UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC  20549  ________________  FORM
10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934  For the quarterly period ended: June 27,
2009 Commission file number: 1-10827   PAR
PHARMACEUTICAL COMPANIES, INC. (Exact
name of registrant as specified in its charter)   Delaware

22-3122182(State or other jurisdiction of

(I.R.S. Employerincorporation or organization)

Identification No.)   300 Tice Boulevard, Woodcliff Lake, New
Jersey  07677 (Address
of principal executive offices) Registrants telephone number, including
area code:  (201) 802-4000   Indicate by check mark
whether the Registrant (1) has filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days.  YesXNo___  Indicate by check mark
whether the registrant has submitted electronically and posted on its corporate
Web site, if any, every Interactive Data File required to be submitted and
posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during
the preceding 12 months (or for such shorter period that the registrant was
required to submit and post such files). YesXNo___  Indicate by check mark
whether the registrant is a large accelerated filer, an accelerated filer, or a
non-accelerated filer.  See definition of accelerated filer and large
accelerated filer in Rule 12b-2 of the Exchange Act:  Large accelerated filer [X] Accelerated filer [  ] Non-accelerated filer [
  ]   Indicate by check mark
whether the Registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act). Yes NoX   Number of shares of the Registrantscommon stock outstanding as of July 28, 2009: 34,768,551          TABLE OF CONTENTS PAR PHARMACEUTICAL
COMPANIES, INC. FORM 10-Q FOR THE FISCAL QUARTER
ENDED JUNE 27, 2009  PAGE  PART I FINANCIAL
INFORMATION   Item 1. Condensed
Consolidated Financial Statements (unaudited)  Condensed
Consolidated Balance Sheets as of June 27, 2009 and December
31, 2008 3  Condensed
Consolidated Statements of Operations for the three months and six months ended
June 27, 2009 and June 28, 2008 4  Condensed
Consolidated Statements of Cash Flows for the six months ended
June 27, 2009 and June 28, 2008 5  Notes
to Condensed Consolidated Financial Statements 6  Item 2. Managements
Discussion and Analysis of Financial Condition and
Results of Operations 32  Item 3. Quantitative
and Qualitative Disclosures about Market Risk 47  Item4. Controls
and Procedures 48   PART II OTHER
INFORMATION  Item1. Legal
Proceedings 48  Item1A. Risk
Factors 53  Item2. Unregistered
Sales of Equity Securities and Use of Proceeds 53  Item
4. Submission
of Matters to a Vote of Security Holders 54  Item 6. Exhibits 54  SIGNATURES 55              2   PART I - FINANCIAL
INFORMATION ITEM 1.  FINANCIAL STATEMENTS PAR
PHARMACEUTICAL COMPANIES, INC. CONDENSED CONSOLIDATED BALANCE
SHEETS (In Thousands, Except Share Data) (Unaudited)   June 27,

December 31,2009

2008ASSETSCurrent assets:Cash and cash
equivalents

$139,359

$170,629Available for sale
marketable debt and equity securities

62,980

93,097Accounts receivable, net

261,950

83,408Inventories

55,072

42,504Prepaid expenses and other
current assets

15,581

20,040Deferred income tax
assets

37,474

53,060Income taxes
receivable

22,257

35,397Total current assets

594,673

498,135Property, plant and equipment, at cost less
accumulated depreciation and
     amortization

79,271

79,439Available for sale marketable debt and equity
securities

1,150

1,949Intangible assets, net

78,252

35,208Goodwill

63,729

63,729Deferred financing costs and other assets

828

1,159Non-current deferred income tax assets, net

67,211

68,618Total assets

$885,114

$748,237LIABILITIES
AND STOCKHOLDERS EQUITYCurrent liabilities:Current portion of
long-term debt

$ -

$130,141Accounts payable

38,622

22,879Payables due to
distribution agreement partners

177,103

91,451Accrued salaries and
employee benefits

14,550

11,850Accrued expenses and other
current liabilities

37,466

38,352Total current
liabilities

267,741

294,673Long-term debt, less current portion

120,038

-Other long-term liabilities

41,259

41,581Commitments and contingencies

-

-Stockholders' equityCommon Stock, par value
$0.01 per share, authorized 90,000,000 shares;issued
 37,560,564 and 37,392,469 shares

375

374Additional paid-in
capital

325,173

319,976Retained earnings

199,360

159,470Accumulated other
comprehensive gain

816

122Treasury stock, at cost
2,792,963 and 2,716,010 shares

(69,648)

(67,959)Total stockholders'
equity

456,076

411,983Total liabilities and stockholders equity

$885,114

$748,237  The accompanying notes are an integral part
of these condensed consolidated financial statements.   3   PAR
PHARMACEUTICAL COMPANIES, INC. CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS (In Thousands, Except Per Share Data) (Unaudited) Three Months Ended

Six Months EndedJune 27,

June 28,

June 27,

June 28,2009

2008

2009

2008Revenues:Net product sales
$400,149

$108,289

$600,372

$259,526Other product related
revenues
3,852

4,648

7,664

8,339Total revenues
404,001

112,937

608,036

267,865Cost of goods sold
317,593

87,829

457,559

193,236Gross margin
86,408

25,108

150,477

74,629Operating expenses:Research and
development
5,937

15,955

13,109

33,113Selling, general and
administrative
44,117

36,690

77,077

68,037Settlements and loss
contingencies, net
61

-

(3,315)

-Restructuring costs
81

-

1,482

-Total operating expenses
50,196

52,645

88,353

101,150Gain on sale of product rights and other
265

500

1,365

2,125Operating income (loss)
36,477

(27,037)

63,489

(24,396)Gain on bargain purchase
3,021

-

3,021

-Gain on extinguishment of senior subordinated
    convertible notes
504

-

749

-Equity in loss of joint venture
-

(310)

-

(330)Loss on marketable securities and other
investments,     net
-

(433)

(55)

(433)Interest income
667

2,129

1,824

5,143Interest expense
(2,595)

(3,544)

(5,162)

(7,054)Income (loss) from continuing operations before
    provision (benefit) for income taxes
38,074

(29,195)

63,866

(27,070)Provision (benefit) for income taxes
14,087

(8,236)

23,624

(7,495)Income (loss) from continuing operations
23,987

(20,959)

40,242

(19,575)Discontinued operations:Gain from discontinued operations
-

-

-

505Provision for income taxes
176

268

352

713Gain (loss) from discontinued operations
(176)

(268)

(352)

(208)Net income (loss)
$23,811

($21,227)

$39,890

($19,783)Basic earnings (loss) per share of common
stock:Income (loss) from continuing operations
$0.71

($0.63)

$1.20

($0.59)Gain (loss) from discontinued operations
0.00

(0.01)

(0.01)

(0.01)Net income (loss)
$0.71

($0.64)

$1.19

($0.60)Diluted earnings (loss) per share of common
stock:Income (loss) from continuing operations
$0.71

($0.63)

$1.19

($0.59)Gain (loss) from discontinued operations
0.00

(0.01)

(0.01)

(0.01)Net income (loss)
$0.71

($0.64)

$1.18

($0.60)Weighted average number of common shares
     outstanding:Basic
33,630

33,304

33,616

33,262Diluted
33,771

33,304

33,772

33,262 The accompanying notes are an integral part
of these condensed consolidated financial statements.   4   PAR PHARMACEUTICAL COMPANIES, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In
Thousands) (Unaudited) Six Months EndedJune 27,

June 28,2009

2008Cash flows
from operating activities:Net income
(loss)
$39,890

($19,783)Deduct: (Loss)
gain from discontinued operations, net of tax
(352)

208Income from
continuing operations
40,242

(19,575)Adjustments to
reconcile net income to net cash (used in) provided by operating
activities:Deferred
income taxes
16,567

(973)Non-cash
interest expense
2,842

3,720Depreciation
and amortization
18,601

11,473Loss
on marketable securities and other investments, net
-

433Equity
in loss of joint venture
-

330Allowances
against accounts receivable
5,523

(47,141)Share-based
compensation expense
7,243

7,152Loss
on disposal of fixed assets
327

162Gain
on extinguishment of senior subordinated convertible notes
(749)

-Gain
on bargain purchase
(3,021)

-Other
126

(55)Changes
in assets and liabilities:(Increase)
decrease in accounts receivable
(184,986)

50,039(Increase)
decrease in inventories
(10,747)

33,113Decrease
in prepaid expenses and other assets
4,353

2,823Increase
(decrease) in accounts payable, accrued expenses and other
liabilities
19,180

(14,894)Increase
in payables due to distribution agreement partners
85,652

8,406Increase
in income taxes receivable/payable
10,983

(4,442)Net
cash provided by operating activities
12,136

30,571Cash flows
from investing activities:Capital
expenditures
(5,656)

(8,656)Purchases
of intangibles
-

(20,000)Business
acquisitions
(55,300)

-Purchases
of available for sale debt securities
(10,000)

(81,710)Proceeds
from maturity and sale of available for sale marketable debt and
            equity
securities
41,981

56,430Proceeds
from settlement with liquidated fund
-

1,667Capital
contributions to joint venture
-

(728)Net
cash used in investing activities
(28,975)

(52,997)Net
cash provided by investing activities from discontinued
operations


505Cash flows
from financing activities:Proceeds
from issuances of common stock upon exercise of stock options
109

304Proceeds
from the issuance of common stock under the Employee Stock
            Purchase
Program
102

143Excess
tax benefits on exercise of nonqualified stock options
37

197Purchase
of treasury stock
(1,690)

(1,199)Reductions
in principal due to repurchases of senior subordinated convertible
notes
(12,989)

-Net
cash used in financing activities
(14,431)

(555)Net decrease
in cash and cash equivalents
(31,270)

(22,476)Cash and cash
equivalents at beginning of period
170,629

200,132Cash and cash
equivalents at end of period
$139,359

$177,656Supplemental
disclosure of cash flow information:Cash (received)
paid during the period for:Income taxes,
net
($4,034)

($2,276)Interest
$2,107

$2,875Non-cash
transactions:Capital
expenditures incurred but not yet paid
$372

$1,963 The accompanying notes are an integral part
of these condensed consolidated financial statements.   5   PAR
PHARMACEUTICAL COMPANIES, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS June 27, 2009 (Unaudited)  Par Pharmaceutical Companies, Inc.
operates primarily through its wholly owned subsidiary, Par Pharmaceutical, Inc.
(collectively referred to herein as Par, the Company, we, our, or us),
in two business segments, for the development, manufacture and distribution of
generic pharmaceuticals and branded pharmaceuticals in the United States.
 In 2007, Par began operating the brand pharmaceutical segment under the
name Strativa Pharmaceuticals (Strativa).  Marketed products are
principally in the solid oral dosage form (tablet, caplet and two-piece
hard-shell capsule).  Par also distributes several oral suspension
products, nasal spray products, and certain products in the semi-solid form of a
cream.  Note 1- Basis of Presentation:  The accompanying condensed
consolidated financial statements at June 27, 2009 and for the three-month and
six-month periods ended June 27, 2009 and June 28, 2008 are unaudited; in the
opinion of Pars management, however, such statements include all adjustments
necessary to present fairly the information presented therein.  The
condensed consolidated balance sheet at December 31, 2008 was derived from Pars
audited consolidated financial statements included in Pars 2008 Annual Report
on Form 10-K.  Pursuant to accounting requirements of
the Securities and Exchange Commission (the SEC) applicable to Quarterly
Reports on Form 10-Q, the accompanying condensed consolidated financial
statements and these Notes do not include all disclosures required by accounting
principles generally accepted in the United States (GAAP) for audited
financial statements.  Accordingly, these statements should be read in
conjunction with Pars 2008 Annual Report on Form 10-K and its Current Report on
Form 8-K dated June 19, 2009 that contains updated historical financial
statements and financial data included in Pars 2008 Annual Report on Form 10-K
for accounting adjustments related to the adoption of Financial Accounting
Standards Board (FASB) issued FASB Staff Position No. APB 14-1, Accounting
for Convertible Debt Instruments That May Be Settled in Cash Upon Conversion
(Including Partial Cash Settlement)(FSP APB 14-1).  Results of
operations for interim periods are not necessarily indicative of those that may
be achieved for full fiscal years.   Note 2  Change in Accounting Principle and Related
Adjustments to Previously Issued Financial Statements:  In May 2008, the FASB issued FSP APB
14-1.  Under the new rules for convertible debt instruments that may be
settled entirely or partially in cash upon conversion, an entity should
separately account for the liability and equity components of the instrument in
a manner that reflects the issuers economic interest cost.  Previous
guidance provided for accounting of this type of convertible debt instruments
entirely as debt. Pars senior subordinated convertible notes are subject to FSP
APB 14-1.  Upon conversion, Par has agreed to satisfy its conversion
obligation in cash in an amount equal to the principal amount of the notes
converted.  The effect of the new rules for this type of convertible debt
instruments is that the equity component would be included in the additional
paid-in capital section of stockholders equity on Pars condensed consolidated
balance sheet and the value of the equity component would be treated as original
issue discount for purposes of accounting for the debt component of the
convertible debt instruments.  FSP APB 14-1 was effective as of January 1,
2009, with retrospective application required.  For instruments subject to
the scope of FSP APB 14-1, higher interest expense will result through the
accretion of the discounted carrying value of the debt instruments to their face
amount over their term.  Prior period interest expense will also be higher
than previously reported due to retrospective application.  Par estimates
that its original $200 million aggregate principal amount of 2.875% senior
subordinated convertible notes due 2010 had an approximate initial measurement
of a $169 million liability component and a $31 million equity
component.  Annual interest expense was retroactively adjusted upward
between $5.6 million to $7.0 million for the years 2008, 2007, 2006, and 2005.  The table below sets forth the effect
of the adjustments on the applicable line items within Pars condensed
consolidated statement of operations for the three-month and six-month periods
ended June 28, 2008 ($ amounts in thousands):  Three months ended June 28, 2008As previously reported

