8-K

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549



                                    FORM 8-K



              Current Report Pursuant to Section 13 or 15(d) of the
                         Securities Exchange Act of 1934


         Date of Report (Date of earliest event reported): MAY 22, 2001



                        INHALE THERAPEUTIC SYSTEMS, INC.
             (Exact name of registrant as specified in its charter)


                                    DELAWARE
                 (State or other jurisdiction of incorporation)





            000-23556                                   94-3134940
      (Commission File No.)                  (IRS Employer Identification No.)





                               150 INDUSTRIAL ROAD
                              SAN CARLOS, CA 94070
              (Address of principal executive offices and zip code)

       Registrant's telephone number, including area code: (650) 631-3100



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





ITEM 5.  OTHER EVENTS

On May 22, 2001, Inhale Therapeutic Systems, Inc. ("Inhale") announced an offer
to acquire privately-held Shearwater Corporation, a research-based drug delivery
company incorporated in Alabama. Shearwater is a leader in advanced PEGylation
technology for enhancing delivery performance of most major drug classes,
including macromolecules such as peptides and proteins, small molecules, and
other drugs.

Inhale's press release, dated May 22, 2001, titled "Inhale Announces Agreement
to Acquire Shearwater Corporation" is attached hereto as Exhibit 99.1.


ITEM 7.  FINANCIAL STATEMENTS AND EXHIBITS

(c) EXHIBITS



     Exhibit
     Number       Description
     ---------    -----------------------------------------------------------
               
     99.1         Press Release titled "Inhale Announces Agreement to Acquire
                  Shearwater Corporation" dated May 22, 2001.



                                       2.



                                    SIGNATURE

         Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.

                                INHALE THERAPEUTIC SYSTEMS, INC.


Dated: May 22, 2001             By:   /s/ Brigid A. Makes
                                      ------------------------------------------
                                          Brigid A. Makes

                                      Chief Financial Officer and Vice President
                                      (Principal Financial and Accounting
                                      Officer)

EX-99.1

                                                                    EXHIBIT 99.1
CONTACTS:
Joyce Strand, Inhale
650 631-3138

          INHALE ANNOUNCES AGREEMENT TO ACQUIRE SHEARWATER CORPORATION

SAN CARLOS, CALIF., MAY 22, 2001 --

Inhale Therapeutic Systems, Inc. (Nasdaq:INHL) today announced that it has
reached agreement to acquire privately held Shearwater Corporation. Shearwater
is a leader in advanced PEGylation technology for enhancing delivery performance
of most major drug classes, including macromolecules such as peptides and
proteins, small molecules, and other drugs.

The addition of this advanced PEGylation technology extends Inhale's portfolio
of technologies and significantly expands Inhale's early and late stage human
clinical pipeline. The acquisition adds 11 drugs to Inhale's pipeline, three of
which have completed clinical trials and are in the pre-approval stage. Further,
two of Shearwater's products are used in marketed products. Shearwater has
collaborations with Hoffman-LaRoche, Pharmacia, Schering-Plough, and several
other biopharmaceutical companies. Following this acquisition, Inhale will have
18 programs in its clinical pipeline, two approved products, and three
technology platforms - inhaleable delivery of macromolecules, supercritical
fluids processing for powder particle production and advanced PEGylation - that
target major drug delivery market opportunities.

In consideration for the acquisition, Inhale will pay $72.5 million of cash and
four million shares of newly issued Inhale stock to Shearwater stock and option
holders for a total acquisition value of approximately $191 million. This
transaction has been approved by the board of directors of each company and is
subject to the satisfaction of customary closing conditions, including the
notification and waiting period requirements of the Hart-Scott-Rodino Act. Upon
completion of the transaction, Shearwater will operate as a wholly owned
subsidiary of Inhale.

Shearwater is a research-based drug delivery company focused on healthcare
applications of advanced PEGylation, a technology for the chemical attachment of
polyethylene glycol (PEG) polymer chains to a broad range of drug substances
such as peptides and proteins including antibody fragments; small molecules; and
other drugs. The effect of PEGylation is to increase drug circulation time in
the bloodstream, improve drug solubility and stability, and reduce
immunogenicity. The potential advantages of PEGylation are to decrease dosing
frequency, improve drug efficacy and safety, improve stability, and simplify
drug formulation.

