaction, if required, pursuant
to Section 7.2 of this Agreement).  The rights and obligations of this Section
7.3 shall in no way diminish the other rights of the Investors pursuant to this
Section 7.

          7.4  Opinion of Counsel.  On or prior to the Closing Date, the Company
               ------------------
will deliver to the Investors the opinion of legal counsel to the Company, in
form and substance

                                       14
<PAGE>

reasonably acceptable to the Investors, addressing those legal matters set forth
in Schedule 7.4 hereto.
   ------------

          7.5  Reservation of Common Stock Pursuant to Section 7.1 and Exercise
               ----------------------------------------------------------------
of Warrants.  The Company hereby agrees at all times to reserve and keep
- -----------
available out of its authorized but unissued shares of Common Stock, solely for
the purpose of providing for the exercise of the Warrants, such number of shares
of Common Stock as shall from time to time equal the number of shares sufficient
to permit the exercise of the Warrants in accordance with the terms of the
Warrants. In addition, as soon as such number is determinable, the Company
agrees to reserve such shares as may be necessary to permit the issuances to the
Investors required by Section 7.1.

          7.6  Reports.  In the event the Company no longer files periodic
               -------
reports with the SEC and for so long as the Investors beneficially own any of
the Securities, the Company will furnish to the Investors the following reports,
each of which shall be provided to the Investors by air mail:

               (a)  Quarterly Reports. Consolidated balance sheets of the
                    -----------------
Company as at the end of each fiscal quarter and the related consolidated
statements of operations, stockholders' equity and cash flows for such period
and for the portion of the Company's fiscal year ended on the last day of such
quarter, all in reasonable detail and certified by a principal financial officer
of the Company to have been prepared in accordance with generally accepted
accounting principles, subject to year-end and audit adjustments.

               (b)  Annual Reports. Consolidated balance sheets of the Company
                    --------------
as of the end of each fiscal year and the related consolidated statements of
earnings, stockholders' equity and cash flows for such year, all in reasonable
detail and accompanied by the report on such consolidated financial statements
of an independent certified public accountant selected by the Company and
reasonably satisfactory to the Investor.

               (c)  Documents Sent to Stockholders. Copies of all notices, proxy
                    ------------------------------
statements, financial statements, reports and documents as the Company shall
send or make available generally to its stockholders, promptly after providing
same to the stockholders.

               (d)  Other Information. Such other information relating to the
                    -----------------
Company as from time to time may reasonably be requested by the Investors
provided the Company produces such information in its ordinary course of
business, and further provided that the Company, solely in its own discretion,
determines that such information is not confidential in nature and disclosure to
the Investors would not be harmful to the Company.

          7.7  Press Releases. Any press release or other publicity concerning
               --------------
this Agreement or the transactions contemplated by this Agreement shall be
submitted to the Investors for comment at least two (2) business days prior to
issuance, unless the release is required to be issued within a shorter period of
time by law or pursuant to the rules of a national securities exchange.

                                       15
<PAGE>

          7.8  No Conflicting Agreements. The Company will not take any action,
               -------------------------
enter into any agreement or make any commitment that would conflict or interfere
in any material respect with the obligations to the Investors under the
Agreements.

          7.9  Insurance.  So long as the Investors beneficially own any
               ---------
Securities, the Company shall not materially reduce the insurance coverages
described in Section 4.20, other than insurance for discontinued products.

          7.10 Compliance with Laws. So long as the Investors beneficially own
               --------------------
any Securities, the Company will use reasonable efforts to comply with all
applicable laws, rules, regulations, orders and decrees of all governmental
authorities, except to the extent non-compliance (in one instance or in the
aggregate) would not have a Material Adverse Effect.

          7.12 Listing of Underlying Shares and Related Matters.  The Company
               ------------------------------------------------
hereby agrees, promptly following the Closing of the transactions contemplated
by this Agreement, to take such action to cause the Shares and the Warrant
Shares to be listed on the American Stock Exchange as promptly as possible but
no later than the effective date of the registration contemplated by the
Registration Rights Agreement. The Company further agrees that if the Company
applies to have its Common Stock or other securities traded on any other
principal stock exchange or market, it will include in such application the
Warrant Shares and will take such other action as is necessary to cause such
Common Stock to be so listed. For so long as the Investors beneficially own any
of the Securities, the Company will use its best efforts to continue the listing
and trading of its Common Stock on the American Stock Exchange, Nasdaq National
Market, Nasdaq SmallCap Market or New York Stock Exchange and will comply in all
respects with the Company's reporting, filing and other obligations under the
bylaws or rules of such exchange, as applicable, to ensure the continued
eligibility for trading of the Shares and the Warrant Shares thereon.

          7.13 Corporate Existence. So long as the Investors beneficially own
               -------------------
any of the Shares or Warrants, the Company shall maintain its corporate
existence, except in the event of a merger, consolidation or sale of all or
substantially all of the Company's assets, as long as the surviving or successor
entity in such transaction (a) assumes the Company's obligations hereunder and
under the agreements and instruments entered into in connection herewith,
regardless of whether or not the Company would have had a sufficient number of
shares of Common Stock authorized and available for issuance in order to fulfill
its obligations hereunder and effect the exercise in full of all Warrants
outstanding as of the date of such transaction; (b) has no legal, contractual or
other restrictions on its ability to perform the obligations of the Company
hereunder and under the agreements and instruments entered into in connection
herewith; and (c) is a publicly traded corporation whose common stock and the
shares of capital stock issuable upon exercise of the Warrants are (or would be
upon issuance thereof) listed for trading on the American Stock Exchange, the
Nasdaq National Market, the Nasdaq SmallCap Market, the New York Stock Exchange
or other recognized foreign exchange; provided, however, that in the event of a
merger or other transaction as a result of which the Company is not a surviving
public company, the Investor shall have the option to require the Company to
repurchase all of the shares of Common Stock (and Common Stock equivalents) then
held by the Investor at a price equal to 120% of the adjusted Purchase Price for
the shares.

                                       16
<PAGE>

     8.   Survival.  All representations, warranties, covenants and agreements
          --------
contained in this Agreement shall be deemed to be representations, warranties,
covenants and agreements as of the date hereof and shall survive the execution
and delivery of this Agreement for a period of two years from the date of this
Agreement; provided, however, that the provisions contained in Section 7 hereof
shall survive in accordance therewith.

     9.   Miscellaneous.
          -------------

          9.1  Successors and Assigns.  This Agreement may not be assigned by a
               ----------------------
party hereto without the prior written consent of the other party hereto, except
that without the prior written consent of the Company, but after notice duly
given, an Investor may assign its rights and delegate its duties hereunder in
whole or in part to an Affiliate or to a third party acquiring some portion or
all of its Shares in a private transaction, and without the prior written
consent of the Investors, but after notice duly given and in compliance with
this Agreement, the Company may assign its rights and delegate its duties
hereunder to any successor-in-interest corporation in the event of a merger or
consolidation of the Company with or into another corporation, or any merger or
consolidation of another corporation with or into the Company that results
directly or indirectly in an aggregate change in the ownership or control of
more than 50% of the voting rights of the equity securities of the Company, or
the sale of all or substantially all of the Company's assets. The terms and
conditions of this Agreement shall inure to the benefit of and be binding upon
the respective permitted successors and assigns of the parties. Nothing in this
Agreement, express or implied, is intended to confer upon any party other than
the parties hereto or their respective successors and assigns any rights,
remedies, obligations, or liabilities under or by reason of this Agreement,
except as expressly provided in this Agreement.

          9.2  Counterparts.  This Agreement may be executed in two or more
               ------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.

          9.3  Titles and Subtitles.  The titles and subtitles used in this
               --------------------
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.

          9.4  Notices.  Unless otherwise provided, any notice required or
               -------
permitted under this Agreement shall be given in writing and shall be deemed
effectively given only upon delivery to each party to be notified by (i)
personal delivery, (ii) telex or telecopier, upon receipt of confirmation of
complete transmittal, or (iii) an internationally recognized overnight air
courier, addressed to the party to be notified at the address as follows, or at
such other address as such party may designate by ten days' advance written
notice to the other party:

               If to the Company:

                    Sheffield Pharmaceuticals, Inc.

                                       17
<PAGE>

                    425 South Woodsmill Road, Suite 270
                    St. Louis, MO 63017-3441
                    Attn: President
                    Fax: 314/579-9799

               If to the Investors, to the addresses set forth
               on the signature pages hereto.


          9.5  Expenses.  The parties hereto shall pay their own costs and
               --------
expenses in connection herewith, except that the Company shall pay to Tail Wind,
Inc. a sum equal to 0.75% of the aggregate Purchase Price as and for
reimbursement for due diligence expenses incurred in connection herewith and
such amount shall be paid at Closing from gross proceeds of the offering.

          9.6  Amendments and Waivers.  Any term of this Agreement may be
               ----------------------
amended and the observance of any term of this Agreement may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and the Investors.
Any amendment or waiver effected in accordance with this paragraph shall be
binding upon each holder of any Securities purchased under this Agreement at the
time outstanding, each future holder of all such securities, and the Company.

          9.7  Severability.  If one or more provisions of this Agreement are
               ------------
held to be unenforceable under applicable law, such provision shall be excluded
from this Agreement and the balance of this Agreement shall be interpreted as if
such provision were so excluded and shall be enforceable in accordance with its
terms.

          9.8  Entire Agreement.  This Agreement, including the Exhibits and
               ----------------
Schedules hereto, and the Registration Rights Agreement constitute the entire
agreement among the parties hereof with respect to the subject matter hereof and
thereof and supersede all prior agreements and understandings, both oral and
written, between the parties with respect to the subject matter hereof and
thereof.

          9.9  Further Assurances.  The parties shall execute and deliver all
               ------------------
such further instruments and documents and take all such other actions as may
reasonably be required to carry out the transactions contemplated hereby and to
evidence the fulfilment of the agreements herein contained.

          9.10 Applicable Law.  This Agreement shall be governed by, and
               --------------
construed in accordance with, the laws of the State of New York without regard
to principles of conflicts of laws.

                                       18
<PAGE>

          IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.

The Company:                            SHEFFIELD PHARMACEUTICALS, INC.

                                        By: /s/ Loren G. Peterson
                                            -----------------------------------
                                        President and Chief Executive Officer


The Investor:                           The Tail Wind Fund Ltd.

                                        By: /s/ The Tail Wind Fund Ltd.
                                            -----------------------------------



Aggregate Purchase Price:  2,250,000
                           ---------
Number of Shares of Common Stock:  626,950
                                   -------
Number of Warrants:  112,500
                    --------
 (50,000 Warrants for each $1,000,000 of aggregate Purchase Price)
Effective per share Purchase Price of Shares:  $3.5888
                                                ------
Exercise price of Warrants:  $4.983
                              -----

     Address for Notice:                The Tail Wind Fund Ltd.
                                        MeesPierson (Bahamas) Ltd.
                                        Attn: Ms. Rolle
                                        Windemere House, 404 East Bay Street
                                        P.O. Box SS 5539, Nassau, Bahamas
                                        Tel: 242/393-8777
                                        Facsimile: 242/393-9021

                   with a copy to:      David Crook, Esq.
                                        c/o EASI
                                        1st Floor, No. 1 Regent Street
                                        London, SW1Y 4NS UK
                                        Telephone: 44-207-468-7660
                                        Facsimile: 44-207-468-7657

                   and with a copy to:  Bryan Cave LLP
                                        700 Thirteenth Street, NW
                                        Washington, DC 20005
                                        Attn: LaDawn Naegle
                                        Telephone: 202/508-6046
                                        Facsimile: 202/508-6200

                                       19
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-4.2
<SEQUENCE>3
<FILENAME>0003.txt
<DESCRIPTION>REGISTRATION RIGHTS AGREEMENT DATED 12/29/2000
<TEXT>

<PAGE>

                                                                     EXHIBIT 4.2

                         REGISTRATION RIGHTS AGREEMENT
                         -----------------------------

          This Registration Rights Agreement (the "Agreement") is made and
entered into as of this 29th day of December, 2000 by and between Sheffield
Pharmaceuticals, Inc., a Delaware corporation (the "Company"), and the
"Investors" named in that Purchase Agreement of even date herewith by and
between the Company and the Investors (the "Purchase Agreement").

    The parties hereby agree as follows:

    1.  Certain Definitions.
        -------------------

          As used in this Agreement, the following terms shall have the
following meanings:

          "Additional Registrable Securities" shall mean the shares of Common
           ---------------------------------
Stock, if any, issued to the Investors pursuant to Section 7.1 of the Purchase
Agreement.