Adjustments

As adjustedInterest expense
($1,667)

($1,877)

($3,544)Loss from continuing operations before benefit for
income taxes
($27,318)

($1,877)

($29,195)Benefit for income taxes
($7,523)

($713)

($8,236)Loss from continuing operations
($19,795)

($1,164)

($20,959)Net loss
($20,063)

($1,164)

($21,227) **** Basic earnings (loss) per share
of common stock:Loss from
continuing operations
($0.59)

($0.04)

($0.63)Net loss
($0.60)

($0.04)

($0.64)Diluted earnings (loss) per
share of common stock:Loss from
continuing operations
($0.59)

($0.04)

($0.63)Net loss
($0.60)

($0.04)

($0.64)   6
 
 
   Six months ended June 28, 2008As previously reported

Adjustments

As adjustedInterest expense
($3,334)

($3,720)

($7,054)Loss from continuing operations before benefit for
income taxes
($23,350)

($3,720)

($27,070)Benefit for income taxes
($6,081)

($1,414)

($7,495)Loss from continuing operations
($17,269)

($2,306)

($19,575)Net loss
($17,477)

($2,306)

($19,783)Basic earnings (loss) per share
of common stock:Loss from
continuing operations
($0.52)

($0.07)

($0.59)Net loss
($0.53)

($0.07)

($0.60)Diluted earnings (loss) per
share of common stock:Loss from
continuing operations
($0.52)

($0.07)

($0.59)Net loss
($0.53)

($0.07)

($0.60)  The table below sets forth the effect of the adjustments
on the applicable line items within Pars condensed consolidated statements of
cash flows for the six-month period ended June 28, 2008 ($ amounts in
thousands): As previously reported

Adjustments

As adjustedCash flows from operating activities:Net loss
($17,477)

($2,306)

($19,783)Loss from continuing operations
($17,269)

($2,306)

($19,575)Adjustments to reconcile net income to net cash
provided by    operating activities:Deferred income
taxes
$441

($1,414)

($973)Non-cash interest
expense
-

$3,720

$3,720Net cash provided by
operating activities
$30,571

-

$30,571   Note 3 - Share-Based
Compensation: Par adopted Statement of Financial
Accounting Standards No. 123 (Revised 2004), Share-Based Payment (SFAS
123R), effective January 1, 2006.  SFAS 123R requires companies to
recognize compensation expense in the amount equal to the fair value of all
share-based payments granted to employees.  Par elected the modified
prospective transition method and, therefore, adjustments to prior periods were
not required as a result of adopting SFAS 123R.  Under this method, the
provisions of SFAS 123R apply to all awards granted after the date of adoption
and to any unrecognized expense of non-vested awards at the date of adoption
based on the grant date fair value.   Under SFAS 123R, Par recognizes
share-based compensation ratably over the service period applicable to the
award.  SFAS 123R also amended SFAS No. 95, Statement of Cash Flows, to
require that excess tax benefits that have been reflected as operating cash
flows be reflected as financing cash flows.  In accordance with SFAS 123R,
$0.04 million and $0.2 million   7   of excess tax benefits for the
six months ended June 27, 2009 and June 28, 2008, have been classified as both
an operating cash outflow and financing cash inflow.  Par grants share-based awards under
its various plans, which provide for the granting of non-qualified stock
options, restricted stock (including restricted stock with market performance
vesting conditions) and restricted stock units to members of our Board of
Directors and to our employees.  Stock options, restricted stock and
restricted stock units generally vest ratably over four years or sooner and
stock options have a maximum term of ten years.  As of June 27, 2009, there were
approximately 4.6 million shares of common stock available for future stock
option grants.  Par issues new shares of common stock when stock option
awards are exercised.  Stock option awards outstanding under our current
plans were granted at exercise prices that were equal to the market value of
Pars common stock on the date of grant.  At June 27, 2009, approximately
0.8 million shares remain available under such plans for restricted stock
(including restricted stock with market conditions described below) and
restricted stock unit grants.  Stock Options  Par uses the Black-Scholes stock
option pricing model to estimate the fair value of stock option awards with the
following weighted average assumptions:  For the three
For the three
For the six
For the sixmonths ended
months ended
months ended
months endedJune 27,
June 28,
June 27,
June 28,2009
2008
2009
2008Risk-free interest rate
2.3%
-
1.9%
3.0%Expected life (in years)
6.3
-
6.3
6.3Expected Volatility
45.9%
-
43.9%
48.5%Dividend
0%
-
0%
0%  The Black-Scholes option pricing model
was developed for use in estimating the fair value of traded options, which have
no vesting restrictions and are fully transferable.  Par compiled
historical data on an employee-by-employee basis from the grant date through the
settlement date.  The results of analyzing the historical data showed that
there were three distinct populations of optionees, the Executive Officers
Group, the Outside Directors Group, and the All Others Group.  The expected
life of options represents the period of time that the options are expected to
be outstanding and is based generally on historical trends.  However,
because none of Pars existing options have reached their full 10-year term, and
also because the majority of such options granted are out-of-the-money and the
expected life of out-of-the-money options is uncertain, we opted to use the
simplified method for plain vanilla options described in Staff Accounting
Bulletin 107.  The simplified method calculation is the average of the
vesting term plus the original contractual term divided by 2.  Par will
revisit this assumption at least annually or sooner if circumstances warrant.
 The risk-free rate is based on the yield on the Federal Reserve treasury
rate with a maturity date corresponding to the expected term of the option
granted.  The expected volatility assumption is based on the historical
volatility of Pars common stock over a term equal to the expected term of the
option granted.  SFAS 123R also requires forfeitures to be estimated at the
time of grant and revised, if necessary, in subsequent periods if actual
forfeitures differ from those estimates.  It is assumed that no dividends
will be paid during the entire term of the options.  All option valuation
models require input of highly subjective assumptions.  Because Par's
employee stock options have characteristics significantly different from those
of traded options, and because changes in subjective input assumptions can
materially affect the fair value estimate, the actual value realized at the time
the options are exercised may differ from the estimated values computed above.
 The weighted average per share fair value of options granted in the three
month period ended June 27, 2009 was $5.40.  The Company did not grant any
options in the three month period ended June 28, 2008.  The weighted
average per share fair value of options granted in the six month periods ended
June 27, 2009 and June 28, 2008 were $5.82 and $9.92.   Set forth below is the impact on Pars
results of operations of recording share-based compensation from its stock
options for the three-month and six-month periods ended June 27, 2009 and June
28, 2008 ($ amounts in thousands):  For the three months
ended

For the six months
endedJune 27,

June 28,

June 27,

June 28,2009

2008

2009

2008Cost of goods sold

$119

$76

$244

$138Research and development

-

190

-

346Selling, general and
administrative

1,068

686

2,194

1,246Total, pre-tax

$1,187

$952

$2,438

$1,730Tax effect of share-based
compensation

(451)

(362)

(926)

(658)Total, net of tax

$736

$590

$1,512

$1,072   8        The following is a
summary of Pars stock option activity (shares and aggregate intrinsic value in
thousands):  Shares

Weighted Average Exercise
Price

Weighted Average Remaining
Life

Aggregate Intrinsic
ValueBalance at December 31, 2008

4,065

$31.88Granted

1,207

12.90Exercised

(16)

6.86Forfeited

(697)

38.44Balance at June 27, 2009

4,559

$25.95

6.1

$4,057Exercisable at June 27, 2009

2,617

$34.78

4.0

$620Vested and expected to vest at June 27,
     2009

4,434

$26.26

5.1

$3,848  The total fair
value of shares vested during the three-month period ended June 27, 2009 was
$0.5 million and $0.8 million for the three-month period ended June 28, 2008.
 The total fair value of shares vested during the six-month period ended
June 27, 2009 was $2.5 million and $6.0 million for the six-month period ended
June 28, 2008.  As of June 27, 2009, the total compensation cost related to
all non-vested stock options granted to employees but not yet recognized was
approximately $10.6 million, net of estimated forfeitures.  This cost will
be amortized on a straight-line basis over the remaining weighted average
vesting period of 3.0 years.  Restricted Stock/Restricted Stock
Units  Outstanding restricted stock and
restricted stock units generally vest ratably over four years.  The related
share-based compensation expense is recorded over the requisite service period,
which is the vesting period.  The fair value of restricted stock is based
on the market value of Pars common stock on the date of grant.  The impact on Pars results of
operations of recording share-based compensation from restricted stock for the
three-month and six-month periods ended June 27, 2009 and June 28, 2008 was as
follows ($ amounts in thousands):  For the three months
ended

For the six months
endedJune 27,

June 28,

June 27,

June 28,2009

2008

2009

2008Cost of goods sold

$207

$160

$388

$324Research and development

-

399

-

809Selling, general and
administrative

1,858

1,435

3,487

2,910Total, pre-tax

$2,065

$1,994

$3,875

$4,043Tax effect of stock-based
compensation

(785)

(758)

(1,473)

(1,537)Total, net of tax

$1,280

$1,236

$2,402

$2,506  The following is a summary of Pars
restricted stock activity (shares and aggregate intrinsic value in
thousands):  Shares

Weighted Average Grant
Price

Aggregate Intrinsic
ValueNon-vested balance at December 31, 2008

864

$20.84Granted

216

13.00Vested

(181)

27.12Forfeited

(69)

18.06Non-vested balance at June 27,
2009

830

$17.65

$12,080   9      The following is a summary of Pars
restricted stock unit activity (shares and aggregate intrinsic value in
thousands):  Shares

Weighted Average Grant
Price

Aggregate Intrinsic
ValueUnvested restricted stock unit balance at December
31, 2008

106

$23.72Granted

64

12.83Vested and shares
issued

(58)

