Big-pharma potential acquisition Sepracor (NASDAQ:SEPR) is slimming down after a government decision that has cost it revenue. It's a move in the right direction, but I'm not sure it's going to be enough to get the company back on track.

Sepracor is reducing its sales force by about 300 positions because of the Centers for Medicare and Medicaid Services' decision last spring to pay for its asthma drug, XOPENEX, at the generic drug level. The price cuts, which started this quarter, resulted in a nearly 25% drop in year-over-year sales for the third quarter. Fortunately, the government's decision doesn't seem to be affecting the retail market, which has historically been between 70% and 75% of XOPENEX sales.

Sales of Sepracor's sleep aid Lunesta headed in the opposite direction, increasing 13.6% year over year. Lunesta sales had been relatively flat over the past few years, so the jump is a little surprising, especially given the introduction of generic versions of Sanofi-Aventis' (NYSE:SNY) Ambien in April. The drug's market share has remained relatively the same, so the increase in sales has been due to a growing market. I'm not sure that kind of growth is sustainable, although Sepracor is doing its best to spur things with an increase in advertisements starting last month.

Sales of its two smaller products and royalties from partners like Schering-Plough (NYSE:SGP)and Sanofi-Aventis couldn't overcome the XOPENEX drop, resulting in a 34% year-over-year decrease in earnings per share.

With no drugs in phase 3 trials, the near-term outlook for Sepracor lies in its ability to increase sales of Lunesta. We'll have to wait another quarter or two to see if sales in the U.S. continue to increase, or if this quarter was a fluke.

The real growth will likely come from global sales. Sepracor recently joined GlaxoSmithKline (NYSE:GSK) in a partnership to sell the drug outside the U.S. and Japan and expects marketing approval from the European Medicines Agency in the second half of 2008.

Sepracor gave guidance of a 74% increase in EPS for next year, excluding the charge for litigation settlement this year. That seems like a pretty tall order, and I'm not sure that the decreased costs and increased sales of Lunesta will be enough to turn things around that significantly.

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Fool contributor Brian Orelli, Ph.D., doesn't own shares of any company mentioned in this article. Glaxo is a selection of the Income Investor newsletter. The Fool has a disclosure policy.