          "Common Stock" shall mean the Company's Common Stock, par value $0.01
           ------------
per share.

          "Investors" shall mean the purchasers identified in the Purchase
           ---------
Agreement and any affiliate or permitted transferee of any Investor who is a
subsequent holder of any Warrants, Registrable Securities or Additional
Registrable Securities.

          "Prospectus" shall mean the prospectus included in any Registration
           ----------
Statement, as amended or supplemented by any prospectus supplement, with respect
to the terms of the offering of any portion of the Registrable Securities or
Additional Registrable Securities covered by such Registration Statement and by
all other amendments and supplements to the prospectus, including post-effective
amendments and all material incorporated by reference in such prospectus.

          "Register," "registered" and "registration" refer to a registration
           --------    ----------       ------------
made by preparing and filing a registration statement or similar document in
compliance with the 1933 Act (as defined below), and the declaration or ordering
of effectiveness of such registration statement or document.

          "Registrable Securities" shall mean the shares of Common Stock issued
           ----------------------
and issuable to the Investors pursuant to the Purchase Agreement (other than
additional shares of Common Stock issuable pursuant to Section 7.1 of the
Purchase Agreement) and issuable upon the exercise of the Warrants, and any
other securities issued or issuable with respect to or in exchange for
Registrable Securities.

          "Registration Statement" shall mean any registration statement of the
           ----------------------
Company filed under the 1933 Act that covers the resale of any of the
Registrable Securities or Additional Registrable Securities pursuant to the
provisions of this Agreement, amendments and
<PAGE>

supplements to such Registration Statement, including post-effective amendments,
all exhibits and all material incorporated by reference in such Registration
Statement.

          "SEC" means the U.S. Securities and Exchange Commission.
           ---

          "1933 Act" means the Securities Act of 1933, as amended, and the rules
           --------
and regulations promulgated thereunder.

          "1934 Act" means the Securities Exchange Act of 1934, as amended, and
           --------
the rules and regulations promulgated thereunder.

          "Warrants" mean warrants to purchase shares of Common Stock issued to
           --------
the Investors pursuant to the Purchase Agreement, the form of which Warrants is
attached to the Purchase Agreement as Exhibit A.

     2.  Registration.
         ------------

               (a)  Registration Statements.
                    -----------------------

               (i)  Registrable Securities. Promptly following the closing of
                    ----------------------
the purchase and sale of Common Stock and Warrants contemplated by Section 2 of
the Purchase Agreement (the "Closing Date") (but no later than thirty (30) days
after the Closing Date), the Company shall prepare and file with the SEC one
Registration Statement on Form S-3 (or, if Form S-3 is not then available to the
Company, on such form of registration statement as is then available to effect a
registration for resale of the Registrable Securities, subject to the Investors'
consent), covering the resale of the Registrable Securities in an amount equal
to the number of shares of Common Stock issued to the Investors on the Closing
Date plus the number of shares of Common Stock necessary to permit the exercise
in full of the Warrants. Such Registration Statement also shall cover, to the
extent allowable under the 1933 Act and the Rules promulgated thereunder
(including Rule 416), such indeterminate number of additional shares of Common
Stock resulting from stock splits, stock dividends or similar transactions with
respect to the Registrable Securities. The Company shall use its reasonable
efforts to obtain from each person who now has piggyback registration rights a
waiver of those rights with respect to the Registration Statement. The
Registration Statement (and each amendment or supplement thereto, and each
request for acceleration of effectiveness thereof) shall be provided in
accordance with Section 3(c) to the Investors and their counsel prior to its
filing or other submission.

               (ii) Additional Registrable Securities. Upon the written demand
                    ---------------------------------
of any Investor following the issuance of any additional shares of Common Stock
to such Investor pursuant to Section 7.1, of the Purchase Agreement, the Company
shall prepare and file with the SEC one Registration Statement on Form S-3 (or,
if Form S-3 is not then available to the Company, on such form of registration
statement as is then available to effect a registration for resale of the
Additional Registrable Securities, subject to the Investor's consent) covering
the resale of the Additional Registrable Securities issued to all Investors and,
at the option of the Company, any additional amounts of Additional Registrable
Securities that the Company reasonably anticipates it could be required to
register. Such Registration Statement also shall cover, to the extent allowable
under the 1933 Act and the Rules promulgated thereunder

                                       2
<PAGE>

(including Rule 416), such indeterminate number of additional shares of Common
Stock resulting from stock splits, stock dividends or similar transactions with
respect to the Additional Registrable Securities. The Company shall use its
reasonable efforts to obtain from each person who now has piggyback registration
rights a waiver of those rights with respect to the Registration Statement. The
Registration Statement (and each amendment or supplement thereto, and each
request for acceleration of effectiveness thereof) shall be provided in
accordance with Section 3(c) to the Investor and its counsel prior to its filing
or other submission.

          (iii)  Notwithstanding anything to the contrary contained herein, the
Company shall have the option to consolidate two or more of the registrations
required by sections (i) and (ii) above into a single Registration Statement
provided that any such consolidating Registration Statement otherwise complies
with and is subject to the provisions of this Agreement.

          (b) Expenses.  The Company will pay all expenses associated with each
              --------
registration, including the Investors' reasonable expenses in connection with
the registration but excluding discounts, commissions, fees of underwriters,
selling brokers, dealer managers or similar securities industry professionals.

          (c) Effectiveness.
              -------------

          (i) The Company shall use its best efforts to have each Registration
Statement declared effective as soon as practicable. If (A) the Registration
Statement covering Registrable Securities is not declared effective by the SEC
within three (3) months following the Closing Date or the Registration Statement
covering Additional Registrable Securities is not declared effective by the SEC
within three (3) months following the demand of an Investor relating to the
Additional Registrable Securities covered thereby, or with respect to any of the
foregoing a Registration Statement which is subject to full review by the SEC
staff (which shall not include a mere "plain English" review), within four (4)
months following the Closing Date or demand, as the case may be (each, a
"Registration Date"), (B) after a Registration Statement has been declared
effective by the SEC, sales cannot be made pursuant to such Registration
Statement for any reason (including without limitation by reason of a stop
order, or the Company's failure to update the Registration Statement) but except
as excused pursuant to subparagraph (ii) below, or (C) the Common Stock
generally or the Registrable Securities specifically are not listed or included
for quotation on the American Stock Exchange, the Nasdaq National Market System,
the Nasdaq Small Cap Market, or the New York Stock Exchange then the Company
will make pro rata payments to each Investor, as liquidated damages (the
"Liquidated Damages Payments") and not as a penalty, in an amount equal to 2% of
the aggregate amount paid by such Investor on the Closing Date to the Company
for shares of Common Stock still held by such Investor for any month or pro rata
for any portion thereof following the Registration Date during which any of the
events described in (A) or (B) or (C) above occurs and is continuing (the
"Blackout Period"), provided, however, that in the case of the events described
in (A) or (B) above with respect only to the Additional Registrable Securities,
such penalty shall equal 2% of the aggregate market value of such Additional
Registrable Securities for the duration of the Blackout Period. Each such
payment shall be due and payable within five (5) days of the end of each month
(or ending portion thereof) of the

                                       3
<PAGE>

Blackout Period. Such payments shall be in partial compensation to the
Investors, and shall not constitute the Investors' exclusive remedy for such
events. The Blackout Period shall terminate upon (x) the effectiveness of the
applicable Registration Statement in the case of (A) and (B) above; (y) listing
or inclusion of the Common Stock on the American Stock Exchange, the Nasdaq
National Market System, the Nasdaq Small Cap Market or the New York Stock
Exchange in the case of (C) above; and (z) in the case of the events described
in (A) or (B) above, the earlier termination of the Registration Period (as
defined in Section 3(a) below). The amounts payable as liquidated damages
pursuant to this paragraph shall be payable, at the option of the Investors, in
lawful money of the United States or in shares of Common Stock at the Market
Price (as defined in the Purchase Agreement), and amounts payable as liquidated
damages shall be paid monthly within two (2) business days of the last day of
each month following the commencement of the Blackout Period until the
termination of the Blackout Period. Amounts payable as liquidated damages
hereunder shall cease when an Investor no longer holds Warrants or Registrable
Securities or Additional Registrable Securities, as applicable.

          (ii) For not more than ten (10) consecutive trading days or for a
total of not more than forty (40) trading days in any twelve (12) month period,
the Company may suspend sales under any Registration Statement contemplated by
this Agreement in the event it desires in good faith and in the best interests
of the Company to delay the disclosure of material non-public information
concerning the Company (an "Allowed Delay"); provided that the Company shall
promptly (a) notify the Investors in writing of the existence of (but in no
event, without the prior written consent of an Investor, shall the Company
disclose to such Investor any of the facts or circumstances regarding) material
non-public information giving rise to an Allowed Delay, and (b) advise the
Investors in writing to cease all sales under the Registration Statement until
the end of the Allowed Delay (upon receipt of which advisory the Investors shall
cease all such sales until the Registration Statement and related Prospectus
have been amended or supplemented as appropriate, which the Company agrees to do
as promptly as practicable).  The duration of the MFN Period provided for in the
Purchase Agreement will be extended by the number of days of any and all Allowed
Delays.

          (d) Underwritten Offering.  If any offering pursuant to a Registration
              ---------------------
Statement pursuant to Section 2(a) hereof involves an underwritten offering, the
Company shall have the right to select an investment banker and manager to
administer the offering, which investment banker or manager shall be reasonably
satisfactory to the Investors.

  3.  Company Obligations. The Company will use its best efforts to effect the
      -------------------
registration of the Registrable Securities and the Additional Registrable
Securities in accordance with the terms hereof, and pursuant thereto the Company
will, as expeditiously as possible:

          (a) use its best efforts to cause such Registration Statement to
become effective and to remain continuously effective for a period that will
terminate upon the earlier of (i) the date on which all Registrable Securities
or Additional Registrable Securities, as the case may be, covered by such
Registration Statement, as amended from time to time, have been sold, and (ii)
the date on which all Registrable Securities or Additional Registrable
Securities, as the case may be, may be sold pursuant to Rule 144(k) (the
"Registration Period");

                                       4
<PAGE>

          (b) prepare and file with the SEC such amendments and post-effective
amendments to the Registration Statement and the Prospectus as may be necessary
to keep the Registration Statement effective for the period specified in Section
3(a) and to comply with the provisions of the 1933 Act and the 1934 Act with
respect to the distribution of all Registrable Securities and Additional
Registrable Securities; provided that, at least five (5) business days prior to
the filing of a Registration Statement or Prospectus, or, at least two (2)
business days prior to filing any amendments or supplements thereto, the Company
will furnish to the Investors copies of all documents proposed to be filed,
which documents will be subject to the comments of the Investors and their
counsel, which must be received within such five (5) or two (2) business day
period, as applicable.