21.22Forfeited

-

-Unvested restricted stock unit
balance at June 27, 2009

112

$18.83

$1,633Vested awards not issued

110

$24.17

$1,608Total restricted stock unit balance
at June 27, 2009

222

$21.47

$3,241  As of June 27, 2009, the total
compensation cost related to all non-vested restricted stock and restricted
stock units (excluding restricted stock grants with market conditions described
below) granted to employees but not yet recognized was approximately $12.8
million, net of estimated forfeitures; this cost will be amortized on a
straight-line basis over the remaining weighted average vesting period of
approximately 2.2 years.  Restricted Stock Grants With
Market Performance Vesting Conditions In 2008, Par issued restricted stock
grants with market performance vesting conditions.  The vesting of
restricted stock grants issued to certain employees of Par is contingent upon
multiple market conditions that are factored into the fair value of the
restricted stock at grant date with cliff vesting after three years if the
market conditions have been met.  Vesting will occur if the applicable
continued employment condition is satisfied and the Total Stockholder Return
(TSR) on Pars common stock exceeds a minimum TSR relative to Pars stock
price at the beginning of the three-year vesting period, the TSR meets or
exceeds the median of a defined peer group of approximately 15 companies, and/or
the TSR exceeds the Standard and Poors 400 Mid Cap Index (S&P 400)
over the three-year measurement period beginning on January 1 in the
year of grant and ending after three years on December 31.  A maximum
number of 466 thousand shares of common stock could be issued after the
three-year vesting period depending on the achievement of the TSR goals.
 No shares of common stock will be issued if Pars TSR is below 6%
annualized return over the three-year vesting period, except by operation of the
provisions of approximately 5 employment contracts for senior executives under
specific termination conditions.  Any shares earned will be distributed
after the end of the three-year period, except by operation of the provisions of
approximately 5 employment contracts under specific termination conditions.
 In all circumstances, restricted stock granted does not entitle the holder
the right, or obligate Par, to settle the restricted stock in cash.  The
effect of the market conditions on the restricted stock issued to certain
employees of Par is reflected in the fair value on the grant date.  The
restricted stock grants with market conditions were valued using a Monte Carlo
simulation.  The Monte Carlo simulation estimates the fair value based on
the expected term of the award, risk-free interest rate, expected dividends, and
the expected volatility for Par, its peer group, and the S&P 400.  The
expected term was estimated based on the vesting period of the awards (3 years),
the risk-free interest was based on the yield on the Federal Reserve treasury
rate with a maturity matching the vesting period (2.6%).  The expected
dividends were assumed to be zero.  Volatility was based on historical
volatility over the expected term (40%).  Restricted stock that included
multiple market conditions had a grant date fair value per restricted share of
$24.78.  The
following table summarizes the components of Pars stock-based compensation
related to its restricted stock grants with market conditions recognized in our
financial statements for the three-month and six-month periods ended June 27,
2009 and June 28, 2008 ($ amounts in thousands): For the three months
ended

For the six months
endedJune 27,

June 28,

June 27,

June 28,2009

2008

2009

2008Cost of goods sold

$46

$59

$93

$110Research and development

-

149

-

276Selling, general and
administrative

410

535

836

993Total, pre-tax

$456

$743

$929

$1,379Tax effect of stock-based
compensation

(173)

(282)

(353)

(524)Total, net of tax

$283

$461

$576

$855   10      As
of June 27, 2009, $2.8 million of total unrecognized compensation cost, net
of estimated forfeitures, related to restricted stock grants with market
conditions, is expected to be recognized over a weighted average period of
approximately 1.5 years.  The following is a summary of Pars
restricted stock grants with market conditions activity (shares and aggregate
intrinsic value in thousands):  Shares

Weighted Average Grant Date Fair
Value Per Share

Aggregate Intrinsic
ValueNon-vested balance at December 31, 2008

290

$24.78Granted

-

-Vested

-

-Forfeited

(29)

24.78Non-vested balance at June 27,
2009

261

$24.78

$3,803  Employee Stock Purchase Program:  Par maintains an Employee Stock
Purchase Program (the Program).  The Program is designed to qualify as an
employee stock purchase plan under Section 423 of the Internal Revenue Code of
1986, as amended.  It enables eligible employees to purchase shares of
Pars common stock at a 5% discount to the fair market value.  An aggregate
of 1,000,000 shares of common stock has been reserved for sale to employees
under the Program.  Employees
purchased 3,000 shares during the three-month period ended June 27, 2009 and
4,000 shares during the three-month period ended June 28, 2008.  Employees
purchased 9,000 shares during the six-month period ended June 27, 2009 and 8,000
shares during the six-month period ended June 28, 2008.   Note 4- Available for Sale Marketable Debt and
Equity Securities:  At June 27, 2009 and December 31,
2008, all of Pars investments in marketable debt and equity securities were
classified as available for sale and, as a result, were reported at their
estimated fair values on the condensed consolidated balance sheets.  Refer
to Note 5 - Fair Value Measurements.  The following is a summary of
amortized cost and estimated fair value of Pars marketable debt and equity
securities available for sale at June 27, 2009 ($ amounts in thousands):  EstimatedUnrealized

FairCost

Gain

(Loss)

ValueSecurities issued by government agencies

$16,300

$137

$ -

$16,437Debt securities issued by various state and
    local municipalities and agencies

27,906

172

-

28,078Other debt securities

18,231

268

(34)

18,465Available for sale
marketable debt securities

62,437

577

(34)

62,980Marketable equity securities available for sale
   Hana Biosciences, Inc.

375

775

-

1,150Total

$62,812

$1,352

($34)

$64,130  Of the $0.03 million of unrealized
loss as of June 27, 2009, $0.03 million has been in an unrealized loss position
for greater than one year.  Par believes that these losses are not
other-than-temporary as it has no intent to sell the debt securities with
unrealized losses and it is not more likely than not that Par will be required
to sell any debt securities with unrealized losses.  All available for sale
debt securities are classified as current on Pars condensed consolidated
balance sheet as of June 27, 2009. Par sold its
investment in a debt security issued by Ford Motor Credit Company for
approximately $1.6 million during the first quarter of 2009.  Par recorded
a pre-tax gain of $0.3 million in the condensed consolidated statement of
operations.  This item was included in Loss on marketable securities and
other investments, net on the condensed consolidated statement of operations.   11   Par
recorded a loss of $0.2 million in the condensed consolidated statement of
operations during the first quarter of 2009, which represented an
other-than-temporary impairment of Pars investment in Hana Biosciences, Inc.
(Hana), triggered by the severity of the loss and the duration of the period
that the investment has been in a loss position.  This item was included in
Loss on marketable securities and other investments, net on the condensed
consolidated statement of operations.  Par classified its investment in
Hana (at the revised cost of $0.4 million) as a non-current asset on its
condensed consolidated balance sheet.  During the three months ended June
27, 2009, Par has recorded a
$0.8
million unre
alized
gain through equity
on the
condensed consolidated balance sheet

as of June 27, 2009.  As of June 27, 2009 the total amount of
unrealized gain which is reflected as part of stockholders equity totaled

$0.8 million .  The following is a summary of
amortized cost and estimated fair value of Pars investments in debt and
marketable equity securities available for sale at December 31, 2008 ($ amounts
in thousands):  EstimatedUnrealized

FairCost

Gain

(Loss)

ValueSecurities issued by government agencies

$41,241

$300

$ -

$41,541Debt securities issued by various state and
     local municipalities and agencies

28,309

276

-

28,585Other debt securities

24,698

-

(378)

24,320Available for sale
marketable debt securities

94,248

576

(378)

94,446Marketable equity securities available for sale
   Hana Biosciences, Inc.

600

-

-

600Total

$94,848

$576

($378)

$95,046  The following is a summary of the contractual
maturities of Pars available for sale debt securities at June 27, 2009 ($ amounts in thousands):   June 27, 2009Estimated FairCost

ValueLess than one year

$31,587

$31,806Due between 1-2 years

27,876

28,180Due between 2-5 years

2,974

2,994Total

$62,437

$62,980   Note 5  Fair Value
Measurements: As described in Note 20 Recent
Accounting Pronouncements, Par adopted SFAS 157 with respect to financial
assets and liabilities as of January 1, 2008.  SFAS 157 defines fair value
as the price that would be received for an asset or paid to transfer a liability
(an exit price) in the principal or most advantageous market for the asset or
liability in an orderly transaction between market participants on the
measurement date.  SFAS 157 requires that assets and liabilities carried at
fair value be classified and disclosed in one of the following three categories:  Level 1: Quoted
market prices in active markets for identical assets and liabilities.
 Active market means a market in which transactions for assets or
liabilities occur with sufficient frequency and volume to provide pricing
information on an ongoing unadjusted basis.  Our Level 1 assets include
Pars investment in Hana Biosciences, Inc. that is traded in an active exchange
market. Level
2:  Observable inputs other than Level 1 prices, such as quoted prices for
similar assets or liabilities; or other inputs that are observable or can be
corroborated by observable market data for substantially the full term of the
assets or liabilities. Pars Level 2 assets primarily include debt securities
including governmental agency and municipal securities, and corporate bonds with
quoted prices that are traded less frequently than exchange-traded instruments.
 All of Pars Level 2 asset values are determined using a pricing model
with inputs that are observable in the market or can be derived principally from
or corroborated by observable market data.  The pricing model information
is provided by third party entities (e.g., banks or brokers).  In some
instances, these third party entities engage external pricing services to
estimate   12   the
fair value of these securities.  Par has a general understanding of the
methodologies employed by the pricing services in their pricing models.
 Par corroborates the estimates of non-binding quotes from the third party
entities pricing services to an independent source that provides quoted market
prices from broker or dealer quotations.  Large differences, if any, are
investigated by Par.  Based on historical differences, Par has not been
required to adjust quotes provided by the third party entities pricing services
used in estimating the fair value of these securities. Level 3:
Unobservable inputs that are not corroborated by market data. The fair value of Pars financial assets and liabilities
measured at fair value on a recurring basis were as follows ($ amounts in
thousands):  Estimated Fair Value at June 27,
2009

Level 1

Level 2

Level 3Securities issued by government
agencies      (Note
4)

$16,437

$ -

$16,437

$ -Debt securities issued by various state and local
    municipalities and agencies (Note 4)

28,078

-

28,078

-Other debt securities (Note
4)

18,465

-

18,465

-Marketable equity securities available for sale
Hana     Biosciences, Inc. (Note 4)

1,150

1,150

-

-Total investments in debt and marketable equity
    securities

$64,130

$1,150

$62,980

$ -   Note 6- Accounts Receivable: Par recognizes revenue for product
sales when title and risk of loss have transferred to its customers, when
reliable estimates of rebates, chargebacks, returns and other adjustments can be
made, and when collectability is reasonably assured. This is generally at the
time that products are received by the customers.  Upon recognizing revenue
from a sale, Par records estimates for chargebacks, rebates and incentive
programs, product returns, cash discounts and other sales reserves that reduce
accounts receivable. The following
tables summarize the impact of accounts receivable reserves and allowance for
doubtful accounts on the gross trade accounts receivable balances at each
balance sheet date ($ amounts in thousands):  June 27,

December 31,2009

2008Gross trade accounts receivable

$379,647

$194,661Chargebacks

(23,608)

(32,738)Rebates and incentive programs

(35,102)

(27,110)Returns

(39,196)

(38,128)Cash discounts and other

(19,790)

(13,273)Allowance for doubtful accounts

(1)

(4)Accounts receivable, net

$261,950

$83,408   Allowance for doubtful accounts

For the six-month period
endedJune 27,

June 28,2009

2008Balance at beginning of period

($4)

($20)Additions  charge to expense

-

-Adjustments and/or deductions

3

1Balance at end of period

($1)

($19)     13   The
following tables summarize the activity for the six months ended June 27, 2009
and the six months ended June 28, 2008,  in the accounts affected by the
estimated provisions described below ($ amounts in thousands):  For the Six Month Period Ended June
27, 2009Accounts receivable reserves

Beginning balance

Provision recorded for current
period sales

(Provision) reversal recorded for
prior period sales

Credits processed

Ending balanceChargebacks

($32,738)

($81,289)

($435)
(1)
$90,854

($23,608)Rebates and incentive programs

(27,110)

(53,382)

157

45,233

(35,102)Returns

(38,128)

(14,482)

(812)

14,226

(39,196)Cash discounts and other

(13,273)

(30,161)

-

23,644

(19,790)Total

($111,249)

($179,314)

($1,090)

$173,957

($117,696)Accrued liabilities(2)

($21,912)

($12,133)

$803

$9,183

($24,059)  For the Six Month Period Ended June
28, 2008Accounts receivable reserves

Beginning balance

Provision recorded for current
period sales

(Provision) reversal recorded for
prior period sales

Credits processed

Ending balanceChargebacks

($46,006)

($198,996)

($539)
(1)
$214,412

($31,129)Rebates and incentive programs

(42,859)

(42,513)

(1,571)
(3)
63,129

(23,814)Returns

(47,102)

(8,323)

4,293
(4)
12,234

(38,898)Cash discounts and other

(16,158)

(23,777)

349

28,442

(11,144)Total

($152,125)

($273,609)

$2,532

$318,217

($104,985)Accrued liabilities(2)

($17,684)

($13,966)

($192)