Shearwater is a pioneer and technology leader in advanced PEGylation, a family
of PEGylation technologies and manufacturing methods designed to enable higher
drug-use efficiency, customize attachment of molecules to achieve desired
delivery results, and manufacture with higher purity. Shearwater's advanced
PEGylation is now being applied primarily to injectable drug products, but is
under exploration for use with other delivery routes, as well as in vivo
diagnostic and medical device applications.



The Shearwater pipeline includes three products that have completed Phase III
trials and are awaiting regulatory approval. Two of these have been disclosed
and include:

     -    PEG-interferon alpha-2a (PEGASYS(R)) with Hoffman-La Roche Ltd. for
          hepatitis-C, PEG-hGHra with Pharmacia Corporation for acromegaly, a
          disease that produces increased quantities of growth hormone leading
          to abnormal growth of hands, feet and other areas of the body.

     -    Shearwater also supplies PEG to Schering-Plough Corporation for use in
          its marketed product PEG-interferon alpha-2b, PEG-INTRON(TM) and has
          collaborations with an additional nine pharmaceutical companies with
          products in various stages of research, feasibility, and development
          including announced collaborations with Regeneron, Maxygen and United
          Therapeutics.

"The addition of this technology to Inhale's portfolio brings Inhale closer to
its strategic goal of becoming the leading provider of drug delivery solutions
to the biopharmaceutical industry," said Ajit S. Gill, President and CEO,
Inhale. "To achieve this we are focusing on platform technologies that can be
applied to large opportunities where we can build leadership positions.
Shearwater's advanced PEGylation technology is an ideal match against these
criteria. Advanced PEGylation technology addresses a growing market need for
improving delivery of protein, peptide, and antibody macromolecules, as well as
small molecules. Given our focus on the delivery of macromolecules, the
technology also complements our inhaleable macromolecule delivery technology.

"Inhale now has leadership positions in three large-market opportunities:
inhaleable macromolecules, supercritical fluids processing through our recent
acquisition of Bradford Particle Design plc, and PEGylation. As a result, Inhale
will be able to offer the biopharmaceutical industry a greater range of
solutions for improving the production and delivery of drugs," Gill continued.

John S. Patton, co-founder and Chief Scientific Officer, Inhale, said, "With the
acquisition of these advanced PEGylation technologies, Inhale is strongly
positioned to respond to our partners' drug delivery needs comprehensively -
from drug particle processing to device delivery to molecule control once
delivered. The exceptional particle and device engineering capabilities afforded
by our inhaleable and supercritical fluids technologies enable us to optimize
both the production and delivery of drugs. With the acquisition of Shearwater,
we now have added the molecular engineering capabilities to effect molecule
behavior."

Milton Harris, president, CEO and founder of Shearwater, who will continue at
Shearwater, said, "We are delighted to have reached agreement with Inhale for
the merging of our two companies. Great synergies exist between us, and together
there is enormous potential for growth. At Shearwater, we have been looking for
technologies that will enable us to administer our products by routes other than
injection. The combination of PEGylation and inhalation could provide a major
step forward in drug delivery. Furthermore, with the additional resources
brought by Inhale, we will be able to take our products further in clinical
development prior to licensing, thereby building increased value for the
company's shareholders."



Inhale Therapeutic Systems, Inc. develops advanced drug delivery solutions for
the biopharmaceutical industry. With the acquisition of Shearwater, Inhale is
pioneering inhaleable delivery of macromolecules, supercritical fluids
processing for powder particle production and advanced PEGylation. The Company
is currently collaborating with major pharmaceutical and biotechnology
companies, including AstraZeneca, Aventis Behring, Biogen, Bristol-Myers Squibb,
GlaxoSmithKline, Lilly and Pfizer.

This release contains forward-looking statements that reflect Inhale
management's current views as to the company's business strategy, this
acquisition, future products, product developments, clinical trials,
manufacturing scale-up, and other future events and operations relating to the
company and Shearwater. The forward-looking statements also involve
uncertainties and risks that are detailed in Inhale's reports and other filings
with the Securities and Exchange Commission, including its Form 10-K as amended
for the year ending December 31, 2000 and its Form 10-Q for the quarter ended
March 31, 2001. Actual results could differ materially from these
forward-looking statements.