          (c) not file any Registration Statement or amendment or supplement
thereto to which Investor's counsel reasonably objects except such filings as
are required to be made pursuant to law or the rules and regulations of the
American Stock Exchange, or other securities exchange, interdealer quotation
system or market on which the Company's securities are then listed;

          (d) furnish to the Investors and their legal counsel (i) promptly
after the same is prepared and publicly distributed, filed with the SEC, or
received by the Company, one copy of any Registration Statement and any
amendment thereto, each preliminary prospectus and Prospectus and each amendment
or supplement thereto, and each letter written by or on behalf of the Company to
the SEC or the staff of the SEC, and each item of correspondence from the SEC or
the staff of the SEC, in each case relating to such Registration Statement
(other than any portion of any thereof which contains information for which the
Company has sought confidential treatment), and (ii) such number of copies of a
Prospectus, including a preliminary prospectus, and all amendments and
supplements thereto and such other documents as each Investor may reasonably
request in order to facilitate the disposition of the Registrable Securities,
and Additional Registrable Securities owned by such Investor;

          (e) in the event the Company selects an underwriter for the offering,
the Company shall enter into and perform its reasonable obligations under an
underwriting agreement, in usual and customary form, including, without
limitation, customary indemnification and contribution obligations, with the
underwriter of such offering;

          (f) if required by the underwriter, or if any Investor is described in
the Registration Statement as an underwriter, the Company shall furnish, on the
effective date of the Registration Statement, on the date that Registrable
Securities or Additional Registrable Securities, as applicable, are delivered to
an underwriter, if any, for sale in connection with the Registration Statement
and at periodic intervals thereafter from time to time on request, (i) an
opinion, dated as of such date, from independent legal counsel representing the
Company for purposes of such Registration Statement, in form, scope and
substance as is customarily given in an underwritten public offering, addressed
to the underwriter and the Investors and (ii) a letter, dated such date, from
the Company's independent certified public accountants in form and substance as
is customarily given by independent certified public accountants to underwriters
in an underwritten public offering, addressed to the underwriter and the
Investors;

                                       5
<PAGE>

          (g) make reasonable efforts to prevent the issuance of any stop order
or other suspension of effectiveness and, if such order is issued, obtain the
withdrawal of any such order at the earliest possible moment;

          (h) furnish to each Investor at least five copies of the Registration
Statement and any post-effective amendment thereto, including financial
statements and schedules by air mail within two business days of the effective
date thereof;

          (i) prior to any public offering of Registrable Securities or
Additional Registrable Securities, use its reasonable best efforts to register
or qualify or cooperate with the Investors and their counsel in connection with
the registration or qualification of such Registrable Securities or Additional
Registrable Securities, as applicable, for offer and sale under the securities
or blue sky laws of such jurisdictions requested by the Investor and do any and
all other reasonable acts or things necessary or advisable to enable the
distribution in such jurisdictions of the Registrable Securities or Additional
Registrable Securities covered by the Registration Statement;

          (j) cause all Registrable Securities or Additional Registrable
Securities covered by a Registration Statement to be listed on each securities
exchange, interdealer quotation system or other market on which similar
securities issued by the Company are then listed;

          (k) immediately notify the Investors, at any time when a Prospectus
relating to the Registrable Securities or Additional Registrable Securities is
required to be delivered under the Securities Act, upon discovery that, or upon
the happening of any event as a result of which, the Prospectus included in such
Registration Statement, as then in effect, includes an untrue statement of a
material fact or omits to state any material fact required to be stated therein
or necessary to make the statements therein not misleading in the light of the
circumstances then existing, and at the request of any such holder, promptly
prepare (subject to any Allowed Delay) and furnish to such holder a reasonable
number of copies of a supplement to or an amendment of such Prospectus as may be
necessary so that, as thereafter delivered to the purchasers of such Registrable
Securities or Additional Registrable Securities, as applicable, such Prospectus
shall not include an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then existing; and

          (l) otherwise use its best efforts to comply with all applicable rules
and regulations of the SEC under the 1933 Act and the 1934 Act, take such other
actions as may be reasonably necessary to facilitate the registration of the
Registrable Securities and Additional Registrable Securities, if applicable,
hereunder; and make available to its security holders, as soon as reasonably
practicable, but not later than the Availability Date (as defined below), an
earnings statement covering a period of at least twelve months, beginning after
the effective date of each Registration Statement, which earnings statement
shall satisfy the provisions of Section 11(a) of the 1933 Act (for the purpose
of this subsection 3(l), "Availability Date" means the 45th day following the
end of the fourth fiscal quarter that includes the effective date of such
Registration Statement, except that, if such fourth fiscal quarter is the last
quarter of the

                                       6
<PAGE>

Company's fiscal year, "Availability Date" means the 90th day after the end of
such fourth fiscal quarter).

          4.  Due Diligence Review; Information.   The Company shall make
              ---------------------------------
available, during normal business hours, for inspection and review by the
Investors, advisors to and representatives of the Investors (who may or may not
be affiliated with the Investors and who are reasonably acceptable to the
Company), any underwriter participating in any disposition of Common Stock on
behalf of the Investors pursuant to the Registration Statement or amendments or
supplements thereto or any blue sky, NASD or other filing, all financial and
other records, all SEC Documents and other filings with the SEC, and all other
corporate documents and properties of the Company as may be reasonably necessary
for the purpose of such review, and cause the Company's officers, directors and
employees, within a reasonable time period, to supply all such information
reasonably requested by the Investors or any such representative, advisor or
underwriter in connection with such Registration Statement (including, without
limitation, in response to all questions and other inquiries reasonably made or
submitted by any of them), prior to and from time to time after the filing and
effectiveness of the Registration Statement for the sole purpose of enabling the
Investors and such representatives, advisors and underwriters and their
respective accountants and attorneys to conduct initial and ongoing due
diligence with respect to the Company and the accuracy of the Registration
Statement.

              The Company shall not disclose material nonpublic information to
the Investors, or to advisors to or representatives of the Investors, unless
prior to disclosure of such information the Company identifies such information
as being material nonpublic information and provides the Investors, such
advisors and representatives with the opportunity to accept or refuse to accept
such material nonpublic information for review. The Company may, as a condition
to disclosing any material nonpublic information hereunder, require the
Investors' advisors and representatives to enter into a confidentiality
agreement (including an agreement with such advisors and representatives
prohibiting them from trading in Common Stock during such period of time as they
are in possession of material nonpublic information) in form reasonably
satisfactory to the Company and the Investors. Nothing herein shall require the
Company to disclose material nonpublic information to the Investors or their
advisors or representatives.

          5.  Obligations of the Investors.
              ----------------------------

                    (a) Each Investor shall furnish in writing to the Company
such information regarding itself, the Registrable Securities or Additional
Registrable Securities, as applicable, held by it and the intended method of
disposition of the Registrable Securities or Additional Registrable Securities,
as applicable, held by it, as shall be reasonably required to effect the
registration of such Registrable Securities or Additional Registrable
Securities, as applicable, and shall execute such documents in connection with
such registration as the Company may reasonably request. At least fifteen (15)
calendar days prior to the first anticipated filing date of any Registration
Statement, the Company shall notify each Investor of the information the Company
requires from such Investor if such Investor elects to have any of the
Registrable Securities or Additional Registrable Securities included in the
Registration Statement. An Investor shall provide such information to the
Company at least five (5) calendar days prior to the first anticipated filing
date of such Registration Statement if such Investor elects

                                       7
<PAGE>

to have any of the Registrable Securities or Additional Registrable Securities
included in the Registration Statement.

                  (b) Each Investor, by its acceptance of the Registrable
Securities and Additional Registrable Securities, if any, agrees to cooperate
with the Company in connection with the preparation and filing of Registration
Statement hereunder, unless such Investor has notified the Company in writing of
its election to exclude all of its Registrable Securities or Additional
Registrable Securities, as applicable, from the Registration Statement.

                  (c) In the event the Company, at the request of the Investors,
determines to engage the services of an underwriter, such Investor agrees to
enter into and perform its obligations under an underwriting agreement, in usual
and customary form, including, without limitation, customary indemnification and
contribution obligations, with the managing underwriter of such offering and
take such other actions as are reasonably required in order to expedite or
facilitate the dispositions of the Registrable Securities or Additional
Registrable Securities, as applicable.

                  (d) Each Investor agrees that, upon receipt of any notice from
the Company of the happening of any event rendering a Registration Statement no
longer effective, such Investor will immediately discontinue disposition of
Registrable Securities or Additional Registrable Securities pursuant to the
Registration Statement covering such Registrable Securities or Additional
Registrable Securities, until the Investor's receipt of the copies of the
supplemented or amended prospectus filed with the SEC and declared effective
and, if so directed by the Company, the Investor shall deliver to the Company
(at the expense of the Company) or destroy (and deliver to the Company a
certificate of destruction) all copies in the Investor's possession of the
prospectus covering the Registrable Securities or Additional Registrable
Securities, as applicable, current at the time of receipt of such notice.

                  (e) No Investor may participate in any third party
underwritten registration hereunder unless it (i) agrees to sell the Registrable
Securities or Additional Registrable Securities, as applicable, on the basis
provided in any underwriting arrangements in usual and customary form entered
into by the Company, (ii) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents reasonably
required under the terms of such underwriting arrangements, and (iii) agrees to
pay its pro rata share of all underwriting discounts and commissions and any
expenses in excess of those payable by the Company pursuant to the terms of this
Agreement.

     6.  Indemnification.
         ---------------

                 (a) Indemnification by Company. The Company agrees to indemnify
                     --------------------------
and hold harmless, to the fullest extent permitted by law the Investors, each of
their officers, directors, partners and employees and each person who controls
the Investors (within the meaning of the 1933 Act) against all losses, claims,
damages, liabilities, costs (including, without limitation, reasonable
attorney's fees) and expenses imposed on such person caused by (i) any untrue or
alleged untrue statement of a material fact contained in any Registration
Statement, Prospectus or any preliminary prospectus or any amendment or
supplement thereto or any

                                       8
<PAGE>

omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading,
except insofar as the same are based upon any information furnished in writing
to the Company by such Investors, expressly for use therein, or (ii) any
violation by the Company of any federal, state or common law, rule or regulation
applicable to the Company in connection with any Registration Statement,
Prospectus or any preliminary prospectus, or any amendment or supplement
thereto, and shall reimburse in accordance with subparagraph (c) below, each of
the foregoing persons for any legal and any other expenses reasonably incurred
in connection with investigating or defending any such claims. The foregoing is
subject to the condition that, insofar as the foregoing indemnities relate to
any untrue statement, alleged untrue statement, omission or alleged omission
made in any preliminary prospectus or Prospectus that is eliminated or remedied
in any Prospectus or amendment or supplement thereto, the above indemnity
obligations of the Company shall not inure to the benefit of any indemnified
party if a copy of such corrected Prospectus or amendment or supplement thereto
had been made available to such indemnified party and was not sent or given by
such indemnified party at or prior to the time such action was required of such
indemnified party by the 1933 Act and if delivery of such Prospectus or
amendment or supplement thereto would have eliminated (or been a sufficient
defense to) any liability of such indemnified party with respect to such
statement or omission. Indemnity under this Section 5(a) shall remain in full
force and effect regardless of any investigation made by or on behalf of any
indemnified party and shall survive the permitted transfer of the Registrable
Securities and Additional Registrable Securities.

          (b) Indemnification by Holder.  In connection with any registration
              -------------------------
pursuant to the terms of this Agreement, each Investor will furnish to the
Company in writing such information as the Company reasonably requests
concerning the holders of Registrable Securities and Additional Registrable
Securities or the proposed manner of distribution for use in connection with any
Registration Statement or Prospectus and agrees, severally but not jointly, to
indemnify and hold harmless, to the fullest extent permitted by law, the
Company, its directors, officers, employees, stockholders and each person who
controls the Company (within the meaning of the 1933 Act) against any losses,
claims, damages, liabilities and expense (including reasonable attorney's fees)
resulting from any untrue statement of a material fact or any omission of a
material fact required to be stated in the Registration Statement or Prospectus
or preliminary prospectus or amendment or supplement thereto or necessary to
make the statements therein not misleading, to the extent, but only to the
extent that such untrue statement or omission is contained in any information
furnished in writing by such Investor to the Company specifically for inclusion
in such Registration Statement or Prospectus or amendment or supplement thereto
and that such information was substantially relied upon by the Company in
preparation of the Registration Statement or Prospectus or any amendment or
supplement thereto.  In no event shall the liability of an Investor be greater
in amount than the dollar amount of the proceeds (net of all expense paid by
such Investor and the amount of any damages such holder has otherwise been
required to pay by reason of such untrue statement or omission) received by such
Investor upon the sale of the Registrable Securities or Additional Registrable
Securities included in the Registration Statement giving rise to such
indemnification obligation.

          (c) Conduct of Indemnification Proceedings.  Any person entitled to
              --------------------------------------
indemnification hereunder shall (i) give prompt notice to the indemnifying party
of any claim with respect to which it seeks indemnification and (ii) permit such
indemnifying party to assume

                                       9
<PAGE>

the defense of such claim with counsel reasonably satisfactory to the
indemnified party; provided that any person entitled to indemnification
                   --------
hereunder shall have the right to employ separate counsel and to participate in
the defense of such claim, but the fees and expenses of such counsel shall be at
the expense of such person unless (a) the indemnifying party has agreed to pay
such fees or expenses, or (b) the indemnifying party shall have failed to assume
the defense of such claim and employ counsel reasonably satisfactory to such
person or (c) in the reasonable judgment of any such person, based upon written
advice of its counsel, a conflict of interest exists between such person and the
indemnifying party with respect to such claims (in which case, if the person
notifies the indemnifying party in writing that such person elects to employ
separate counsel at the expense of the indemnifying party, the indemnifying
party shall not have the right to assume the defense of such claim on behalf of
such person); and provided, further, that the failure of any indemnified party
                  --------  -------
to give notice as provided herein shall not relieve the indemnifying party of
its obligations hereunder, except to the extent that such failure to give notice
shall materially adversely affect the indemnifying party in the defense of any
such claim or litigation. It is understood that the indemnifying party shall
not, in connection with any proceeding in the same jurisdiction, be liable for
fees or expenses of more than one separate firm of attorneys at any time for all
such indemnified parties. No indemnifying party will, except with the consent of
the indemnified party, consent to entry of any judgment or enter into any
settlement that does not include as an unconditional term thereof the giving by
the claimant or plaintiff to such indemnified party of a release from all
liability in respect of such claim or litigation.