$8,183

($23,659)  (1) Unless
specific in nature, the amount of provision or reversal of reserves related to
prior periods for chargebacks is not determinable on a product or customer
specific basis; however, based upon historical analysis and analysis of activity
in subsequent periods, Par has determined that its chargeback estimates remain
reasonable. (2) Includes
amounts due to customers for which no underlying accounts receivable exists and
is principally comprised of Medicaid rebates and rebates due under other U.S.
Government pricing programs. (3) The
changes in accounts receivable reserves recorded for prior period sales related
to rebates and incentives programs are principally comprised of the finalization
of contract negotiations with a certain customer that resulted in an adjustment
of ($2.3) million to our rebates and incentive programs for sales made to that
customer in the fourth quarter of 2007.  With the exception of the
foregoing factor, there were no other factors that were deemed to be material
individually or in the aggregate. (4) The changes in
accounts receivable reserves recorded for prior period sales related to returns
principally comprised of the successful resolution in the six-month period ended
June 28, 2008 of a customer dispute over invalid customer deductions taken in
prior periods of $1.5 million, and an update to managements prior period
returns estimates of $2.8 million relating to the loss of a customer for certain
products and new returns information that became available during the six-month
period ended June 28, 2008.  Par sells its products directly to
wholesalers, retail drug store chains, drug distributors, mail order pharmacies
and other direct purchasers and customers that purchase its products indirectly
through the wholesalers, including independent pharmacies, non-warehousing
retail drug store chains, managed health care providers and other indirect
purchasers.  Par has entered into agreements at negotiated contract prices
with those health care providers that purchase products through Pars wholesale
customers at those contract prices.  Chargeback credits are issued to
wholesalers for the difference between Pars invoice price to the wholesaler and
the contract price through which the product is resold to health care providers.
 Approximately 44% of our net product sales were derived from the wholesale
distribution channel for the three months ended June 27, 2009 and 68%for
the three months ended June 28, 2008.  The information that Par considers
when establishing its chargeback reserves includes contract and non-contract
sales trends, average historical contract pricing, actual price changes,
processing time lags and customer inventory information from its three largest   14   wholesale customers.
 Pars chargeback provision and related reserve vary with changes in
product mix, changes in customer pricing and changes to estimated wholesaler
inventory.  Customer rebates and incentive
programs are generally provided to customers as an incentive for the customers
to continue carrying Pars products or replace competing products in their
distribution channels with products sold by Par.  Rebate programs are based
on a customers dollar purchases made during an applicable monthly, quarterly or
annual period.  Par also provides indirect rebates, which are rebates paid
to indirect customers that have purchased Pars products from a wholesaler under
a contract with Par.  The incentive programs include stocking or trade show
promotions where additional discounts may be given on a new product or certain
existing products as an added incentive to stock Pars products.  Par may,
from time to time, also provide price and/or volume incentives on new products
that have multiple competitors and/or on existing products that confront new
competition in order to attempt to secure or maintain a certain market share.
 The information that Par considers when establishing its rebate and
incentive program reserves are rebate agreements with and purchases by each
customer, tracking and analysis of promotional offers, projected annual sales
for customers with annual incentive programs, actual rebates and incentive
payments made, processing time lags, and for indirect rebates, the level of
inventory in the distribution channel that will be subject to indirect rebates.
 Par does not provide incentives designed to increase shipments to its
customers that it believes would result in out-of-the ordinary course of
business inventory for them.  Par regularly reviews and monitors estimated
or actual customer inventory information at its three largest wholesale
customers for its key products to ascertain whether customer inventories are in
excess of ordinary course of business levels.  Pursuant to a drug rebate agreement
with the Centers for Medicare and Medicaid Services, TriCare and similar
supplemental agreements with various states, Par provides a rebate on drugs
dispensed under such government programs.  Par determines its estimate of
the Medicaid rebate accrual primarily based on historical experience of claims
submitted by the various states and any new information regarding changes in the
Medicaid program that might impact Pars provision for Medicaid rebates.
 In determining the appropriate accrual amount Par considers historical
payment rates; processing lag for outstanding claims and payments; and levels of
inventory in the distribution channel.  Par reviews the accrual and
assumptions on a quarterly basis against actual claims data to help ensure that
the estimates made are reliable.  On January 28, 2008, the Fiscal Year 2008
National Defense Authorization Act was enacted, which expands TriCare to include
prescription drugs dispensed by TriCare retail network pharmacies.  TriCare
rebate accruals reflect this program expansion and are based on actual and
estimated rebates on Department of Defense eligible sales.  Par accepts returns of product
according to the following criteria: (i) the product returns must be approved by
authorized personnel with the lot number and expiration date accompanying any
request and (ii) Par generally will accept returns of products from any customer
and will provide the customer with a credit memo for such returns if such
products are returned within six months prior to, and until 12 months following,
such products expiration date. Par records a provision for product returns
based on historical experience, including actual rate of expired and damaged
in-transit returns, average remaining shelf-lives of products sold, which
generally range from 12 to 48 months, and estimated return dates.
 Additionally, Par considers other factors when estimating its current
period return provision, including levels of inventory in the distribution
channel, significant market changes that may impact future expected returns, and
actual product returns, and may record additional provisions for specific
returns that it believes are not covered by the historical rates.  Par offers cash discounts to its
customers, generally 2% of the sales price, as an incentive for paying within
invoice terms, which generally range from 30 to 90 days.  Par accounts for
cash discounts by reducing accounts receivable by the full amount of the
discounts that Par expects its customers to take.  In addition to the
significant gross-to-net sales adjustments described above, Par periodically
makes other sales adjustments.  Par generally accounts for these other
gross-to-net adjustments by establishing an accrual in the amount equal to its
estimate of the adjustments attributable to the sale.  Par may at its discretion provide
price adjustments due to various competitive factors, through shelf-stock
adjustments on customers existing inventory levels.  There are
circumstances under which Par may not provide price adjustments to certain
customers as a matter of business strategy, and consequently may lose future
sales volume to competitors and risk a greater level of sales returns on
products that remain in the customers existing inventory.  As detailed above, Par has the
experience and access to relevant information that it believes are necessary to
reasonably estimate the amounts of such deductions from gross revenues.
 Some of the assumptions used by Par for certain of its estimates are based
on information received from third parties, such as wholesale customer
inventories and market data, or other market factors beyond Pars control.
 The estimates that are most critical to the establishment of these
reserves, and therefore, would have the largest impact if these estimates were
not accurate, are estimates related to contract sales volumes, average contract
pricing, customer inventories and return volumes.  Par regularly reviews
the information related to these estimates and adjusts its reserves accordingly,
if and when actual experience differs from previous estimates.  With the
exception of the product returns allowance, the ending balances of accounts
receivable reserves and allowances generally are processed during a two-month to
four-month period.  Use of Estimates in Reserves Par believes that its reserves,
allowances and accruals for items that are deducted from gross revenues are
reasonable and appropriate based on current facts and circumstances.  It is
possible, however, that other parties applying reasonable judgment to the same
facts and circumstances could develop different allowance and accrual amounts
for items that are deducted from gross revenues.   15   Additionally, changes in
actual experience or changes in other qualitative factors could cause Pars
allowances and accruals to fluctuate, particularly with newly launched or
acquired products.  Par reviews the rates and amounts in its allowance and
accrual estimates on a quarterly basis. If future rates and amounts are
significantly greater than those reflected in its recorded reserves, the
resulting adjustments to those reserves would decrease Pars reported net
revenues; conversely, if actual product returns, rebates and chargebacks are
significantly less than those reflected in its recorded reserves, then the
resulting adjustments to those reserves would increase its reported net
revenues. If Par were to change its assumptions and estimates, its reserves
would change, which would impact the net revenues that Par reports.  Par
regularly reviews the information related to these estimates and adjusts its
reserves accordingly, if and when actual experience differs from previous
estimates.  Major Customers  Gross Accounts Receivable  June 27,

December 31,2009

2008McKesson Corporation

21%

36%CVS Caremark

16%

5%AmerisourceBergen Corporation

14%

17%Walgreen Corporation

10%

4%Other customers

39%

38%Total gross accounts receivable

100%

100%  During the six months ended June 27,
2009, Par shipped a greater percentage of metoprolol as compared to prior
periods directly to retail customers such as CVS and Walgreens to help alleviate
supply issues in the market.   Note 7- Inventories: ($ amounts in thousands) June 27,

December 31,2009

2008Raw materials and supplies

$16,348

$13,760Work-in-process

3,338

4,495Finished goods

35,386

24,249$55,072

$42,504  Inventory write-offs (inclusive of
pre-launch inventories detailed below) were $2.2 million for the quarter ended
June 27, 2009 and $1.8 million for the quarter ended June 28, 2008.
 Inventory write-offs were $4.7 million for the year-to-date period ended
June 27, 2009 and $4.9 million for the year-to-date period ended June 28, 2008.  Par
capitalizes inventory costs associated with certain products prior to regulatory
approval and product launch, based on management's judgment of reasonably
certain future commercial use and net realizable value, when it is reasonably
certain that the pre-launch inventories will be saleable.  The
determination to capitalize is made once Par (or its third party development
partners) has filed an Abbreviated New Drug Application (ANDA) that has been
acknowledged by the FDA for containing sufficient information to allow the FDA
to conduct their review in an efficient and timely manner and management is
reasonably certain that all regulatory and legal hurdles will be cleared.
 This determination is based on the particular facts and circumstances
relating to the expected FDA approval of the generic drug product being
considered, and accordingly, the time frame within which the determination is
made varies from product to product.  Par could be required to write down
previously capitalized costs related to pre-launch inventories upon a change in
such judgment, or due to a denial or delay of approval by regulatory bodies, or
a delay in commercialization, or other potential factors.  As of June 27,
2009, Par had approximately $1.5 million in inventories related to products that
were not yet available to be sold.  The amounts in the table below are
also included in the total inventory balances presented above. Pre-Launch Inventories ($ amounts in thousands) June 27,

December 31,2009

2008Raw materials and supplies

$1,529

$577Work-in-process

-

542Finished goods

-

474$1,529

$1,593   16      Pre-launch inventories at December 31,
2008 were mainly comprised of specific in-house developed products.  Since
that time, Par maintained the levels of non-commercial inventory flat by
launching new products during the first half of 2009 and replenishing raw
materials of anticipated future launches.  Write-offs of pre-launch
inventories, net of partner allocation, were $0 for the quarter ended June 27,
2009 and $1.0 million for the quarter ended June 28, 2008.  Write-offs of
pre-launch inventories, net of partner allocation, were $0.4 million for the
year-to-date period ended June 27, 2009 and $2.0 million for the year-to-date
period ended June 28, 2008.   Note 8  Property, Plant and Equipment, net: ($ amounts in thousands) June 27,

December 31,2009

2008Land

$1,882

$1,882Buildings

25,581

25,571Machinery and equipment

47,629

44,027Office equipment, furniture and
fixtures

4,841

4,774Computer software and hardware

43,687

29,179Leasehold improvements

11,911

11,548Construction in progress

4,016

16,462139,547

133,443Less accumulated depreciation and
amortization

60,276

54,004$79,271

$79,439  Depreciation and amortization expense
related to property, plant and equipment was $3.0 million and $3.1 million for
the three months ended June 27, 2009 and June 28, 2008.   Depreciation
and amortization expense related to property, plant and equipment was $5.5
million and $6.9 million for the six months ended June 27, 2009 and June 28,
2008.   Note 9- Intangible Assets, net: ($ amounts in thousands)  June
27,

December
31,2009

2008QOL Medical, LLC Asset Purchase
Agreement, net of accumulated amortization of
           $1,140

$53,581

$ -Spectrum Development and
Marketing Agreement, net of accumulated amortization
           of  $16,215
and $6,839

8,785

18,161Trademark licensed from
Bristol-Myers Squibb Company, net of accumulated
           amortization
of $4,549 and $3,850

5,452

6,151Paddock Licensing Agreement, net
of accumulated amortization of $2,750 and $2,250

3,250

3,750Genpharm, Inc. Distribution
Agreement, net of accumulated amortization of $7,943
           and
$7,582

2,890

3,251SVC Pharma LP License and
Distribution Agreement, net of accumulated
          amortization of
$1,555 and $1,106

2,129

2,578MDRNA, Inc. Asset Purchase
Agreement, net of accumulated amortization of $0

1,400

-FSC Laboratories Agreement, net
of accumulated amortization of $5,068 and $4,816

754

1,006Other intangible assets, net of
accumulated amortization of $5,237 and $5,216

11

32Bristol-Myers Squibb Company
Asset Purchase Agreement, net of accumulated
        amortization of
$11,699 and $11,420

