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                                                                   EXHIBIT 10.11

                                SECOND AMENDMENT

                                       TO

                                 LOAN AGREEMENT

         THIS SECOND AMENDMENT TO LOAN AGREEMENT, dated as of December 20, 2002
(the "Second Amendment"), is made and entered into by and between Halsey Drug
Co., Inc., a New York corporation ("Borrower"), and Watson Pharmaceuticals,
Inc., a Nevada corporation ("Lender").

                                    RECITALS

         WHEREAS, Borrower and Lender are parties to that certain Loan
Agreement, dated as of March 29, 2000, as amended by a certain Amendment to Loan
Agreement dated as of March 31, 2000 (as so amended, the "Loan Agreement"); and

         WHEREAS, pursuant to a certain Debenture Purchase Agreement dated of
even date herewith (the "2002 Purchase Agreement") executed by Borrower in favor
of the several purchasers named therein (the "Purchasers"), Borrower will issue
its 5% Convertible Senior Secured Debentures due March 31, 2006 in the aggregate
principal amount of up to approximately $35,000,000 (the "2002 Debentures"); and

         WHEREAS, as a condition to their investment in the 2002 Debentures, the
Purchasers have required that Lender amend the Loan Agreement to extend the
maturity date of the Loan Agreement from March 31, 2003 to March 31, 2006; and

         WHEREAS, as a condition to its agreement to so extend the Maturity
Date, the Lender has required that (i) the $3,901,331 principal amount of
Borrower's payment obligations to Watson as of the date hereof under that
certain Core Products Supply Agreement (as hereinafter defined) be added to the
Borrower's secured Obligations under the Loan Agreement (such new obligations,
the "New Obligations"), and (ii) that the interest rate on both the $17,500,000
principal amount currently outstanding pursuant to the Loan Agreement be
increased to the interest rate on the New Obligations; and

         NOW, THEREFORE, the parties hereto agree as follows.
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                                    AGREEMENT

         1.       Article One of the Loan Agreement is hereby amended in its
entirety to read as follows:

              "1. AMOUNT AND TERMS OF LOAN.

                  1.1      Term Loans. Subject to the terms herein, Lender has
         previously loaned to Borrower the aggregate principal amount of
         Seventeen Million Five Hundred Thousand Dollars ($17,500,000), and, as
         described in this Second Amendment, is adding to such principal amount
         the additional principal amount of Three Million Nine Hundred and One
         Thousand Three Hundred Thirty One Dollars ($3,901,331), representing
         excess payments made by Lender to Borrower pursuant to that certain
         Finished Goods Supply Agreement (Core Products), as defined and
         provided in Section 12.15 hereof (collectively, the "Loan").
         Notwithstanding any prepayment of the Loan by Borrower, sums repaid
         hereunder may not be re-borrowed.

                  1.2      Promissory Notes. Borrower's obligation to pay the
         principal of, and interest on, the Loan shall be evidenced by two
         secured promissory notes (the "Notes"), duly executed and delivered by
         Borrower, the first such Note (the "Replacement Note") to be in the
         form attached as Exhibit A to this Second Amendment and representing
         the $17,500,000 principal balance originally loaned to Borrower
         pursuant to the Loan Agreement, and the second such Note (the "New
         Note") to be in the form attached as Exhibit B to this Second Amendment
         and representing the $3,901,331 principal balance being added to the
         Obligations as described in this Second Amendment. Upon execution and
         delivery of the Replacement Note, the Secured Promissory Note dated
         March 31, 2000 issued by Borrower to Lender in the principal amount of
         $17,500,000 shall be null and void and of no further legal force or
         effect."

         2.       The definition of "Obligations" set forth in Section 12.1 of
the Loan Agreement is hereby amended in its entirety to read as follows:

              " 'Obligations' shall mean all obligations, liabilities and
         indebtedness of every kind, nature and description of the Borrower and
         the Guarantors from time to time owing to the Lender or any Indemnitee
         under or in connection with the Loan Documents and the New

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         Note, whether direct or indirect, primary or secondary, joint or
         several, absolute or contingent, due or to become due, now existing or
         hereafter arising and however acquired and shall include, without
         limitation, all principal and interest on the Loan and, to the extent
         chargeable under any Loan Document or the New Note, all charges,
         expenses, fees and reasonable attorney's fees."

         3.       A new Section 12.15 is hereby added to the Loan Agreement as
follows:

              "12.15 Core Products Supply Agreement. Borrower and Lender are
         parties to a certain Finished Goods Supply Agreement (Core Products)
         dated March 29, 2000 (the "Original Core Products Supply Agreement"),
         as amended by that certain Amendment and Supplement No. 1 to Finished
         Goods Supply Agreement (Core Products) dated as of August 8, 2001 (the
         "Amendment to Core Products Supply Agreement," and together with the
         Original Core Products Supply Agreement as so amended, the "Core
         Products Supply Agreement"). In accordance with the terms of the
         Original Core Products Supply Agreement, Lender made certain minimum
         quarterly payments to Borrower resulting in payments to Borrower
         exceeding the purchase price of the quantities of products provided by
         Borrower to Lender under the Core Products Supply Agreement. As a
         result, Borrower and Lender executed the Amendment to Core Products
         Supply Agreement providing, among other items, (i) for the parties'
         agreement on the amount by which Lender's aggregate minimum quarterly
         payments made through and including the quarter ended December 31, 2000
         exceeded the aggregate purchase price of the products supplied by
         Borrower during such period (the "Excess Payments"), and (ii) for
         Borrower's repayment obligation to Lender of the Excess Payments.
         Borrower and Lender acknowledge and agree that the outstanding balance
         of the Excess Payments as of December 20, 2002 equals Three Million
         Nine Hundred and One Thousand Three Hundred Thirty One Dollars
         ($3,901,331) (the "Core Products Amount"). In accordance with the terms
         of Article One hereof, the Core Products Amount has been added to the
         Obligations of Borrower hereunder. On the date of execution by the
         parties of the Second Amendment, Borrower shall execute and deliver to
         Lender the New Note, which shall evidence the New Obligations. Borrower
         and Lender covenant and agree to execute the Second Amendment to
         Finished Goods Supply Agreement (Core Products) in the form attached as
         Exhibit C to the Second Amendment in order to give effect to the terms
         of this Section 12.15."

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         4.       Limitation of Amendment. Except as amended above, the terms of
the Loan Agreement shall remain in full force and effect.

         5.       Governing Law. This Second Amendment and the rights of the
parties hereunder shall be governed in all respects by the laws of the State of
California wherein the terms of this Second Amendment were negotiated.

         6.       Counterparts. This Second Amendment may be executed in any
number of counterparts, each of which shall be an original, but all of which
together shall constitute one instrument.

         IN WITNESS WHEREOF, Borrower and Lender have caused this Second
Amendment to be duly executed by their duly authorized officers all as of the
day and year first above written.

"BORROWER"                                  "LENDER"

HALSEY DRUG CO., INC.                       WATSON PHARMACEUTICALS, INC.

By:____________________________             By:_________________________________
Name:  Michael Reicher                      Name:  _____________________________
Title: Chief Executive Officer              Title: _____________________________

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                                    EXHIBIT A

                                Replacement Note
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                                    EXHIBIT B

                                    New Note
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                                    EXHIBIT C

                          Second Amendment to Finished
                     Goods Supply Agreement (Core Products)