               (d) Contribution. If for any reason the indemnification provided
                   ------------
for in the preceding paragraphs (a) and (b) is unavailable to an indemnified
party or insufficient to hold it harmless, other than as expressly specified
therein, then the indemnifying party shall contribute to the amount paid or
payable by the indemnified party as a result of such loss, claim, damage or
liability in such proportion as is appropriate to reflect the relative fault of
the indemnified party and the indemnifying party, as well as any other relevant
equitable considerations. No person guilty of fraudulent misrepresentation
within the meaning of Section 11(f) of the 1933 Act shall be entitled to
contribution from any person not guilty of such fraudulent misrepresentation. In
no event shall the contribution obligation of a holder of Registrable Securities
or Additional Registrable Securities be greater in amount than the dollar amount
of the proceeds (net of all expenses paid by such holder and the amount of any
damages such holder has otherwise been required to pay by reason of such untrue
or alleged untrue statement or omission or alleged omission) received by it upon
the sale of the Registrable Securities or Additional Registrable Securities
giving rise to such contribution obligation.

     7.  Miscellaneous.
         -------------

               (a) Amendments and Waivers. This Agreement may be amended only by
                   ----------------------
a writing signed by the parties hereto. The Company may take any action herein
prohibited, or omit to perform any act herein required to be performed by it,
only if the Company shall have obtained the written consent to such amendment,
action or omission to act, of each Investor.

               (b) Notices. All notices and other communications provided for or
                   -------
permitted hereunder shall be made as set forth in Section 9.4 of the Purchase
Agreement.

                                       10
<PAGE>

          (c) Assignments and Transfers by Investors.  This Agreement and all
              --------------------------------------
the rights and obligations of the Investors hereunder may not be assigned or
transferred to any transferee or assignee except to an affiliate or permitted
transferee of an Investor who is a subsequent holder of any Warrants,
Registrable Securities or Additional Registrable Securities.

          (d) Assignments and Transfers by the Company.  This Agreement may not
              ----------------------------------------
be assigned by the Company without the prior written consent of each Investor,
except that without the prior written consent of the Investors, but after notice
duly given, the Company shall assign its rights and delegate its duties
hereunder to any successor-in-interest corporation, and such successor-in-
interest shall assume such rights and duties, in the event of a merger or
consolidation of the Company with or into another corporation or the sale of all
or substantially all of the Company's assets.

          (e) Benefits of the Agreement.  The terms and conditions of this
              -------------------------
Agreement shall inure to the benefit of and be binding upon the respective
permitted successors and assigns of the parties.  Nothing in this Agreement,
express or implied, is intended to confer upon any party other than the parties
hereto or their respective successors and assigns any rights, remedies,
obligations, or liabilities under or by reason of this Agreement, except as
expressly provided in this Agreement.

          (f) Counterparts.  This Agreement may be executed in two or more
              ------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.

          (g) Titles and Subtitles.  The titles and subtitles used in this
              --------------------
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.

          (h) Severability.  If one or more provisions of this Agreement are
              ------------
held to be unenforceable under applicable law, such provision shall be excluded
from this Agreement and the balance of this Agreement shall be interpreted as if
such provision were so excluded and shall be enforceable in accordance with its
terms to the fullest extent permitted by law.

          (i) Further Assurances.  The parties shall execute and deliver all
              ------------------
such further instruments and documents and take all such other actions as may
reasonably be required to carry out the transactions contemplated hereby and to
evidence the fulfillment of the agreements herein contained.

          (j) Entire Agreement.  This Agreement is intended by the parties as a
              ----------------
final expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein.  This Agreement supersedes all prior
agreements and understandings between the parties with respect to such subject
matter.

          (k) Applicable Law.  This Agreement shall be governed by, and
              --------------
construed in accordance with, the laws of the State of New York without regard
to principles of conflicts of law.

                                       11
<PAGE>

          IN WITNESS WHEREOF, the parties have executed this Registration Rights
Agreement as of the date first written above.

The Company:                            SHEFFIELD PHARMACEUTICALS, INC.


                                        By: /s/ Loren G.Peterson
                                            ------------------------------------
                                        President and Chief Executive Officer


The Investors:                          THE TAIL WIND FUND LTD.

                                        By: /s/ The Tail Wind Fund Ltd.
                                            ------------------------------------

                                       12
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-4.3
<SEQUENCE>4
<FILENAME>0004.txt
<DESCRIPTION>WARRANT DATED 12/29/2000
<TEXT>

<PAGE>

                                                                     EXHIBIT 4.3

     NEITHER THIS WARRANT NOR THE SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT
HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE
SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE
DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT OR EXEMPTION
FROM REGISTRATION UNDER THE FOREGOING LAWS.

     VOID AFTER 5:00 P.M. EASTERN TIME ON DECEMBER 29, 2005 ("EXPIRATION DATE").


                        SHEFFIELD PHARMACEUTICALS, INC.

                     WARRANT TO PURCHASE 112,500 SHARES OF
           COMMON STOCK, PAR VALUE $0.01 PER SHARE ("Common Stock")

     For VALUE RECEIVED, The Tail Wind Fund Ltd. ("Warrantholder"), is entitled
to purchase, subject to the provisions of this Warrant, from Sheffield
Pharmaceuticals, Inc., a Delaware corporation ("Company"), at any time not later
than 5:00 P.M., Eastern time, on the Expiration Date, at an exercise price per
share equal to $4.983 (the exercise price in effect being herein called the
"Warrant Price"), 112,500 shares ("Warrant Shares") of Common Stock. The number
of Warrant Shares purchasable upon exercise of this Warrant and the Warrant
Price shall be subject to adjustment from time to time as described herein.

     Section 1.  Registration. The Company shall maintain books for the transfer
                 ------------
and registration of the Warrant. Upon the initial issuance of the Warrant, the
Company shall issue and register the Warrant in the name of the Warrantholder.

     Section 2.  Transfers.  As provided herein, this Warrant may be transferred
                 ---------
only pursuant to a registration statement filed under the Securities Act of
1933, as amended ("Securities Act") or an exemption from such registration;
provided, however, this Warrant may only be transferred to an affiliate of the
Warrantholder. Subject to such restrictions, the Company shall transfer this
Warrant from time to time upon the books to be maintained by the Company for
that purpose, upon surrender thereof for transfer properly endorsed or
accompanied by appropriate instructions for transfer and such other documents as
may be reasonably required by the Company to establish that such transfer is
being made in accordance with the terms hereof, and a new Warrant shall be
issued to the transferee and the surrendered Warrant shall be canceled by the
Company.

     Section 3.  Exercise of Warrant.  Subject to the provisions hereof, the
                 -------------------
Warrantholder may exercise this Warrant in whole or in part at any time upon
surrender of the Warrant, together with delivery of the duly executed Warrant
exercise form attached hereto (the "Exercise Agreement") and payment by cash,
certified check or wire transfer of funds for the Warrant Price for that number
of Warrant Shares then being purchased, to the Company during normal business
hours on any business day at the Company's principal executive offices (or such
other office or agency of the Company as it may designate by
<PAGE>

notice to the holder hereof). The Warrant Shares so purchased shall be deemed to
be issued to the holder hereof or such holder's designee, as the record owner of
such shares, as of the close of business on the date on which this Warrant shall
have been surrendered (or evidence of loss, theft or destruction thereof and
security or indemnity satisfactory to the Company), the Warrant Price shall have
been paid and the completed Exercise Agreement shall have been delivered.
Certificates for the Warrant Shares so purchased, representing the aggregate
number of shares specified in the Exercise Agreement, shall be delivered to the
holder hereof within a reasonable time, not exceeding seven (7) business days,
after this Warrant shall have been so exercised. The certificates so delivered
shall be in such denominations as may be requested by the holder hereof and
shall be registered in the name of such holder or such other name as shall be
designated by such holder. If this Warrant shall have been exercised only in
part, then, unless this Warrant has expired, the Company shall, at its expense,
at the time of delivery of such certificates, deliver to the holder a new
Warrant representing the number of shares with respect to which this Warrant
shall not then have been exercised.

          Each exercise hereof shall constitute the representation and warranty
of the Warrantholder to the Company that the representations and warranties
contained in Article 5 of the Purchase Agreement (as defined below) are true and
correct in all material respects with respect to the Warrantholder as of the
time of such exercise.

     Section 4.  Compliance with the Securities Act of 1933. Neither this
                 ------------------------------------------
Warrant nor the Common Stock issued upon exercise hereof nor any other security
issued or issuable upon exercise of this Warrant may be offered, sold or
transferred except as provided in this agreement and in conformity with the
Securities Act, and then only against receipt of an agreement of such person to
whom such offer of sale is made to comply with the provisions of this Section 4
with respect to any resale or other disposition of such security. The Company
may cause the legend set forth on the first page of this Warrant to be set forth
on each Warrant or similar legend on any security issued or issuable upon
exercise of this Warrant, unless counsel for the Company is of the opinion as to
any such security that such legend is unnecessary.

     Section 5.  Payment of Taxes. The Company will pay any documentary stamp
                 ----------------
taxes attributable to the initial issuance of Warrant Shares issuable upon the
exercise of the Warrant; provided, however, that the Company shall not be
required to pay any tax or taxes which may be payable in respect of any transfer
involved in the issuance or delivery of any certificates for Warrant Shares in a
name other than that of the registered holder of this Warrant in respect of
which such shares are issued, and in such case, the Company shall not be
required to issue or deliver any certificate for Warrant Shares or any Warrant
until the person requesting the same has paid to the Company the amount of such
tax or has established to the Company's satisfaction that such tax has been
paid. The holder shall be responsible for income taxes due under federal, state
or other law, if any such tax is due.

     Section 6.  Mutilated or Missing Warrants. In case this Warrant shall be
                 -----------------------------
mutilated, lost, stolen, or destroyed, the Company shall issue in exchange and
substitution of and upon cancellation of the mutilated Warrant, or in lieu of
and substitution for the Warrant

                                       2
<PAGE>

lost, stolen or destroyed, a new Warrant of like tenor and for the purchase of a
like number of Warrant Shares, but only upon receipt of evidence reasonably
satisfactory to the Company of such loss, theft or destruction of the Warrant,
and with respect to a lost, stolen or destroyed Warrant, reasonable indemnity or
bond with respect thereto, if requested by the Company.

     Section 7.  Reservation of Common Stock. The Company hereby represents and
                 ---------------------------
warrants that there have been reserved, and the Company shall at all applicable
times keep reserved until issued (if necessary) as contemplated by this Section
7, out of the authorized and unissued Common Stock, sufficient shares to provide
for the exercise of the rights of purchase represented by the Warrant. The
Company agrees that all Warrant Shares issued upon exercise of the Warrant shall
be, at the time of delivery of the certificates for suchWarrant Shares, duly
authorized, validly issued, fully paid and non-assessable shares of Common Stock
of the Company.

     Section 8.  Adjustments. Subject and pursuant to the provisions of this
                 -----------
Section 8, the Warrant Price and number of Warrant Shares subject to this
Warrant shall be subject to adjustment from time to time as set forth
hereinafter.

          (a)  If the Company shall at any time or from time to time while the
Warrant is outstanding, pay a dividend or make a distribution on its Common
Stock in shares of Common Stock, subdivide its outstanding shares of Common
Stock into a greater number of shares or combine its outstanding shares into a
smaller number of shares or issue by reclassification of its outstanding shares
of Common Stock any shares of its capital stock (including any such
reclassification in connection with a consolidation or merger in which the
Company is the continuing corporation), then the number of Warrant Shares
purchasable upon exercise of the Warrant and the Warrant Price in effect
immediately prior to the date upon which such change shall become effective,
shall be adjusted by the Company so that the Warrantholder thereafter exercising
the Warrant shall be entitled to receive the number of shares of Common Stock or
other capital stock which the Warrantholder would have received if the Warrant
had been exercised immediately prior to such event upon payment of a Warrant
Price that has been adjusted to reflect a fair allocation of the economics of
such event to the Warrantholder. Such adjustments shall be made successively
whenever any event listed above shall occur.