-

279$78,252

$35,208  Par recorded amortization expense
related to intangible assets of $13.1 million for the six-month period ended
June 27, 2009 and $4.5 million for the six-month period ended June 28, 2008, and
the majority of this amortization expense is included in cost of goods sold.  During the three-month period ended
June 27, 2009, the Company acquired the rights to Nascobal® Nasal Spray
from QOL   17   Medical, LLC for $54.5 million
in cash and the assumption of certain liabilities. The purchase price of
the acquisition has been allocated to the net tangible and intangible assets
acquired on the basis of estimated fair values.  The Company allocated the
purchase price based on input from third party appraisals. The fair value
of the product rights received is being amortized on a straight-line basis over
twelve years. Refer to Nascobal® in Note
19, Acquisitions.  During the three-month period ended
June 27, 2009, the Company acquired additional rights to calcitonin, a generic
drug, from MDRNA, Inc., mainly in order to facilitate the acquisition of the
rights to Nascobal® Nasal
Spray.  The purchase price of the acquisition has been allocated to the net
tangible and intangible assets acquired on the basis of estimated fair values.
 The Company allocated the purchase price based on input from third party
appraisals.  This asset has a fair market value of $1.4 million and will be
amortized over its estimated useful life of 2 years.  Refer to MDRNA,
Inc. in Note 19, Acquisitions. Amortization
expense related to the intangible assets currently being amortized is expected
to total approximately $9.2 million for the remainder of 2009, $12.4 million in
2010, $11.0 million in 2011, $7.4 million in 2012, $5.2 million in 2013, and
$33.1 million thereafter.  Par evaluates all intangible assets
for impairment quarterly or whenever events or other changes in circumstances
indicate that the carrying value of an asset may no longer be recoverable.
 As of June 27, 2009, Par believes its net intangible assets are
recoverable.   Note 10- Income Taxes:  Par reflects interest and penalties
attributable to income taxes, to the extent they arise, as a component of its
income tax provision or benefit. The IRS is
currently examining Pars 2003-2007 federal income tax returns.  Prior
periods have either been audited or are no longer subject to IRS audit.
 Par is currently under audit by two state jurisdictions for the years
2003-2005.  In most other state jurisdictions, Par is no longer subject to
examination by tax authorities for years prior to 2004.  Current deferred income tax assets at
June 27, 2009 consisted of temporary differences primarily related to accounts
receivable reserves.  Current deferred income tax assets at December 31,
2008 consisted of temporary differences primarily related to accounts receivable
reserves and accrued expenses.  Non-current deferred income tax assets at
June 27, 2009 and December 31, 2008 consisted of the tax benefit related to
purchased call options, acquired in-process research and development and timing
differences primarily related to intangible assets and stock options.  Pars effective tax rate for
continuing operations for the three months ended June 27, 2009 was 37% and 28%
for the three months ended June 28, 2008.  Pars effective tax rate for
continuing operations for the six months ended June 27, 2009 was 37% and 28% for
the six months ended June 28, 2008.   Note 11 -
Long-Term Debt: Long-Term Debt ($ amounts in thousands) June 27,

December 31,2009

2008Senior subordinated convertible
notes

$120,038

$130,141Less current portion

-

(130,141)$120,038

$-  On June 27, 2009, the senior
subordinated convertible notes had a face value of $128.2 million and a quoted market value of approximately
$122.4 million.  On December 31, 2008, the senior subordinated convertible
notes had a face value of $142 million and a quoted market value of
approximately $112 million.  The notes bear interest at an annual rate of
2.875%, payable semi-annually on March 30 and September 30 of each year.
 The notes are convertible into common stock at an initial conversion price
of $88.76 per share, upon the occurrence of certain events.  Upon
conversion, Par has agreed to satisfy the conversion obligation in cash in an
amount equal to the principal amount of the notes converted.  The notes
mature on September 30, 2010, unless earlier converted or
repurchased.  Par may not redeem the notes prior to their maturity
date.  See Legal Proceedings in Note 14,
Commitments, Contingencies and Other Matters for discussion involving notices
of default and acceleration Par received from the Trustee of Pars 2.875% senior
subordinated convertible notes due 2010 and the related litigation that resulted
in Par reflecting the obligations as a current liability as of December 31,
2008.  In June 2009, the lawsuit was   18   dismissed; and as a result Par
reflected the obligations as a long-term liability, in accordance with the
September 30, 2010 maturity date of the notes, on the condensed consolidated
balance sheet as of June 27, 2009.  In March 2009, Par repurchased senior
subordinated convertible notes in the aggregate principal (face) amount of $2.5
million for approximately $2.3 million, including accrued interest.  Par
recorded a gain of approximately $0.2 million in the first quarter of 2009
related to this debt extinguishment.  In June 2009, Par repurchased senior
subordinated convertible notes in the aggregate principal amount of $11.3
million for approximately $10.8 million, including accrued interest.  Par
recorded a gain of approximately $0.5 million, in the second quarter of 2009
related to this debt extinguishment.  Subsequent to June 27, 2009, Par
repurchased additional senior subordinated notes.  Refer to Note 21,
Subsequent Events for further details.  See Note 2, Change in Accounting
Principle and Related Adjustments to Previously Issued Financial Statements for
the impact of the adoption of FSP APB 14-1.   Note 12- Changes in Stockholders Equity: Changes
in Pars Common Stock, Additional Paid-In Capital and Accumulated Other
Comprehensive Income/(Loss) accounts during the six-month period ended June 27,
2009 were as follows: AccumulatedAdditional

OtherCommon Stock

Paid-In

ComprehensiveShares

Amount

Capital

Income/(Loss)Balance, December 31, 2008

37,392

$374

$319,976

$122Unrealized gain on available for sale securities,
    net of tax

-

-

-

694Exercise of stock options

17

-

109

-Tax benefit from exercise of stock options

-

-

37

-Tax deficiency related to vesting of restricted
    stock

-

-

(1,484)

-Issuance of common stock under the Employee
    Stock Purchase Program

-

-

102

-Forfeitures of restricted stock

(96)

(1)

1

-Issuances of restricted stock

248

2

(2)

-Compensatory arrangements

-

-

7,243

-Other

-

-

(809)

-Balance, June 27, 2009

37,561

$375

$325,173

$816  Comprehensive Income
(Loss)

Three months ended

Six months endedJune 27,

June 28,

June 27,

June 28,2009

2008

2009

2008Net income
(loss)

$23,811

($21,227)

$39,890

($19,783)Other comprehensive income
(loss):Unrealized gain on marketable securities, net
of tax

724

445

660

127Less: reclassification adjustment for net losses
    included in net income, net of tax

-

-

34

-Comprehensive income (loss)

$24,535

($20,782)

$40,584

($19,656)  In April 2004, Pars Board of
Directors authorized the repurchase of up to $50.0 million of Pars common
stock.  The repurchases may be made, subject to compliance with applicable
securities laws, from time to time in the open market or in privately negotiated
transactions.  Shares of common stock acquired through the repurchase
program are and will be available for general corporate purposes.  Par had
repurchased 849 thousand shares of its common stock for approximately $32.2
million pursuant to the April 2004 authorization.  On September 28, 2007,
Par announced that its Board approved an expansion of its share repurchase
program allowing for the repurchase of up to $75.0 million of Pars common
stock, inclusive of the $17.8 million remaining from the April 2004
authorization.  Par repurchased 1,643 thousand shares of its common stock
for approximately $31.4 million pursuant to the   19   expanded program in 2007.
 The authorized amount remaining for stock repurchases under the repurchase
program was $43.6 million, as of June 27, 2009.  The repurchase program has
no expiration date. See Note 2,
Change in Accounting Principle and Related Adjustments to Previously Issued
Financial Statements for the impact of the adoption of FSP APB 14-1.   Note 13- Earnings Per Share: The following is a reconciliation of
the amounts used to calculate basic and diluted earnings per share:  Three months ended

Six months endedJune 27,

June 28,

June 27,

June 28,2009

2008

2009

2008Income (loss) from continuing operations

$23,987

($20,959)

$40,242

($19,575)Gain from discontinued operations

-

-

-

505Provision for income taxes

176

268

352

713Gain (loss) from discontinued operations

(176)

(268)

(352)

(208)Net income
(loss)

$23,811

($21,227)

$39,890

($19,783)Basic:Weighted average number of common shares
    outstanding

33,630

33,304

33,616

33,262Income (loss) from continuing operations

$0.71

($0.63)

$1.20

($0.59)Gain (loss) from discontinued operations

0.00

(0.01)

(0.01)

(0.01)Net income (loss) per share of common stock

$0.71

($0.64)

$1.19

($0.60)Assuming dilution:Weighted average number of common shares
    outstanding

33,630

33,304

33,616

33,262Effect of dilutive securities

141

-

156

-Weighted average number of common and
    common equivalent shares
outstanding

33,771

33,304

33,772

33,262Income (loss) from continuing operations

$0.71

($0.63)

$1.19

($0.59)Gain (loss) from discontinued operations

0.00

(0.01)

(0.01)

(0.01)Net income (loss) per share of common
    stock

$0.71

($0.64)

$1.18

($0.60)  Outstanding options of 4.0 million as
of June 27, 2009 and 4.1 million as of June 28, 2008 were not included in the
computation of diluted earnings per share because their exercise prices were
greater than the average market price of the common stock during the respective
periods and their inclusion would, therefore, have been anti-dilutive.  For
the three months and six months ended June 27, 2009, restricted stock grants
with market conditions were not included in the calculation of diluted earnings
per share because the Total Stockholder Return (TSR) on Pars common stock did
not exceed a minimum TSR relative to Pars stock price at the beginning of the
vesting period.  In addition, outstanding warrants sold concurrently with
the sale of the senior subordinated convertible notes in September 2003 and
issued in conjunction with the acquisition of Kali in June 2004 were not
included in the computation of diluted earnings per share as of June 27, 2009
and June 28, 2008.  The warrants related to the notes are exercisable for
an aggregate of 1,444 thousand shares of common stock at an exercise price of
$105.20 per share and the warrants related to the Kali acquisition are
exercisable for an aggregate of 150 thousand shares of common stock at an
exercise price of $47.00 per share.   Note 14- Commitments, Contingencies and
Other Matters: Legal
Proceedings Unless otherwise indicated in the
details provided below, Par cannot predict with certainty the outcome or the
effects on Par of the litigations described below.  The outcome of these
litigations could include substantial damages, the imposition of substantial
fines, penalties, and injunctive or administrative remedies, however unless
otherwise indicated, Par at this time is not able to estimate the possible loss
or range of loss, if any, associated with these legal proceedings.   20    Contractual Matters On May 3, 2004, Pentech
Pharmaceuticals, Inc. (Pentech) filed an action against Par in the United
States District Court for the Northern District of Illinois.  This action
alleged that Par breached its contract with Pentech relating to the supply and
marketing of paroxetine (Paxil®) and that Par breached fiduciary duties
allegedly owed to Pentech.  On February 9, 2009, following a bench trial,
the district court entered a judgment in favor of Pentech and against Par in the
amount of $70 million.  Subsequently, on March 5, 2009, in order to avoid
any further costs, burdens or distractions of litigation, Par entered into a
settlement agreement with Pentech pursuant to which Par paid Pentech an amount
of approximately $66 million.  Pursuant to the terms of the agreement, a
stipulation dismissing the appeal of judgment and Pentechs satisfaction of
judgment was filed with the District Court.  Corporate Litigation Par and certain of its former
executive officers have been named as defendants in consolidated class action
lawsuits filed on behalf of purchasers of common stock of Par between July 23,
2001 and July 5, 2006. The lawsuits followed Pars July 5, 2006 announcement
regarding the restatement of certain of its financial statements and allege that
Par and certain members of its then management engaged in violations of the
Securities Exchange Act of 1934, as amended (the Exchange Act), by issuing
false and misleading statements concerning Pars financial condition and results
of operations. The class actions are pending in the United States District
Court, District of New Jersey.  On June 24, 2008, the Court dismissed
co-lead plaintiffs Consolidated Amended Complaint without prejudice with leave
to re-file.  On July 24, 2008, co-lead plaintiffs filed a Second
Consolidated Amended Complaint. Par and the individual defendants have filed a
motion to dismiss.  The motion has been fully briefed but not yet scheduled
for argument.  Par and the individual defendants intend to vigorously
defend the class action.  On
September 1, 2006, Par received a notice of default from the American Stock
Transfer & Trust Company, as trustee (the Trustee)  of Pars 2.875%
Senior Subordinated Convertible Notes due 2010 (the Notes). The Trustee
claimed, in essence, that Pars failure to include financial statements in its
Quarterly Report on Form 10-Q for the second quarter of 2006 constituted a
default under Section 6.2 of the Indenture, dated as of September 30,
2003 (the Indenture), between Par, as issuer, and the Trustee, relating to the
Notes.  Under the Indenture, Par is required only to provide the Trustee
with copies of its annual and other reports (or copies of such portions of such
reports as the SEC may by rules and regulations prescribe) that it is required
to file with the SEC pursuant to Section 13 or 15(d) of the Exchange Act within
15 calendar days after it files such annual and other reports with the SEC.
Moreover, Pars Indenture specifically contemplates providing the Trustee with
portions of reports. On August 24, 2006 (within 15 days of filing with the SEC),
Par provided to the Trustee a copy of its Quarterly Report on Form 10-Q for the
second quarter of 2006. Pars Form 10-Q did not include Pars financial
statements for the second quarter of 2006 and related Managements Discussion
and Analysis due to Pars work to restate certain of its past financial
statements, and, therefore, in accordance with SEC rules, Par filed a Form
12b-25 Notification of Late Filing disclosing the omissions. Pars Form 12b-25
also was provided to the Trustee on August 24, 2006. Accordingly, Par believes
that it complied with the Indenture provision in question. After Par communicated its position to
the Trustee, the Trustee filed a lawsuit, on October 19, 2006, on behalf of
the holders of the Notes, in the Supreme Court of the State of New York, County
of New York, alleging a breach of the Indenture and of an alleged covenant of
good faith and fair dealing. The lawsuit demanded, among other things, that Par
pay the holders of the Notes either the principal, any accrued and unpaid
interest and additional interest (as such term is defined in the Indenture), if
any, or the difference between the fair market value of the Notes on
October 2, 2006 and par, whichever the Trustee elects, or in the
alternative, damages to be determined at trial, alleged by the Trustee to exceed
$30.0 million. Par removed the lawsuit to the U.S. District Court for the
Southern District of New York and filed its answer to the complaint in that
Court. On January 19, 2007, the Trustee filed a motion for summary
judgment. On February 16, 2007, Par filed its response to the Trustees motion
for summary judgment and cross-moved for summary judgment in its favor.  On
June 19, 2009, the U.S. District Court for the Southern District of New York
dismissed the lawsuit.  On June 22, 2009, the Court issued its opinion and
order denying the Trustees motion for summary judgment and granting Pars
cross-motion for summary judgment.  The Court ruled that Pars actions
did not breach the Indenture and dismissed all of the Trustees claims.  Patent Related Matters  On April 28,
2006, CIMA Labs, Inc. (CIMA) and Schwarz Pharma, Inc. (Schwarz Pharma) filed
separate lawsuits against Par in the United States District Court for the
District of New Jersey.  CIMA and Schwarz Pharma each have alleged that Par
infringed U.S. Patent Nos. 6,024,981 (the 981 patent) and 6,221,392 (the
392 patent) by submitting a Paragraph IV certification to the FDA for
approval of alprazolam orally disintegrating tablets.  CIMA owns the 981
and 392 patents and Schwarz Pharma is CIMAs exclusive licensee.  The two
lawsuits were consolidated on January 29, 2007.  In response to the
lawsuit, Par has answered and counterclaimed denying CIMAs and Schwarz Pharmas
infringement allegations, asserting that the 981 and 392 patents are not
infringed and are invalid and/or unenforceable. All 40 claims in the 981 patent
were rejected in two non-final office actions in a reexamination proceeding at
the United States Patent and Trademark Office (PTO) on February 24, 2006 and
on February 24, 2007.  The 392 patent is also the subject of a
reexamination proceeding.  As of July 10, 2008, the PTO has rejected with
finality all claims pending in both the 392 and 981 patents.  CIMA has
moved to stay this lawsuit pending the outcome of the reexamination proceedings
and to consolidate this lawsuit with another lawsuit in the same district
involving the same patents (CIMA Labs, Inc. et al.   21   v.
Actavis Group hf et al.). Par intends to vigorously defend this lawsuit and
pursue its counterclaims. Par entered
into a licensing agreement with developer Paddock Laboratories, Inc. (Paddock)
to market testosterone 1% gel, a generic version of Unimed Pharmaceuticals,
Inc.s (Unimed) product Androgel®.  Pursuant to this agreement, Par is
responsible for management of any litigation and payment of all legal fees
associated with this product.  The product, if successfully brought to
market, would be manufactured by Paddock and marketed by Par.  Paddock has
filed an ANDA (that is pending with the FDA) for the testosterone 1% gel
product.  As a result of the filing of the ANDA, Unimed and Laboratories
Besins Iscovesco (Besins), co-assignees of the patent-in-suit, filed a lawsuit
against Paddock in the United States District Court for the Northern District of
Georgia, alleging patent infringement on August 22, 2003.  Par has an
economic interest in the outcome of this litigation by virtue of its licensing
agreement with Paddock.  Unimed and Besins sought an injunction to prevent
Paddock from manufacturing the generic product.  On September 13, 2006, Par
acquired from Paddock all rights to the ANDA for testosterone 1% gel, a generic
version of Unimeds product Androgel® for $6 million.  The lawsuit was
resolved by a settlement and license agreement that terminates all on-going
litigation and permits Par to launch the generic version of the product no
earlier than August 31, 2015 and no later than February 28, 2016, assuring Pars
ability to market a generic version of Androgel® well before the expiration of
the patents at issue.  On March 7, 2007, Par was issued a Civil
Investigative Demand seeking information and documents in connection with the
court-approved settlement in 2006 of the patent infringement case, Unimed v.
Paddock, in the U.S. District Court for Northern District of Georgia.  The
Bureau of Competition for the Federal Trade Commission (FTC) is investigating
whether the settlement of the litigation constituted unfair methods of
competition in a potential violation of Section 5 of the FTC Act.  On
January 30, 2009, the FTC filed a lawsuit against the Company in the U.S.
District Court for the District of Central California alleging violations of
antitrust laws stemming from Pars court-approved settlement in the patent
litigation.  On February 2, 2009, Meijer Distribution, Inc. filed a class
action complaint in the same district court alleging antitrust violations and
seeking treble damages. On February 3, 2009, both Rochester Drug Co-Operative,
Inc. and Louisiana Wholesale Drug Co., Inc. filed class action complaints in the
same district court.  On April 9, 2009, the U.S. District Court for Central
California granted Pars motion to transfer the FTC lawsuit, as well as the
three aforementioned class action suits, to the U.S. District Court for Northern
Georgia, the jurisdiction in which Pars original consent judgment relating to
the patent litigation settlement entered.  On April 10, 2009, the cases
were transferred.  On April 17, 2009 the Fraternal Order of Police, Fort
Lauderdale Lodge 31 Insurance Trust Fund filed a class action complaint naming
Par in the U.S. District Court for the District of New Jersey and on April 21,
2009 Raymond Scurto on behalf of another class, filed a second class action
complaint naming Par in the same court both alleging antitrust violations.
 On May 28, 2009, the FTC filed an amended complaint in the United States
District Court, Northern District of Georgia, realleging violations of antitrust
laws stemming from Pars court-approved settlement in the patent litigation but
dropping its California state claims as well as its first Sherman Act claim.
 On June 18, 2009, Rite Aid, Eckerd, and CVS, among others, filed a class
action complaint naming Par in the U.S. District Court for the Middle District
of Pennsylvania alleging antitrust violations.  On June 29, 2009,
Walgreens, among others, filed a class action complaint naming Par in the U.S.
District Court for the Middle District of Pennsylvania as well, alleging
antitrust violations.  Par believes it has complied with all applicable
laws in connection with the court-approved settlement and intends to vigorously
defend these actions. On December 19, 2006, Reliant
Pharmaceuticals, Inc. (Reliant) filed a lawsuit against Par in the United
States District Court for the District of Delaware.  Reliant alleged, in
its Complaint, that Par infringed U.S. Patent No. 5,681,588 (the 588 patent)
by submitting a Paragraph IV certification to the FDA for approval to market
generic 325 mg Propafenone HCl SR capsules.  On January 26, 2007, Reliant
amended its complaint to add the additional allegation that Par infringed the
588 patent by submitting a Paragraph IV certification to the FDA for approval
to market generic 225 mg and 425 mgin addition to the 325 mgPropafenone HCl SR
capsules.  Par has Answered and Counterclaimed denying Reliants
infringement allegations, and asserting that the 588 patent is invalid and
unenforceable.  On April 17, 2009, a dismissal with prejudice was entered
in the case pursuant to a settlement agreement between the parties.  In
view of this agreement, Par will enter the market with generic Rythmol SR on
January 1, 2011 or earlier depending on certain circumstances.  On May 9, 2007, Purdue Pharma Products
L.P. (Purdue), Napp Pharmaceutical Group Ltd. (Napp), Biovail Laboratories
International SRL (Biovail), and Ortho-McNeil, Inc. (Ortho-McNeil) filed a
lawsuit against Par in the United States District Court for the District of
Delaware.  The complaint alleges infringement of U.S. Patent No. 6,254,887
(the 887 patent) because Par submitted a Paragraph IV certification to the
FDA for approval of 200 mg extended release tablets containing tramadol
hydrochloride.  On May 30, 2007, Par filed its Answer and Counterclaim to
the Complaint seeking a declaration of noninfringement and invalidity of the
'887 patent.  A subsequent Complaint was served on July 2, 2007 in the same
District Court.  The new Complaint alleges that Par's 100 mg and 200 mg
extended release tablets containing tramadol hydrochloride infringe the 887
patent.  Par filed its Answer and Counterclaim on July 23, 2007 and will
assert all available defenses in addition to seeking a declaration of
noninfringement and invalidity of the '887 patent.  On October 24, 2007,
plaintiffs filed an amended complaint in the Delaware District Court in view of
Par's amendment of its ANDA to include the 300 mg strength of extended release
tramadol. On April 22, 2009, Pars bench trial in U.S. District Court of
Delaware concluded and Par filed its post-trial briefs on May 23, 2009 and its
replies on June 15, 2009.   Par awaits the courts decision and
intends to defend this action vigorously and pursue its counterclaims against
the plaintiffs.  On July 6, 2007, Sanofi-Aventis and
Debiopharm, S.A. filed a lawsuit against Par and its development partner, MN
Pharmaceuticals ("MN"), in the United States District Court for the District of
New Jersey.  The complaint alleges infringement of   22   U.S. Patent Nos. 5,338,874 and
5,716,988 because Par and MN submitted a Paragraph IV certification to the FDA
for approval of 50 mg/10 ml, 100 mg/20 ml, and 200 mg/40 ml oxaliplatin by
injection.  Par and MN filed their Answer and Counterclaims on October 10,
2007 and an amendment to it on October 22, 2007.  On January 14, 2008,
following MN's amendment of its ANDA to include oxaliplatin injectable 5 mg/ml,
40 ml vial, Sanofi-Aventis filed a complaint asserting infringement of the '874
and the '988 patents.  Par and MN filed their Answer and Counterclaim on
February 20, 2008.  The court has set an expert discovery deadline of June
9, 2009, with all motions due by June 15, 2009.  On June 18, 2009, the U.S.
District Court granted summary judgment of non-infringement to several
defendants including Par on the 874 patent but has not rendered a summary
judgment decision regarding the 988 patent to date.  On June 15, 2009, Par
filed motions for summary judgment concerning two additional patents to
accompany the Companys earlier filed summary judgment motions on the 874 and
988 patents.  Par and MN intend to defend these actions vigorously and
pursue their counterclaims against Sanofi and Debiopharm.  On September 21, 2007, Sanofi-Aventis
and Sanofi-Aventis U.S., LLC (Sanofi-Aventis) filed a lawsuit against Par and
its development partner, Actavis South Atlantic LLC ("Actavis"), in the United
States District Court for the District of Delaware.  The complaint alleges