          (b)  If any capital reorganization, reclassification of the capital
stock of the Company, consolidation or merger of the Company with another
corporation in which the Company is not the survivor, or sale, transfer or other
disposition of all or substantially all of the Company's assets to another
corporation shall be effected, then, as a condition of such reorganization,
reclassification, consolidation, merger, sale, transfer or other disposition,
lawful and adequate provision shall be made whereby each Warrantholder shall
thereafter have the right to purchase and receive upon the basis and upon the
terms and conditions herein specified and in lieu of the Warrant Shares
immediately theretofore issuable upon exercise of the Warrant, such shares of
stock, securities or assets as would have been issuable or payable with respect
to or in exchange for a number of Warrant Shares equal to the number of Warrant
Shares immediately theretofore issuable upon exercise of the

                                       3
<PAGE>

Warrant, had such reorganization, reclassification, consolidation, merger, sale,
transfer or other disposition not taken place, and in any such case appropriate
provision shall be made with respect to the rights and interests of each
Warrantholder to the end that the provisions hereof (including, without
limitations, provision for adjustment of the Warrant Price) shall thereafter be
applicable, as nearly equivalent as may be practicable in relation to any shares
of stock, securities or properties thereafter deliverable upon the exercise
thereof. The Company shall not effect any such consolidation, merger, sale,
transfer or other disposition unless prior to or simultaneously with the
consummation thereof the successor corporation (if other than the Company)
resulting from such consolidation or merger, or the corporation purchasing or
otherwise acquiring such assets or other appropriate corporation or entity shall
assume the obligation to deliver to the holder of the Warrant such shares of
stock, securities or assets as, in accordance with the foregoing provisions,
such holder may be entitled to purchase and the other obligations under this
Warrant. The provisions of this paragraph (b) shall similarly apply to
successive reorganizations, reclassifications, consolidations, mergers, sales,
transfers or other dispositions.

          (c)  In case the Company shall fix a payment date for the making of a
distribution to all holders of Common Stock (including any such distribution
made in connection with a consolidation or merger in which the Company is the
continuing corporation) of evidences of indebtedness or assets (other than cash
dividends or cash distributions payable out of consolidated earnings or earned
surplus or dividends or distributions referred to in Section 8(a)), or
subscription rights or warrants, the Warrant Price to be in effect after such
payment date shall be determined by multiplying the Warrant Price in effect
immediately prior to such payment date by a fraction, the numerator of which
shall be the total number of shares of Common Stock outstanding multiplied by
the Market Price per share of Common Stock (as defined below), less the fair
market value (as determined by the Company's Board of Directors in good faith)
of said assets or evidences of indebtedness so distributed, or of such
subscription rights or warrants, and the denominator of which shall be the total
number of shares of Common Stock outstanding multiplied by such Market Price per
share of Common Stock. "Market Price" shall mean the average of the closing bid
prices of the Common Stock over the twenty (20) consecutive trading days
preceding the date in question. Such adjustment shall be made successively
whenever such a payment date is fixed.

          (d)  During the term of this Warrant, the Warrant Price shall be
subject to adjustment on a basis consistent with the provisions of Section
7.1(a) of the Purchase Agreement by and between the Company and the Investors
named therein dated December 29, 2000 (the "Purchase Agreement"), except that
the Warrant Price shall be adjusted to a price equal to 125% of the adjusted
Purchase Price, if such adjustment to the Warrant Price would result in a lower
Warrant Price and that the adjustment shall be made regardless of whether the
Holder of this Warrant then holds any other shares of Common Stock subject to
adjustment under the terms of Section 7.1(a) of the Purchase Agreement. Such
adjustments shall be made successively whenever required regardless of the
Holder's then Common Stock ownership.

                                       4
<PAGE>

          (e)  An adjustment shall become effective immediately after the
payment date in the case of each dividend or distribution and immediately after
the effective date of each other event which requires an adjustment.

          (f)  In the event that, as a result of an adjustment made pursuant to
Section 8(a), the holder of this Warrant shall become entitled to receive any
shares of capital stock of the Company other than shares of Common Stock, the
number of such other shares so receivable upon exercise of this Warrant shall be
subject thereafter to adjustment from time to time in a manner and on terms as
nearly equivalent as practicable to the provisions with respect to the Warrant
Shares contained in this Warrant.

     Section 9.  Fractional Interest. The Company shall not be required to issue
                 -------------------
fractions of Warrant Shares upon the exercise of the Warrant. If any fraction of
a Warrant Share would, except for the provisions of this Section, be issuable
upon the exercise of the Warrant (or specified portions thereof), the fractional
share shall be disregarded and the number of shares to be issued upon exercise
shall be the number of whole shares only.

     Section 10. Benefits. Nothing in this Warrant shall be construed to give
                 --------
any person, firm or corporation (other than the Company and the Warrantholder)
any legal or equitable right, remedy or claim, it being agreed that this Warrant
shall be for the sole and exclusive benefit of the Company and the
Warrantholder.

     Section 11. Notices to Warrantholder. Upon the happening of any event
                 ------------------------
requiring an adjustment of the Warrant Price, the Company shall promptly give
written notice thereof to the Warrantholder at the address appearing in the
records of the Company, stating the adjusted Warrant Price and the adjusted
number of Warrant Shares resulting from such event and setting forth in
reasonable detail the method of calculation and the facts upon which such
calculation is based. In the event of a dispute with respect to any such
calculation, the certificate of the Company's independent certified public
accountants shall be conclusive evidence of the correctness of any computation
made, absent manifest error. Failure to give such notice to the Warrantholder or
any defect therein shall not affect the legality or validity of the subject
adjustment.

     Section 12. Identity of Transfer Agent. The Transfer Agent for the Common
                 --------------------------
Stock is Computershare Investor Services. Upon the appointment of any subsequent
transfer agent for the Common Stock or other shares of the Company's capital
stock issuable upon the exercise of the rights of purchase represented by the
Warrant, the Company will mail to the Warrantholder a statement setting forth
the name and address of such transfer agent.

                                       5
<PAGE>

     Section 13. Notices. Any notice pursuant hereto to be given or made by the
                 -------
Warrantholder to or on the Company shall be sufficiently given or made if sent
by certified mail, return receipt requested, postage prepaid, addressed as
follows:

          Sheffield Pharmaceuticals, Inc.
          425 South Woodsmill Road
          Suite 270
          St. Louis, MO 63017-3441
          Attn: President
          Fax:  314-579-9799

or such other address as the Company may specify in writing by notice to the
Warrantholder complying as to delivery with the terms of this Section 13.

     Any notice pursuant hereto to be given or made by the Company to or on the
Warrantholder shall be sufficiently given or made if personally delivered or if
sent by an internationally recognized courier services by overnight or two-day
service, to the address set forth on the books of the Company or, as to each of
the Company and the Warrantholder, at such other address as shall be designated
by such party by written notice to the other party complying as to delivery with
the terms of this Section 13. All such notices, requests, demands, directions
and other communications shall, when sent by courier be effective two (2) days
after delivery to such courier as provided and addressed as aforesaid.

     Section 14. Registration Rights. The initial holder of this Warrant is
                 -------------------
entitled to the benefit of certain registration rights in respect of the Warrant
Shares as provided in the Registration Rights Agreement dated as of as of
December 29, 2000.

     Section 15. Successors. All the covenants and provisions hereof by or for
                 -----------
the benefit of the Warrantholder shall bind and inure to the benefit of its
respective successors and assigns hereunder.

     Section 16. Governing Law. This Warrant shall be deemed to be a contract
                 -------------
made under the laws of the State of New York, without giving effect to its
conflict of law principles, and for all purposes shall be construed in
accordance with the laws of said State.

     IN WITNESS WHEREOF, the parties hereto have caused this Warrant to be duly
executed, as of the day and year first above written.

                                   SHEFFIELD PHARMACEUTICALS, INC.

                                   By:  /s/ Loren G. Peterson
                                        -------------------------------------
                                        President and Chief Executive Officer

                                       6
<PAGE>

                        Sheffield Pharmaceuticals, Inc.
                             WARRANT EXERCISE FORM

To: Sheffield Pharmaceuticals, Inc.

     This undersigned hereby irrevocably elects to exercise the right of
purchase represented by the within Warrant ("Warrant") for, and to purchase
thereunder by the payment of the Warrant Price and surrender of the Warrant,
_______________ shares of Common Stock ("Warrant Shares") provided for therein,
and requests that certificates for the Warrant Shares be issued as follows:

                     ____________________________________
                     Name
                     ____________________________________
                     Address
                     ____________________________________
                     ____________________________________
                     Federal Tax ID or Social Security No.

     and delivered by   certified mail to the above address, or
                        electronically (provide DWAC Instructions:_________), or
                        other (specify: ______________________________________).

and, if the number of Warrant Shares shall not be all the Warrant Shares
purchasable upon exercise of the Warrant, that a new Warrant for the balance of
the Warrant Shares purchasable upon exercise of this Warrant be registered in
the name of the undersigned Warrantholder or the undersigned's Assignee as below
indicated and delivered to the address stated below.

     By exercising the rights represented by this Warrant, the undersigned
hereby certifies that, as of the date of exercise of this Warrant, the
representations and warranties contained in Section 5 of the Purchase Agreement
are true and correct in all material respects with respect to the undersigned.

Dated:___________________, ____

Note: The signature must correspond with       Signature:_______________________
the name of the registered holder as written
on the first page of the Warrant in every      ______________________________
particular, without alteration or enlargement  Name (please print)
or any change whatever, unless the Warrant
has been assigned.                             ______________________________
                                               ______________________________
                                               Address
                                               ______________________________
                                               Federal Identification or
                                               Social Security No.

                                               Assignee:
                                               ______________________________
                                               ______________________________
                                               ______________________________
                                               ______________________________

                                       7
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-4.6
<SEQUENCE>5
<FILENAME>0005.txt
<DESCRIPTION>WARRANT DATED 9/17/1998
<TEXT>

<PAGE>

                                                                     EXHIBIT 4.6


     THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
     AS AMENDED (THE "SECURITIES ACT"), AND THEY MAY NOT BE OFFERED, SOLD,
     PLEDGED, HYPOTHECATED, ASSIGNED OR TRANSFERRED EXCEPT (i) PURSUANT TO A
     REGISTRATION STATEMENT UNDER THE SECURITIES ACT WHICH HAS BECOME EFFECTIVE
     AND IS CURRENT WITH RESPECT TO THESE SECURITIES, OR (ii) PURSUANT TO A
     SPECIFIC EXEMPTION FORM REGISTRATION UNDER THE SECURITIES ACT BUT ONLY UPON
     THE HOLDER HEREOF FIRST HAVING OBTAINED THE WRITTEN OPINION OF COUNSEL TO
     THE CORPORATION, OR OTHER COUNSEL REASONABLY ACCEPTABLE TO THE CORPORATION,
     THAT THE PROPOSED DISPOSITION IS CONSISTENT WITH ALL APPLICABLE PROVISIONS
     OF THE SECURITIES ACT AS WELL AS ANY APPLICABLE "BLUE SKY" OR OTHER STATE
     SECURITIES LAW.


                         COMMON STOCK PURCHASE WARRANT

              For the Purchase of 100,000 Shares of Common Stock

                                      of

                        SHEFFIELD PHARMACEUTICALS, INC.

                           (A Delaware Corporation)

1.   Warrant.
     -------

        THIS CERTIFIES THAT, for value received, Continental Capital & Equity
Corporation (the "Holder"), as registered owner of this Warrant, is entitled
during the period commencing March 17, 1999 and ending at 5:00 pm., New York
City time, on the earlier to occur of (i) the third anniversary of the date
hereof and (ii) the first anniversary of the date that the shares of Common
Stock issuable upon exercise of this Warrant (the "Warrant Shares") are first
registered for resale pursuant to an effective registration statement (such
earlier date being the " Expiration Date"), but not thereafter, to subscribe
for, purchase and receive, in whole or in part, up to One Hundred Thousand
(100,000) shares of Common Stock, par value $.01 per share (the "Common Stock"),
of Sheffield Pharmaceuticals, Inc., a Delaware corporation (the "Company") in
accordance with the terms hereof.


        The exercise price (the "Exercise Price") per share of Common Stock
shall be $2.25 per share.

<PAGE>

2.   Exercise.
     --------

          In order to exercise this Warrant, the exercise form attached hereto
must be duly executed, completed and delivered to the Company, together with
this Warrant and payment of the applicable Exercise Price for the shares of the
common Stock being purchased. If the rights represented hereby shall not have
been exercised before 5:oo p.m., New York City time, on the Termination Date,
this Warrant shall become and be void and without  further force or effect and
all rights represented hereby shall cease and expire.