infringement of U.S. Patent Nos. 4,661,491 and 6,149,940 because Par and Actavis
submitted a Paragraph IV certification to the FDA for approval of 10 mg
alfuzosin hydrochloride extended release tablets. Par has filed an Answer to the
Complaint and counterclaims that the patents asserted are not infringed and are
invalid.  On April 3, 2008, the judge ordered all actions in the case
stayed pending the plaintiffs motion for transfer and consolidation under the
rules governing multi-district litigation.  On June 9, 2008, the
Multi-District Litigation Panel granted plaintiffs motion for transfer and
consolidation and lifted the stay of litigation.  On December 24, 2008, Par
agreed to terminate its collaboration agreement with Actavis and, with it, all
obligations and all benefits related to Alfuzosin.  An order for stipulated
dismissal of Par from the litigation was entered May 9, 2009.  On October 1, 2007, Elan
Corporation, PLC (Elan) filed a lawsuit against Par and its development
partner, IntelliPharmaCeutics Corp., and IntelliPharmaCeutics Ltd. ("IPC") in
the United States District Court for the District of Delaware.  On October
5, 2007, Celgene Corporation (Celgene) and Novartis filed a lawsuit against
IPC in the United States District Court for the District of New Jersey.
 The Complaint in the Delaware case alleged infringement of U.S. Patent
Nos. 6,228,398 and 6,730,325 because Par submitted a Paragraph IV certification
to the FDA for approval of 5, 10, 15, and 20 mg dexmethylphenidate hydrochloride
extended release capsules.  The original Complaint in the New Jersey case
alleged infringement of U.S. Patent Nos. 6,228,398; 6,730,325; 5,908,850;
6,355,656; 6,528,530; 5,837,284; and 6,635,284 because Par and IPC submitted a
Paragraph IV certification to the FDA for approval of 5, 10, 15, and 20 mg
dexmethylphenidate extended release capsules.  Par and IPC filed an Answer
and Counterclaims in both the Delaware case and the New Jersey case.  Elan
filed a motion to consolidate the cases on January 2, 2008, and on February 20,
2008, the judge in the Delaware litigation consolidated all four related cases
pending in Delaware and entered a scheduling order providing for April 15, 2009
as the deadline for all discovery, June 29, 2009 as the date for a Markman
hearing, and August 17, 2009 as the date for a bench trial.  The Delaware
court has established a March 5, 2009 deadline for fact discovery and a June 15,
2009 deadline for expert discovery.  A Rule 16 conference was held for the
New Jersey litigation on March 4, 2008 setting a deadline of December 12, 2008
for all discovery with a Markman hearing scheduled for June 19, 2009.  The
New Jersey court has set a fact discovery deadline of March 1, 2009.  On
July 1, 2009, the Delaware district court removed the trial, pre-trial
conference, and claim construction hearing from the calendar with discovery due
November 6, 2009 and claim construction briefing due November 9, 2009.  Par
intends to defend these actions vigorously and pursue its counterclaims against
Elan, Celgene and Novartis.  On September 13, 2007, Santarus, Inc.
(Santarus), and The Curators of the University of Missouri (Missouri) filed
a lawsuit against Par in the United States District Court for the District of
Delaware.  The Complaint alleges infringement of U.S. Patent Nos.
6,699,885; 6,489,346; and 6,645,988 because Par submitted a Paragraph IV
certification to the FDA for approval of 20 mg and 40 mg omeprazole/sodium
bicarbonate capsules.  Par filed its Answer and Counterclaims on October
17, 2007.  A scheduling conference was held February 11, 2008, setting
September 8, 2008 as the date for the claim construction hearing and July 13,
2009 as the first day of the bench trial. On December 20, 2007, Santarus, Inc.,
and Missouri filed a second lawsuit against Par in the United States District
Court for the District of Delaware alleging infringement of U.S. Patent Nos.
6,699,885; 6,489,346; 6,780,882; and 6,645,988 because Par submitted a Paragraph
IV certification to the FDA for approval of 20 mg and 40 mg omeprazole/sodium
bicarbonate powders for oral suspension.  Par filed an Answer and
Counterclaims in this action as well.  On March 4, 2008, the cases
pertaining to Pars ANDAs for omeprazole capsules and omeprazole oral suspension
(see below) were consolidated for all purposes.  Par filed its claim
construction brief on August 22, 2008, and its answering brief on September 22,
2008, as the Court rescheduled the Markman hearing.  The Court held a
Markman hearing on November 5, 2008 and issued its claim construction order on
the same day.  The Delaware District Court conducted a bench trial from
July 13-17, 2009, and found for Santarus only on the issue of infringement,
while not rendering an opinion on the issues of invalidity and
unenforceability.  The parties will participate in post-trial briefing with
initial briefs due August 14, 2009.  Par intends to defend this action
vigorously and pursue its counterclaims against Santarus and Missouri.  On December 11, 2007, AstraZeneca
Pharmaceuticals, LP, AstraZeneca UK Ltd., IPR Pharmaceuticals, Inc. and Shionogi
Seiyaku Kabushiki Kaisha filed a lawsuit against Par in the United States
District Court for the District of Delaware.  The Complaint alleges patent
infringement because Par submitted a Paragraph IV certification to the FDA for
approval of 5 mg, 10 mg, 20 mg and 40 mg rosuvastatin calcium tablets.  Par
filed an Answer and Counterclaims, and on April 11, 2008, the court held a
scheduling   23   conference setting the Markman
hearing for March 10, 2009, the pre-trial conference for January 11, 2010, and a
bench trial for February 15, 2010. Par intends to defend these actions
vigorously and pursue its counterclaims against AstraZeneca Pharmaceuticals, LP,
AstraZeneca UK Ltd., IPR Pharmaceuticals, Inc. and Shionogi Seiyaku Kabushiki
Kaisha.  On November 14, 2008, Pozen, Inc.
filed a lawsuit against Par in the United States District Court for the Eastern
District of Texas.  The Complaint alleges infringement of U.S. Patent Nos.
6,060,499; 6,586,458; and 7,332,183 because Par submitted a Paragraph IV
certification to the FDA for approval of 500 mg/85 mg naproxen
sodium/sumatriptan succinate oral tablets.  Par filed an Answer and
Counterclaims on December 8, 2008 and the court has scheduled a Markman hearing
for February 2010 and trial for October 2010.  On March 17, 2009, Par filed
an Amended Answer and Counterclaim in order to join GlaxoSmithKline as a
counterclaim defendant in this litigation.  On April 28, 2009, GSK was
dismissed from the case by the Court, but will be bound by its decision and will
be required to produce witnesses and materials during discovery.  Par
intends to defend this action vigorously and pursue its counterclaims against
Pozen.  On April 15, 2009, Par filed a
declaratory judgment Complaint against Novartis and Ajinomoto Co., Inc. in the
United States District Court for the Eastern District of Pennsylvania.  The
complaint seeks declaratory judgment of invalidity and non-infringement of U.S.
Patent Nos. 5,463,116; 5,488,150; 6,559,188; 6,641,841; 6,844,008; and 6,878,749
in view of Pars December 22, 2004 submission of a Paragraph IV certification to
the FDA for approval of 60 mg and 120 mg nateglinide oral tablets.  Par
intends to prosecute this action vigorously against Novartis and Ajinomoto.  On April 29, 2009, Pronova BioPharma
ASA filed a lawsuit against Par in the United States District Court for the
District of Delaware.  The complaint alleges infringement of U.S. Patent
Nos. 5,502,077 and 5,656,667 because Par submitted a Paragraph IV certification
to the FDA for approval of omega-3-acid ethyl esters oral capsules.  Par
intends to defend this action vigorously and pursue its defenses and
counterclaims against Pronova.  On July 1, 2009, Alcon Research Ltd.
filed a lawsuit against Par in the United States District Court for the District
of Delaware.  The complaint alleges infringement of U.S. Patent Nos.
5,510,383; 5,631,287; 5,849,792; 5,889,052; 6,011,062; 6,503,497; 6,849,253
because Par submitted a Paragraph IV certification to the FDA for approval of
0.004% travoprost ophthalmic solutions and 0.004% travoprost ophthalmic
solutions (preserved).  Par intends to defend this action vigorously and
pursue its defenses and counterclaims against Alcon.  Industry Related
Matters  Beginning in September 2003, Par,
along with numerous other pharmaceutical companies, has been named as a
defendant in actions brought by state Attorneys General and a number of
municipal bodies within the state of New York, as well as a federal qui tamaction brought on behalf of the United States by the pharmacy Ven-A-Care of
the Florida Keys, Inc. ("Ven-A-Care") alleging generally that the defendants
defrauded the state Medicaid systems by purportedly reporting Average Wholesale
Prices (AWP) and/or Wholesale Acquisition Costs that exceeded the actual
selling price of the defendants prescription drugs.  To date, Par has been
named as a defendant in substantially similar civil law suits filed by the
Attorneys General of Alabama, Alaska, Hawaii, Idaho, Illinois, Iowa, Kentucky,
Massachusetts, Mississippi, South Carolina, Texas and Utah, and also by the city
of New York, 46 counties across New York State and Ven-A-Care.  These cases
generally seek some combination of actual damages, and/or double damages, treble
damages, compensatory damages, statutory damages, civil penalties, disgorgement
of excessive profits, restitution, disbursements, counsel fees and costs,
litigation expenses, investigative costs, injunctive relief, punitive damages,
imposition of a constructive trust, accounting of profits or gains derived
through the alleged conduct, expert fees, interest and other relief that the
court deems proper. Several of these cases have been transferred to the AWP
multi-district litigation proceedings pending in the U.S. District Court for the
District of Massachusetts for pre-trial proceedings.  The case brought by
the state of Mississippi will be litigated in the Chancery Court of Rankin
County, Mississippi and the federal case brought by Ven-A-Care will be litigated
in the United States District of Massachusetts.  The other cases will
likely be litigated in the state or federal courts in which they were
filed.  In the Utah suit, the time for responding to the Complaint has not
yet elapsed.  In each of the remainder of these matters, Par has either
moved to dismiss the complaints or answered the complaints denying
liability.  Par intends to defend each of these actions vigorously. In
addition, at various times between 2006 and 2009, the Attorneys General of
Florida, Indiana and Virginia and the United States Office of Personnel
Management (the USOPM) issued subpoenas, and the Attorneys General of
Michigan, Tennessee and Texas issued civil investigative demands, to Par. 
The demands generally request documents and information relating to sales and
marketing practices that allegedly caused pharmacies to dispense higher priced
drugs when presented with prescriptions for certain products.  Par has
provided, or is in the process of providing, certain documents in response to
these subpoenas to the respective Attorneys General and theUSOPM and
will continue to cooperate with the Attorneys General and the USOPM in these
investigations if it is called upon to do so.   24   Other  On March 19, 2009, Par was served with
a subpoena by the Department of Justice requesting documents related to
Strativas marketing of Megace® ES.  The subpoena indicated that the
Department of Justice is currently investigating promotional practices in the
sales and marketing of Megace® ES.  We intend to fully cooperate with the
Department of Justice's inquiry.  Par is, from time to time, a party to
certain other litigations, including product liability litigations.  Par
believes that these litigations are part of the ordinary course of its business
and that their ultimate resolution will not have a material adverse effect on
its financial condition, results of operations or liquidity. Par intends to
defend or, in cases where Par is plaintiff, to prosecute these litigations
vigorously.  Contingency Par accrued for a loss contingency
related to a routine post award contract review of Pars Department of Veterans
Affairs contract (the VA Contingency) for the periods 2004 to 2007 that is
being conducted by the Office of Inspector General of the Department of Veterans
Affairs.  The regulations that govern the calculations used to generate the
pricing-related information are complex and require the exercise of judgment.
 Should there be ambiguity with regard to how to interpret the regulations
that govern the calculations, and report these calculations, and even in the
absence of any such ambiguity, a governmental authority may take a position
contrary to the position that Par has taken.  In accordance with Statement
of Financial Accounting Standards No. 5, Accounting for
Contingencies, Par accrues for contingencies by a charge to income when it
is both probable that a loss will be incurred and the amount of the loss can be
reasonably estimated.  In the event that Pars loss contingency is
ultimately determined to be higher than originally accrued, the recording of the
additional liability may result in a material impact on Pars results of
operations, liquidity or financial condition when such additional liability is
accrued.  Pars estimate of the probable loss is approximately $4.9
million, including interest, which has been accrued as of June 27, 2009.   Note 15  Discontinued
Operations  Related Party Transaction: In January 2006, Par announced the
divestiture of FineTech Laboratories, Ltd (FineTech), effective December 31,
2005.  Par transferred the business for no proceeds to Dr. Arie Gutman,
president and chief executive officer of FineTech.  Dr. Gutman also
resigned from Pars Board of Directors.  The results of FineTech operations
are classified as discontinued for all periods presented because Par has no
continuing involvement in FineTech.  In January 2008, Dr. Gutman sold
FineTech to a third party.  Under the terms of the divestiture, Par
received $0.5 million which represents Pars share of the net proceeds of the
sale transaction.  This $0.5 million has been classified as discontinued
operations on the condensed consolidated statement of operations for the period
ended June 28, 2008.   Note 16- Segment Information:  Par operates in two reportable
business segments: generic pharmaceuticals and branded pharmaceuticals.
 Branded products are marketed under brand names through marketing programs
that are designed to generate physician and consumer loyalty.  Branded
products generally are patent protected, which provides a period of market
exclusivity during which they are sold with little or no competition.  Par
operates the brand pharmaceutical segment under the name Strativa
Pharmaceuticals.  Generic pharmaceutical products are the chemical and
therapeutic equivalents of reference brand drugs.  The Drug Price
Competition and Patent Term Restoration Act of 1984 provides that generic drugs
may enter the market upon the approval of an ANDA and the expiration,
invalidation or circumvention of any patents on corresponding brand drugs, or
the expiration of any other market exclusivity periods related to the brand
drugs.  The business
segments of Par were determined based on managements reporting and
decision-making requirements in accordance with SFAS No. 131, Disclosures
about Segments of an Enterprise and Related Information.  Par believes
that its generic products represent a single operating segment because the
demand for these products is mainly driven by consumers seeking a lower cost
alternative to brand name drugs.  Pars generic drugs are developed using
similar methodologies, for the same purpose (e.g., seeking bioequivalence
with a brand name drug nearing the end of its market exclusivity period for any
reason discussed above).  Pars generic products are produced using similar
processes and standards mandated by the FDA, and Pars generic products are sold
to similar customers.  Based on the economic characteristics, production
processes and customers of Pars generic products, Par has determined that its
generic pharmaceuticals are a single reportable business segment.  Pars
chief operating decision maker does not review the generic segment in any more
granularity, such as at the therapeutic or other classes or categories.
 Certain of Pars expenses, such as the direct sales force and other sales
and marketing expenses and specific research and development expenses, are
charged directly to either of the two segments.   Other expenses, such
as general and administrative expenses and non-specific research and development
expenses, are allocated between the two segments based on assumptions determined
by Pars management.    25   The financial data for
the two business segments are as follows:  Three months ended