3.   Transfer.
     --------

          3.1  General Restrictions. The registered Holder of this Warrant, by
               --------------------
his acceptance hereof, agrees that it shall not sell, transfer or assign or
hypothecate this Warrant without the prior written consent of the Company. The
shares of Common Stock issuable upon exercise of this Warrant shall be subject
to the transfer restrictions set forth below.

          3.2  Restrictions Imposed by the Securities Act. The Holder by
               ------------------------------------------
accepting this Warrant confirms that the Warrants were acquired by the Holder
solely for investment and with no present intention to distribute any Warrants
or securities issuable upon the exercise hereof only in compliance with
applicable Federal and state securities laws. The shares of Common Stock
purchased upon exercise of this Warrant shall not be transferred unless and
until (i) the company has received the opinion of counsel for the Holder that
such shares may be sold pursuant to an exemption from registration under the
Securities Act of 1933, as amended (the "Securities Act"), the availability of
which is established to the reasonable satisfaction of the Company, or (ii) a
registration statement relating to such shares has been filed by the Company and
declared effective by the Securities and Exchange Commission ("the Commission")

          Each certificate for securities purchased upon exercise of this
Warrant shall bear a legend substantially as follows unless such securities
have been registered under the Securities Act:

          "The securities represented by this certificate have not been
          registered under the Securities Act of 1933 ("the Act"). The
          securities may not be offered for sale, sold or otherwise transferred
          except (i) pursuant to an effective registration statement under the
          Act or (ii) pursuant to an exemption from registration under the Act
          in respect of which the Company has received an opinion of counsel
          satisfactory to the Company to such effect. Copies of the agreement
          covering both

                                      -2-



<PAGE>

          the purchase of the securities and restricting their transfer may be
          obtained at no cost by written request made by the holder of record of
          this certificate to the Secretary of the Company at the principal
          executive offices of the Company."

4.   New Warrants to be Issued.
     -------------------------

          4.1  Partial Exercise or Transfer. Subject to the restrictions in
               ----------------------------
Section 3 hereof, this Warrant may be exercised in whole or in part. In the
event of the exercise hereof in part, upon surrender of this Warrant for
cancellation, together with the duly executed exercise form, the Company shall
cause to be delivered to the Holder without charge a new warrant or new warrants
of like tenor with this Warrant in the name of the Holder evidencing the right
to purchase, in the aggregate, the remaining number of underlying shares of
Common Stock purchasable hereunder after giving effect to any such partial
exercise.

          4.2  Lost Certificate. Upon receipt by the Company of evidence
               ----------------
satisfactory to it of the loss, theft, destruction or mutilation of this Warrant
and of an indemnification in favor of the Company, reasonably satisfactory to
it, the Company shall execute and deliver a new warrant of like tenor and date.
Any such new warrants executed and delivered as a result of such loss, theft,
mutilation or destruction shall constitute an additional contractual obligation
on the part of the Company.

5.   Reservation. The Company shall at all times reserve and keep available out
     -----------
of its authorized shares of Common Stock, solely for the purpose of issuance
upon exercise of the Warrant, such number of authorized but unissued shares of
Common Stock, free from preemptive rights, as shall be issuable upon the
exercise thereof. The Company covenants and agrees that, upon exercise of the
Warrant and payment of the applicable Exercise Price therefor, all shares of
Common Stock shall be duly and validly issued, fully paid and nonassessable and
not subject to preemptive rights of any stockholder. The Company further
covenants and agrees that upon exercise of this Warrant and payment of the
applicable Exercise Price therefor, all shares of Common Stock shall be duly and
validly issued, fully paid and nonassessable and not subject to preemptive
rights of any stockholder. If the Common Stock is then listed on a national
securities exchange, all shares of Common Stock issued upon exercise of this
Warrant shall also be duly listed thereon.

6.   Adjustments. The Exercise Price and the number of shares purchasable
     -----------
hereunder are subject to adjustment from to time as follows.

          6.1  Merger, Sale of Assets, Etc. If at any time while this Warrant,
               ---------------------------
or any portion thereof, is outstanding and unexpired

                                      -3-


<PAGE>

there shall be (i) a reorganization (other than a combination, reclassification,
exchange or subdivision of shares otherwise provided for herein), (ii) a merger
or consolidation of the Company with or into another corporation in which the
Company is the surviving entity but the shares of the Company's capital stock
outstanding immediately prior to the merger are converted by virtue of the
merger into other property, whether in the form of securities, cash, or
otherwise, or (iii) a sale or transfer of the Company's properties and assets
as, or substantially as, an entirety to any other person, then as a part of such
reorganization, merger, consolidation, sale or transfer lawful provision shall
be made so that the holder of this Warrant shall thereafter be entitled to
receive upon exercise of this Warrant, during the period specified herein and
payment of the Exercise Price then in effect, the number of shares of stock or
other securities or property of the successor corporation resulting from such
reorganization, merger, consolidation, sale or transfer that a holder of the
shares deliverable upon exercise of this Warrant would have been entitled to
receive in such reorganization, consolidation, merger, sale or transfer if this
Warrant had been exercised immediately before such reorganization, merger,
consolidation, sale or transfer, all subject to further adjustment as provided
in this Section 6. The foregoing provisions of this Section 6 shall similarly
apply to successive reorganization, consolidations, mergers, sales and transfers
and to the stock or securities of any other corporation that are at the time
receivable upon the exercise of this Warrant. If the per-share consideration
payable to the holder hereof for shares in connection with any such transaction
is in a form other than cash or marketable securities, then the value of such
consideration shall be determined in good faith by the Company's Board of
Directors. In all events, appropriate adjustment (as determined in good faith
by the Company's Board of Directors) shall be made in the application of the
provisions of this Warrant with respect to the rights and interests of the
Holder after the transaction, to the end that the provisions of this Warrant
shall be applicable after that event, as near as reasonably may be, in relation
to any shares or other property deliverable after that event upon exercise of
this Warrant.

          6.2  Reclassification, Etc. If the Company, at any time while this
               ----------------------
Warrant, or any portion thereof, remains outstanding and unexpired by
reclassification of securities or otherwise, shall change any of the securities
as to which purchase rights under this Warrant exist into the same or a
different number of securities of any other class or classes, this Warrant shall
thereafter represent the right to acquire such number and kind of securities as
would have been issuable as the result of such change with respect to the
securities that were subject to the purchase rights under this Warrant
immediately prior to such reclassification or other change and the Exercise
Price therefor shall be appropriately adjusted, all subject to further
adjustment as provided in this Section 6.

                                      -4-

<PAGE>

        6.3   Split Subdivision or Combination of Shares. If the Company at any
              ------------------------------------------
time while this Warrant, or any portion thereof, remains outstanding and
unexpired shall split, subdivide or combine the securities as to which purchase
rights under this Warrant exist, into a different number of securities of the
same class, the Exercise Price for such securities shall be proportionately
decreased in the case of a split or subdivision or proportionately increased in
the case of a combination.

        6.4   Certificate as to Adjustments. Upon the occurrence of each
              -----------------------------
adjustment or readjustment pursuant to this Section 6, the Company at its
expense shall promptly compute such adjustment or readjustment in accordance
with the terms hereof and furnish to each Holder of this Warrant a certificate
setting forth such adjustment or readjustment and showing in detail the facts
upon which such adjustment or readjustment is based.

7.   Registration Rights.
     -------------------

        7.1   "Piggy Back" Registration Rights. If the Company shall at any time
              --------------------------------
or from time to time after the date hereof determine to register any of its
securities with the Commission (other than by means of a registration statement
on a form (e.g., Form F-4, S-4 or S-8 or successor forms) which, by its terms,
           ----
could not be used for the sale and distribution of the Company's common stock),
Sheffield shall:

        (a)   give written notice thereof to the Holder;

        (b)   use its best efforts to effect the registration and any
     qualifications of Warrant Shares.


        7.2   Expenses. The Company shall bear all expenses in connection with
              --------
any registration, qualification and compliance under this Section 7, including,
without limitations, all registration and filing fees, printing expenses and
fees and disbursements of Company's counsel, provided, that the Company shall
not, in any event, be required to bear the cost of any commissions and
compensation paid, and concessions and discounts allowed to, underwriters,
dealers or others performing similar functions in connection with the sale and
distribution of the Warrant Shares sold by the Holder.

       7.3    Information Provided by the Holder. Holder shall furnish in
              ----------------------------------
writing to the Company such information regarding Holder and the distribution
proposed by Holder as the Company may request in writing and as shall be
reasonably required in connection with any registration referred to in this
Section 7.

                                      -5-

<PAGE>

          7.4  Prospectuses, Etc.  The Company will, at its expense, furnish to
               -----------------
Holder such number of prospectuses, offering circulars and other documents
incident to such registration and related qualification or compliance as Holder
from time to time may reasonably request.

          7.5  Underwritten Offering; Exceptions.  (a) In the event any
               ---------------------------------
registration under this Section 7 is underwritten and the managing underwritter
determines that the inclusion of any Warrant Shares would materially interfere
with the successful completion thereof in the reasonable judgment of such
managing underwriter, then the number of Warrant Shares to be included may be
reduced by such amount as such managing underwriting shall determine.

          (b)  The Company shall have no obligation to register the Warrant
Shares under any registration statement that would be prohibited due to any
contractual rights granted by the Company prior to the date of this Warrant.

8.   Certain Notice Requirements.
     ---------------------------

          8.1  Holder's Right to Receive Notice.  Nothing herein shall be
               --------------------------------
construed as conferring upon the Holder the right to vote or consent or to
receive notice as a stockholder for the election of directors or any other
matter, or as having any rights whatsoever as a stockholder of the Company prior
to the exercise hereof (including the right to receive dividends). If, however,
at any time prior to the expiration of the Warrant and its exercise, any of the
events described in Section 6 shall occur, then, in one or more of said events,
the Company shall give written notice of such event at least ten (10) days prior
to the date fixed as a record date or the date of closing the transfer books for
the determination of the stockholders entitled to such dividend, distribution,
conversion or exchange of securities or subscription rights, or entitled to vote
on such proposed dissolution,liquidation, winding up, merger, consolidation,
reorganization or sale. Such notice shall specify such record date or the date
of the closing of the transfer books, as the case may be.

          8.2  Transmittal of Notices.  Any notice or other communication or
               ----------------------
delivery required or permitted hereunder shall be in writing and shall be
delivered personally or sent by certified mail, postage prepaid, or by a
nationally recognized overnight courier service, and shall be deemed given when
so delivered personally or by overnight courier service, or, if mailed, three
(3) days after the date of deposit in the United States mails, as follows:

                                      -6-

<PAGE>

     (i)  if to the Company, to:

          Sheffield Pharmaceuticals, Inc.
          425 South Woodsmill Road, Suite 270
          St. Louis, Missouri 63017-3441
          Attention:  Chief Financial Officer

          With a copy to:

          Olshan Grundman Frome & Rosenzweig LLP
          505 Park Avenue
          New York, New York 10022
          Attention:  Daniel J. Gallagher, Esq.

     (ii) if to the Holder, to the address of such Holder as shown on the books
of the Company.

Either of the Holder or the Company may change the foregoing address by notice
given pursuant to this Section 8.2.

9.  Miscellaneous.
    -------------

          9.1  Purchase for Investment. By his acceptance of this Warrant, the
               -----------------------
Holder represents and warrants that the Holder has acquired this Warrant for the
Holder's own account for investment and not with the view to the distribution
thereof, except in accordance with applicable federal and state securities laws.
The Holder represents that he is an "accredited investor" as such term is
defined under Rule 501 of Regulation D promulgated under the Securities Act. The
Holder confirms that she has been advised that the Warrants have not been, and
the shares of Common Stock issuable upon exercise of this Warrant Shares will
not be, registered under the Securities Act and that he has consulted with and
been advised by counsel as to the restrictions on resale to which this Warrant
and such Shares will be subject.

          9.2  Amendments. All modifications or amendments to this Warrant shall
               ----------
require the written consent of each party.

          9.3  Headings.   The headings contained herein are for the sole
               --------
purpose of convenience of reference, and shall not in any way limit or affect
the meaning or interpretation of any of the terms or provisions of this Warrant.

          9.4  Issuance Under Agreement.  The Holder and the Company acknowledge
               ------------------------
that this Warrant is issued to Holder in satisfaction of the Company's
obligations to Continental Capital & Equity Corporation under the agreement
dated September 17, 1998 between the Company and Continental Capital & Equity
Corporation.

          9.5  Entire Agreement.   This Warrant constitutes the entire agreement
               ----------------
of the parties hereto with respect to the subject

                                      -7-

<PAGE>

matter hereof, and supersede all prior agreements and understandings of the
parties, oral and written, with respect to the subject matter hereof.

          9.6  Binding Effect; Board Approval.   This warrant shall inure solely
               ------------------------------
to the benefit of and shall be binding upon, the Holder and the Company and
their permitted assignees, respective successors, legal representatives and
assigns, and no other person shall have or be construed to have any legal or
equitable right, remedy or claim under or in respect of or by virtue of this
Warrant or any provisions herein contained.  This Warrant shall become effective
upon its approval by the Board of Directors of the Company.

          9.7  Governing Law.   This Warrant shall be governed by and construed
               -------------
and enforced in accordance with the laws of the State of New York, without
giving effect to conflict of laws.

          9.8  Waiver, Etc.  The failure of the Company or the Holder to at any
               -----------
time enforce any of the provisions of this Warrant shall not be deemed or
construed to be a waiver of any such provision, nor to in any way affect the
validity of this Warrant or any provison hereof or the right of the Company or
any Holder to thereafter enforce each and every provision of this Warrant. No
waiver of any breach, noncompliance or nonfulfillment of any of the provisions
of this Warrant shall be effective unless set forth in a written instrument
executed by the party or parties against whom or which enforcement of such
waiver is sought; and no waiver of any such breach, noncompliance or
nonfulfillment shall be construed or deemed to be a waiver of any other or
subsequent breach, noncompliance or nonfulfillment.

          IN WITNESS WHEREOF, the Company has caused this Warrant to be signed
by its duly authorized officer as of the 17th day of September, 1998.


                                           SHEFFIELD PHARMACEUTICALS, INC.

                                           By: /s/ Loren G. Peterson
                                               --------------------------
                                                   Loren G. Peterson
                                                   President and CEO

AGREED AND ACCEPTED:

CONTINENTAL CAPITAL & EQUITY CORPORATION

By: /s/ Jim Schnorf
    -----------------------
    Name:  JIM SCHNORF
    Title: CFO

                                      -8-

<PAGE>

Form to be used to exercise Warrant:

Sheffield Pharmaceuticals, Inc.
425 South Woodsmill Road, Suite 270
St. Louis, Missouri 63017-3441
Attention: Chief Financial Officer

Date: ______________, 19___

          The Undersigned hereby elects irrevocably to exercise the within
Warrant and to purchase __________ shares of Common Stock of Sheffield
Pharmaceuticals, Inc. and hereby makes payment of $____________ (at the rate of
$___________ per share) in payment of the Exercise Price pursuant thereto.
Please issue the shares as to which this Warrant is exercised in accordance with
the instructions given below.

                                             ___________________________________
                                             Signature


                                             ___________________________________
                                             Signature Guaranteed


                  INSTRUCTIONS FOR REGISTRATION OF SECURITIES

Name________________________________________________________________________
                           (Print in Block Letters)

Address_____________________________________________________________________

          NOTICE:  The signature to this form must correspond with the name as
written upon the face of the within Warrant in every particular without
alteration or enlargement or any change whatsoever, and must be guaranteed by a
bank, other than a savings bank, or by a trust company or by a firm having
membership on a registered national securities exchange.

                                      -9-

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-4.7
<SEQUENCE>6
<FILENAME>0006.txt
<DESCRIPTION>WARRANT DATED 9/30/1997
<TEXT>

<PAGE>
                                                                     Exhibit 4.7


THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE COMMON STOCK ISSUABLE UPON
EXERCISE OF SUCH WARRANTS HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR UNDER ANY STATE SECURITIES LAWS, AND ARE TRANSFERABLE ONLY
                         IN COMPLIANCE WITH SUCH LAWS

                             WARRANT CERTIFICATE

                   20,000 Warrants to Purchase Common Stock

                        Sheffield Pharmaceuticals, Inc.

            (Incorporated under the laws of the State of Delaware)

          This is to certify that, for value received, The P. L. Thomas Group,
Inc., or registered assigns, is the owner of 20,000 Warrants, each of which
entitles the registered owner to purchase from Sheffield Pharmaceuticals, Inc.,
a Delaware corporation (the "Corporation"), at any time after the date
specified below, one share of fully paid and non-assessable common stock
(the "Common Stock") of the Corporation, at a purchase price per share of $3.00
(the "Applicable Exercise Price"), subject to adjustment as set forth herein.
This Warrant Certificate covers an aggregate of 20,000 shares of Common Stock,
subject to adjustment as set forth herein. The shares of Common Stock issuable
upon the exercise of the Warrants are sometimes called the "Warrant Share."

          Subject to the provisions hereof, the Warrants represented by this
Warrant Certificate may be exercised by the registered holder in whole or in
part by surrender of this Warrant Certificate at the principal executive offices
of the Corporation with the form of election to exercise attached hereto duly
executed and with payment in full to the Corporation of the Applicable Exercise
Price for each of the Warrant Shares so purchased. Payment of such Applicable
Exercise Price shall be made in cash or by certified official bank check.
Thereupon, the Warrants shall be deemed to have been exercised and the person
exercising the same to have become a holder of record of the Warrant Shares so
purchased (or of the other securities or property to which such person is
entitled upon such exercise) for all purposes; and certificates for Warrant
Shares so purchased shall be delivered to the purchaser within a reasonable time
(not exceeding 10 days) after the Warrants shall have been exercised as set
forth above.

          The right of the registered holder to exercise the Warrants
represented by this Warrant Certificate shall be exercisable in full on or after
October 15, 1997, and until 5:00 p.m., Eastern Standard Time, October 15, 2002
(the "Expiration Time"). Any Warrants not exercised on or before the Expiration
Time shall expire and be of no further force or effect. If only a portion of the
Warrants shall be exercised, the holder of this Warrant Certificate shall be
entitled to

<PAGE>

receive a similar warrant certificate of like tenor and date covering the number
of Warrants which shall not have been exercised.

          This Warrant Certificate is exchangeable upon surrender by its
registered holder at the principal executive offices of the Corporation, for new
warrant certificates of like tenor and date representing in the aggregate the
right to purchase the number of Warrant Shares which may be purchased hereunder.

          This Warrant Certificate and the rights evidenced hereby may not be
sold, conveyed, pledged or otherwise transferred by the holder hereof without
the prior written consent of the Corporation.

          The Corporation covenants and agrees that all shares of Common Stock
which may be issued upon the exercise of the rights represented by this Warrant
Certificate will, upon issuance, be validly issued, fully paid and non-
assessable and free from all taxes, liens and charges with respect to the issue
thereof (other than taxes in respect of any transfer occurring contemporaneously
with such issue). The Corporation further covenants and agrees that it will at
all times have authorized and reserved a sufficient number of shares of Common
Stock to provide for the exercise of the rights represented by this Warrant
Certificate.

                                   ARTICLE I

          Section 1.1  Adjustment of Applicable Exercise Price.
                       ---------------------------------------

          (a)  The Applicable Exercise Price shall be subject to adjustment from
time to time as follows:

          (i)  If the number of shares of Common Stock outstanding at any time
     after the date hereof is increased by a stock dividend payable in shares of
     Common Stock or by a subdivision or split-up of shares of Common Stock,
     then, following the record date fixed for the determination of holders of
     Common Stock entitled to receive such stock dividend, subdivision or split-
     up, the number of Warrants and the Applicable Exercise Price shall be
     appropriately adjusted so that the number of shares of Common Stock
     issuable on exercise of each Warrant shall be increased and the Applicable
     Exercise Price decreased in proportion to such increase of outstanding
     shares.

          (ii) If the number of shares of Common Stock outstanding at any time
     after the date hereof is decreased

                                      -2-

<PAGE>

     by a combination of the outstanding shares of Common Stock, then, following
     the record date for such combination, the number of Warrant Shares issuable
     upon exercise of Warrants and the Applicable Exercise Price shall be
     appropriately adjusted so that the number of shares of Common Stock
     issuable on exercise of each Warrant shall be decreased and the Applicable
     Exercise Price shall be increased in proportion to such decrease in
     outstanding shares.

          (iii) If any consolidation or merger of the Corporation with or into
     another entity, or the sale of all or substantially all its assets to
     another entity shall be effected, or in case of any capital reorganization
     or reclassification of the capital stock of the Corporation, then lawful
     and adequate provision shall be made whereby each holder of Warrants shall
     thereafter have the right to receive upon the basis and upon the terms and
     conditions specified herein and in lieu of the shares of Common Stock of
     the Corporation immediately theretofore receivable upon the conversion of
     such Warrants, such shares of stock, securities, interests or assets as may
     be issued or payable with respect to or in exchange for a number of
     outstanding shares of Common Stock equal to the number of shares of Common
     Stock immediately theretofore so receivable by such holder had such
     consolidation, merger, sale, reorganization or reclassification not taken
     place, and in any such case appropriate provision shall be made with
     respect to the rights and interests of the holder to the end that the
     provisions hereof (including without limitation provisions for adjustment
     of the Applicable Exercise Price) shall thereafter be applicable, as nearly
     as may be in relation to any shares of stock, securities or assets
     thereafter deliverable upon the exercise of such conversion rights.

          (iv)  All calculations under this paragraph (a) shall be made to the
     nearest cent or to the nearest one hundredth (1/100) of a share, or one
     cent ($.01), as the case may be.

          (b)    In any case in which the provisions of this Article I shall
require that an adjustment shall become effective immediately after a record
date for an event, the Corporation may defer until the occurrence of such event
(x) issuing to the holder of any Warrant exercised after such record date and
before the occurrence of such event, the additional shares of Common Stock
issuable upon such exercise by reason of the adjustment required by such event
over and above the shares of Common Stock issuable upon such exercise before
giving effect to such adjustment and (y) paying to such holder any amount in
cash in lieu of a fractional share of Common Stock pursuant to

                                      -3-

<PAGE>

Section 1.2; provided, however, that the Corporation shall deliver to such
             --------  -------
holder a due bill or other appropriate instrument evidencing such holder's right
to receive such additional shares, and such cash, upon the occurrence of the
event requiring such adjustment.

          (c)  Except in the case of shares registered pursuant to Section 2.1,
any and all Warrant Shares issued pursuant to the exercise of the Warrants shall
bear a legend reflecting that such Warrant Shares have not been registered under
the Securities Act of 1933, as amended, or under any state securities law, and
cannot be transferred by sale, pledge or otherwise, except in compliance with
such securities laws and all regulations thereunder. As a condition to the
issuance of Warrant Shares, the holder hereof requesting to so exercise the
Warrants shall execute appropriate investment letters and shall deliver such
other documents (including legal opinions) as may be reasonably required by the
Corporation and its counsel to assure that Warrant Shares are issued only in
compliance with applicable securities law.

          (d)  In the event the Corporation proposes to take any action of the
types described in this Section 1.1, the Corporation shall give notice to each
holder of Warrants, at the address of such holder shown on the books of the
Corporation, which notice shall specify the record date, if any, with respect to
any such action and the date on which such action is to take place. The notice
shall also set forth the facts with respect thereto reasonably necessary to
indicate the effect of the action (to the extent the effect may be known at the
date of such notice) on the Applicable Exercise Price and the number, kind or
class of shares or other securities or property which shall be deliverable or
purchasable upon the occurrence of such action or deliverable upon exercise of
the Warrants. In the case of any action which would require the fixing of a
record date, notice shall be given at least 10 days prior to the date so fixed,
and in case of all other action, such notice shall be given at least 15 days
prior to taking of such proposed action. Failure to give such notice, or any
defect therein, shall not affect the legality or validity of any such action,
and the holder of these Warrants shall have no right to prevent or delay any
such action by injunction or otherwise.

          (e)  In the event that at any time as a result of an adjustment made
pursuant to this Section 1.1, the holder of any Warrants thereafter surrendered
or exercised shall become entitled to receive any shares of the Corporation or
another corporation other than shares of Common Stock, the provisions of

                                      -4-

<PAGE>

this Section 1.1 and Section 1.2 with respect to the Common Stock shall apply on
like terms to any such other shares.

          Section 1.2.  No certificates for fractional shares of Common Stock
shall be issued upon the exercise of Warrants, but in lieu thereof the
Corporation shall pay, upon exercise in full of the Warrants represented by this
Warrant Certificate, out of funds legally available therefor, a cash adjustment
in respect of such fractional shares based upon the then effective Applicable
Exercise Price.

                                  ARTICLE II

          Section 2.1.  If the Corporation at any time after the date hereof,
proposes to register any of its shares of Common Stock under the Securities Act
pursuant to a registration statement (other than pursuant to a registration
statement on Form S-4 or S-8 or any successor or similar forms), it will
promptly give written notice to the registered holder hereof of its intention to
do so and, upon the written request of the holder given within 20 days after
receipt of any such notice (which request shall state the intended method of
disposition of such Warrant Shares by such holder), the Corporation will use its
best efforts to cause any or all of the Warrant Shares held by such holder, or
which may be acquired by such holder upon exercise of the Warrants, to be
registered under the Securities Act, all to the extent requisite to permit the
sale or other disposition (in accordance with the intended methods thereof, as
aforesaid) by such holder of such Warrant Shares; provided, however, that the
Corporation may at any time withdraw or cease proceeding with any such
registration if it shall at the same time withdraw or cease proceeding with the
registration of such other Common Stock originally proposed to be registered;
provided, further, that if the Corporation's underwriters recommend a reduction
in the number of shares to be registered, the number of Warrant Shares which the
Corporation is required to register hereunder on behalf of the holder shall be
reduced in the same ratio that recommended reduction bears to the total number
of shares (other than shares of Common Stock issuable by the Company) originally
proposed to be registered. The Corporation need not reduce the number of any
shares which it proposes to sell, in which case any reduction shall be allocated
proportionately among the balance of the shares to be registered (other than
shares of Common Stock issuable by the Company), including the Warrant Shares.
In addition, if at any time after the date hereof the Corporation proposes to
register shares of its date hereof the Corporation proposes to register shares
of its Common Stock for offering otherwise than in connection with an
underwritten public offering (including pursuant to

                                      -5-

<PAGE>

Rule 415(a)(iii) or (viii) of the Securities Act), the Corporation will use its
best efforts to cause any Warrant Shares not theretofore issued to be registered
for issuance upon exercise thereof.

     Section 2.2.   All expenses incurred by the Corporation in complying with
this Article II, including, without limitation, all registration and filing fees
(including all expenses incident to filing with the National Association of
Securities Dealers, Inc.), printing expenses, fees and disbursements of counsel
for the Corporation, the expense of any special audits incident to or required
by any such registration, and the expense (including counsel fees) of complying
with securities or Blue Sky laws shall be paid by the Corporation; provided in
no event shall the Corporation be liable for any fees payable to counsel or
accountants retained by any holder hereof or for underwriting fees, discounts or
selling commissions attributable to such Warrant Shares.

     Section 2.3.   In the event of any registration of Warrant Shares under the
Securities Act pursuant to this Article 2, the Corporation will indemnify and
hold harmless the holder against any losses, claims, damages or liabilities to
which such holder may become subject under the Securities Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained (on the effective date thereof) in any
registration statement under which such Warrant Shares were registered under the
Securities Act, any preliminary prospectus, prospectus subject to completion or
final prospectus contained therein, or any amendment or supplement thereto, or
arise out of or are based upon the omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein not misleading; and will reimburse such holder for reasonable
legal or any other expenses reasonably incurred by such holder in connection
with investigating or defending any such loss, claim, damage, liability or
action; provided, however, that the Corporation will not be liable in any such
case to the extent that any such loss, claim, damage or liability arises out of
or is based upon an untrue statement or omission or alleged omission made in
said registration statement, said preliminary prospectus, prospectus subject to
completion or final prospectus, or said amendment or supplement in reliance upon
and in conformity with written information furnished to the Corporation through
an instrument duly executed by such holder specifically for use in the
preparation thereof.

                                      -6-
<PAGE>

     Section 2.4.   In the event of any registration of any Warrant Shares
pursuant to this Article II, the holder will indemnify and hold harmless the
Corporation, its attorneys, accountants, underwriters and each other person, if
any, who controls the Corporation within the meaning of the Securities Act,
against any losses, claims, damages or liabilities, joint or several, to which
the Corporation or such other person may become subject under the Securities Act
or otherwise, insofar as such losses, claims, damages or liabilities (or actions
in respect thereof) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained (on the effective date
thereof) in any registration statement under which such Warrant Shares were
registered under the Securities Act, any preliminary prospectus, prospectus
subject to completion or final prospectus contained therein, or any amendment or
supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, in each case to the
extent and only to the extent that any such loss, claim, damage or liability
arises out of or is based upon an untrue statement or alleged untrue statement
or omission or alleged omission made in said registration statement, said
preliminary prospectus, prospectus subject to completion or said amendment or
supplement in reliance upon and in conformity with written information furnished
to the Corporation through an instrument duly executed by such holder
specifically for use in the preparation thereof, and such holder will reimburse
the Corporation and each such other person for any legal or any other expenses
reasonably incurred by the Corporation or such other person in connection with
investigating or defending any such loss, claim, damage, liability or action.

     Section 2.5.   In the event of any claim for which indemnity is sought
under Section 2.3 or 2.4, above, the party seeking indemnification shall give
prompt notice of its claim to the other party and shall permit the other party
to engage counsel and to defend against the same.

     Section 2.6.   The holder's right to request registration of Warrant Shares
under this Article II shall cease and terminate as to any particular Warrant
Shares when such Warrant Shares shall have been effectively registered under the
Securities Act or when such Warrant Shares shall have become eligible for sale
pursuant to Rule 415 of the Securities Act. The holder's right to request
registration of Warrant Shares under this Article II shall be transferable in
connection with any disposition of such shares to a permitted transferee of at
least 5,000 of such Warrant Shares upon the agreement of such transferee to be
bound by the terms hereof; provided, however, if

                                      -7-
<PAGE>

at any time The P. L. Thomas Group, Inc., shall hold less than 5,000 Warrant
Shares as a result of having transferred Warrant Shares together with
registration rights hereunder, its registration rights with respect to the
Warrant Shares it still holds shall terminate. For purposes of this Warrant
Certificate, shares of Common Stock shall cease to be Warrant Shares when such
shares have been sold pursuant to an effective registration statement under the
Securities Act or pursuant to an effective registration statement under the
Securities Act or pursuant to an exemption from registration thereunder or when
such Warrant Shares shall have become eligible for sale pursuant to Rule 415 of
the Securities Act.

                                  ARTICLE III

     Section 3.1. The issue of any stock or other certificate upon the exercise
of the Warrants shall be made without charge to the registered holder hereof for
any transfer or issuance tax in respect of the issue thereof. The Corporation
shall not, however, be required to pay any tax which may be payable in respect
of any transfer involved in the issue and delivery of any certificate in a name
other than that of the registered holder of this Warrant Certificate, and the
Corporation shall not required to issue or deliver any such certificate unless
and until the person or persons requesting the issue thereof shall have paid to
the Corporation the amount of such tax or shall have established to the
satisfaction of the Corporation that such tax has been paid.

     Section 3.2. If this Warrant Certificate shall be lost, stolen, mutilated
or destroyed, the Corporation shall, on such terms as to indemnify or otherwise
protect the Corporation as the Corporation may in its discretion impose, issue a
new warrant certificate of like denomination, tenor and date as the Warrant
Certificate so lost, stolen, mutilated or destroyed. Any such new warrant
certificate shall constitute an original contractual obligation of the
Corporation, whether or not the allegedly lost, stolen, mutilated or destroyed
Warrant Certificate shall be at any time enforceable by anyone.

     Section 3.3.   The Corporation may deem and treat the registered holder of
this Warrant Certificate as the absolute owner of this Warrant Certificate for
all purposes and shall not be affected by any notice to the contrary. This
Warrant Certificate and all rights hereunder are transferable on the books of
the Corporation, upon surrender of this Warrant Certificate, with the form of
assignment attached hereto duly executed by the registered holder hereof or by
his attorney duly authorized in writing, to the Corporation at its principal

                                      -8-
<PAGE>

executive offices and thereupon there shall be issued in the name of the
transferee or transferees, in exchange for this Warrant Certificate, a new
warrant certificate or warrant certificates of like tenor and date, representing
in the aggregate the right to subscribe for and purchase the number of shares
which may be subscribed for and purchased hereunder; provided that the
Corporation shall not be obligated to record or give effect to any transfer of
Warrants, unless the holder shall furnish evidence reasonably satisfactory to
the Corporation that the proposed transfer does not violate any applicable
securities law or regulation. References in this Certificate to a "holder" shall
include any transferee or transferees to whom the Warrants may be transferred
pursuant to the foregoing. Notwithstanding the foregoing, this Warrant
Certificate and the rights represented hereby may not be sold, conveyed, pledged
or otherwise transferred without the prior written consent of the Corporation.

          Section 3.4.  Except as otherwise provided herein, this Warrant
Certificate shall not entitle the holder to any rights of a stockholder of the
Corporation either at law or in equity, including, without limitation, the right
to vote, to receive dividends and other distributions, to exercise any
preemptive rights or to receive any notice of meetings of stockholders or of any
other proceedings of the Corporation.

          Section 3.5.  Upon the exercise or permitted transfer of any Warrants
hereunder, if the holder has Warrants with different Applicable Exercise Prices,
he shall designate the Applicable Exercise Price with respect to the Warrants
exercised or transferred. Such designation shall be recorded by the Corporation
in its books and records and shall be specifically identified with such
Warrants.

          Section 3.6.  This Warrant Certificate shall, in all events, remain
outstanding and fully exercisable until it is exercised in its entirety or
terminates in accordance with the terms hereof.

          Section 3.7. In the event that one or more of the provisions of this
Warrant Certificates shall for any reason be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provison of this Warrant Certificate, but this
Warrant Certificate shall be construed as if such invalid, illegal or
unenforceable provision had never been contained herein.

          Section 3.8.  This Warrant Certificate shall be governed by and
construed in accordance with the laws of the

                                      -9-
<PAGE>

State of New York applicable to agreements made and to be entirely performed
within such State.

          Dated: As of 4/30, 1997.
                       ----

                                            Sheffield Pharmaceuticals, Inc.


                                            By /s/ Loren G. Peterson
                                               ----------------------------
                                               Chief Financial Officer

                                     -10-
<PAGE>

                               FORM OF EXERCISE
                               ----------------
               (to be executed by the registered holder hereof)

          The undersigned hereby exercises the right to purchase ___________
shares of common stock ("Common Stock") of Sheffield Pharmaceuticals, Inc.,
evidenced by the within Warrant Certificate for an Applicable Exercise Price of
$___________ per share and herewith makes payment of the purchase price in full
of $____________.  Kindly issue certificates for shares of Common Stock (and for
the unexercised balance of the Warrants evidenced by the within Warrant
Certificate, if any) in accordance with the instructions given below.

Dated: ________________, 19_____.

                                                 _______________________________

Instructions for registration of stock

______________________________________
         Name (Please Print)

Social Security or other identifying Number: _____________________

Address: _______________________________________
                City/State and Zip Code

          Instructions for registration of certificate representing
                 the unexercised balance of Warrants (if any)

______________________________________
         Name (Please Print)

Social Security or other identifying Number: _____________________

Address: _______________________________________
                City, State and Zip Code

                                     -11-

<PAGE>

                        TRANSFER OF WARRANT CERTIFICATE
                        -------------------------------

          For value received ___________________________________________________
hereby sells, assigns and transfers unto _______________________________________
the rights to purchase ____________________ shares of common stock of Sheffield
Pharmaceuticals, Inc. (the "Corporation"), at an Applicable Exercise Price of
$_________ per share, which rights are represented by the within Warrant
Certificate, and does hereby irrevocably constitute and appoint ________________
attorney to transfer said rights on the books of the within named Corporation,
with full power of substitution in the premises.  The undersigned acknowledges
that such sale, assignment and transfer is subject to the written approval of
the Corporation in accordance with the terms of the Warrant Certificate.


                                             ___________________________________

DATED:

In the Presence of ____________________________


Social Security and other Identifying
Number of Assignee: _________________


Address of Assignee:


_____________________________________
     City, State and Zip Code



</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-23.2
<SEQUENCE>7
<FILENAME>0007.txt
<DESCRIPTION>CONSENT OF ERNST & YOUNG LLP
<TEXT>

<PAGE>

                                                                    Exhibit 23.2


                        Consent of Independent Auditors
                        -------------------------------


We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-3, No. 333-_______) and related Prospectus of
Sheffield Pharmaceuticals, Inc. for the registration of 913,258 shares of its
common stock and to the incorporation by reference therein of our report dated
March 1, 2000, with respect to the consolidated financial statements of
Sheffield Pharmaceuticals, Inc. and subsidiaries as of and for the year ended
December 31, 1999 included in its annual Report (Form 10-K) for the year ended
December 31, 1999, filed with the Securities and Exchange Commission.

                                                   ERNST & YOUNG LLP

St. Louis, Missouri
January 24, 2001

</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
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