Six months endedJune 27,

June 28,

June 27,

June 28,2009

2008

2009

2008Revenues:Generic

$382,167

$92,901

$570,248

$222,785Strativa

21,834

20,036

37,788

45,080Total revenues

$404,001

$112,937

$608,036

$267,865Gross margin:Generic

$70,701

$9,228

$122,732

$39,360Strativa

15,707

15,880

27,745

35,269Total gross margin

$86,408

$25,108

$150,477

$74,629Operating income (loss):Generic

$44,862

($26,119)

$76,240

($24,440)Strativa

(8,385)

(918)

(12,751)

44Total operating income (loss)

$36,477

($27,037)

$63,489

($24,396)Gain on bargain purchase

3,021

-

3,021

-Gain on extinguishment of senior
subordinated         convertible
notes

504

-

749

-Equity in loss of
joint venture

-

(310)

-

(330)Loss on marketable
securities and other
         investments,
net

-

(433)

(55)

(433)Interest
income

667

2,129

1,824

5,143Interest
expense

(2,595)

(3,544)

(5,162)

(7,054)Provision (benefit)
for income taxes

14,087

(8,236)

23,624

(7,495)Income (loss) from continuing
operations

$23,987

($20,959)

$40,242

($19,575)    Pars chief operating decision maker
does not review our assets, depreciation or amortization by business segment at
this time as they are not material to its branded operations.  Therefore,
such allocations by segment are not provided.  Total revenues of Pars top selling
products were as follows: Three months ended

Six months endedJune 27,

June 28,

June 27,

June 28,Product

2009

2008

2009

2008GenericMetoprolol succinate ER (Toprol-XL®)

$306,349

$39,011

$418,563

$82,309Sumatriptan succinate injection (Imitrex®)

21,824

-

37,844

-Meclizine Hydrochloride (Antivert®)

8,905

-

18,725

6,426Dronabinol (Marinol®)

5,502

-

12,503

-Propranolol HCl ER (Inderal LA®)

3,209

3,469

7,210

8,924Cabergoline (Dostinex®)

3,100

4,613

6,875

12,595Cholestyramine Powder (Questran®)

2,985

1,904

4,358

4,340Tramadol HCl and acetaminophen tablets
    (Ultracet®)

2,192

563

3,720

472Fluoxetine (Prozac®)

2,171

1,357

3,187

3,374Methimazole (Tapazole®)

2,019

2,204

4,394

5,223Megestrol oral suspension (Megace®)

1,764

2,754

4,647

4,819Hydralazine Hydrochloride (Apresazide®)

1,651

1,618

4,273

4,204Fluticasone (Flonase®)

1,235

10,529

5,392

28,291Ibuprofen Rx (Advil®, Nuprin®, Motrin®)

715

2,551

3,859

5,831Various amoxicillin products (Amoxil®)

250

3,201

373

8,789Other product related revenues (2)

1,352

2,006

2,664

3,054Other (1)

16,944

17,121

31,661

44,134Total Generic Revenues

$382,167

$92,901

$570,248

$222,785  StrativaMegace® ES

$17,136

$17,394

$30,590

$39,795Nascobal® Nasal Spray (3)

2,198

-

2,198

-Other product related revenues (2)

2,500

2,642

5,000

5,285Total Strativa Revenues

$21,834

$20,036

$37,788

$45,080  26     (1) The
further detailing of revenues of the other approximately 60 generic drugs
is impracticable due to the low volume of revenues associated with each of
these generic products.  No single product in the other category is
in excess of 3% of total generic revenues for three-month or six-month
periods ended June 27, 2009 or June 28, 2008.(2) Other
product related revenues represents licensing and royalty related revenues
from profit sharing agreements related to products such as Nifedipine ER,
the generic version of Procardia®, doxycycline monohydrate, the generic
version of Adoxa®, and Nitrofurantoin, the generic version of Macrobid®.
 Other product related revenues included in the Strativa segment
relate to a co-promotion arrangement with Solvay.  On January 30,
2009, the FTC filed a lawsuit against the Company in the U.S. District
Court for the District of Central California alleging violations of
antitrust laws stemming from Pars court-approved settlement in the patent
litigation with Solvay Pharmaceuticals (See Legal Proceedings in Note
14, Commitments, Contingencies and Other Matters).(3)
Refer to Note 19, Acquisitions.  During the six-month period ended June
27, 2009, Par recognized a gain on the sale of product rights of $1.4 million
and $1.5 million during the six-month period ended June 28, 2008 related to the
sale of multiple ANDAs.  In November 2007, Par entered into an agreement to
provide certain information and other deliverables related to Megace®ESto enable the formal technology transfer to a third party
seeking to commercialize Megace®ESoutside of the U.S.
 Par recorded $0.6 million in the operating results of the first quarter of
2008 when Pars obligations were fulfilled related to this agreement.     Note 17- Research and Development
Agreements: In July 2007,
we entered into an exclusive licensing agreement with BioAlliance Pharma to
acquire the U.S. commercialization rights to BioAlliance's miconazole,
mucoadhesive bucccal tablets, which is marketed under the brand name Loramyc® in
Europe, an antifungal therapy in development for the treatment of oropharyngeal
candidiasis, an opportunistic infection commonly found in immunocompromised
patients, including those with HIV and cancer.  Under the terms of the
agreement, we paid BioAlliance an initial payment of $15.0 million.
 BioAlliance completed Phase III studies and on February 6, 2009 submitted
a NDA for miconazole bucccal tablets.  On April 9, 2009, we announced that
the NDA was not accepted based on the lack of an imprint code on the tablet.
 BioAlliance developed a debossed tablet and resubmitted the NDA on
June 16, 2009.  If the product receives FDA approval, we will pay
BioAlliance $20.0 million and commercialize the product, which will be supplied
by BioAlliance.  In addition to paying BioAlliance royalties on net sales,
BioAlliance may also receive additional milestone payments if commercial sales
achieve specified sales targets. In June 2008, we entered into an
exclusive licensing agreement with MonoSol Rx to acquire the U.S.
commercialization rights to MonoSols orally dissolving film strip formulation
of ondansetron, which is being developed for the prevention of nausea and
vomiting associated with chemotherapy, radiotherapy, and the post-operative
period.  Under the terms of the agreement, we made payments to MonoSol
totaling $3.5 million through March 2009.  MonoSol completed Phase III
studies and on April 7, 2009, we submitted a NDA for the product and on June 10,
2009 we announced that the FDA accepted the NDA for review.  If the product
receives FDA approval, we will pay MonoSol $2.5 million and commercialize the
product, which will be supplied by MonoSol.  In addition to royalties on
net sales, MonoSol may also receive additional milestone payments if commercial
sales achieve specified sales targets.   Note 18  Restructuring Costs:  In October 2008, Par announced its
plans to resize its generic products division as part of an ongoing strategic
assessment of its businesses.  In conjunction with this plan, Par has taken
steps to reduce its research and development expenses by decreasing its internal
generic research and development effort.  Under this plan, Par is
continuing to concentrate its efforts on completing a more focused portfolio of
generic products and will continue to look for opportunities with external
partners.  In addition, during the fourth quarter of 2008, Par initiated
actions to trim its generic product portfolio in an effort to retain only those
marketed products that   27   deliver acceptable profit to
Par.  These actions resulted in a workforce reduction of approximately 190
positions in manufacturing, research and development, and general and
administrative functions.  In connection with these actions, Par incurred
expenses for severance and other employee-related costs.  In addition, as
part of its plans to resize its generic products division, Par made the
determination to abandon or sell certain assets that resulted in asset
impairments, and accelerated depreciation expense. During the
first quarter of 2009, Par incurred additional restructuring costs as it
continued to execute this plan.  The Company recognized pretax charges of
approximately $1.4 million, ($0.9 million, after-tax) primarily comprised of
one-time termination benefit costs. The pretax charges are reported in the
Restructuring costs line in the condensed consolidated statements of
operations for the three months ended June 27, 2009. The following
table summarizes the restructuring costs incurred by Par in the first quarter of
2009 and the remaining related restructuring liabilities balance (included in
accrued expenses and other current liabilities on the condensed consolidated
balance sheet) as of June 27, 2009 ($ amounts in thousands);  Restructuring
Activities

Initial Charge

Liabilities at December 31,
2008

Cash
Payments

Additional Charges

Reversals, Reclass or Transfers

Liabilities at June 27,
2009Severance and employee
    benefits to be paid in cash

$6,254

$6,254

$2,989

$1,309

$ -

$4,574Severance related to
share-   based compensation

3,291

-

-

-

-

-Asset impairments and
    other

5,907

60

173

173

-

$60$15,452

$6,314

$3,162

$1,482

$ -

$4,634  Par
expects that approximately $6 million of the initial charge and $1.4 million of
the additional charges will result in cash expenditures during 2009.  The
carrying amount of assets held for sale related to these actions was $2.0
million at June 27, 2009 and included in other current assets on the condensed
consolidated balance sheet. Par previously
disclosed that it had expected to record $4 million of accelerated depreciation
related to assets that were held and used as of December 31, 2008 and were
expected to be idled or sold in late 2009.  In conjunction with its
acquisition of Nascobal® and the
MDRNA facility (see Note 19  Acquisitions), Par reevaluated its plan for
these assets.  Under its revised plans, these assets will be held and used
for the life of the asset, and therefore Par resumed depreciating these assets
in the first quarter of 2009 in accordance with their expected useful life.
 Par accounted for these actions as a change in estimate in accordance with
US GAAP.  Note 19  Acquisitions During the
three months ended June 27, 2009, the Company acquired Nascobal® from QOL
Medical, LLC and certain assets and liabilities from MDRNA, Inc., as described
in more detail below.  The acquisitions have been accounted for as
business combinations under the guidance of SFAS No. 141(R).  One of
the acquisitions resulted in an excess of the fair value of assets acquired over
the purchase price and was accounted for as a gain on the condensed consolidated
statement of operations.  The Company has allocated the purchase price,
including the value of identifiable intangibles with a finite life supported by
third party appraisals.  Purchase price allocations will be finalized no
later than twelve months from acquisition.  The operating results of
the acquired businesses have been included in the consolidated financial results
of the Company from March 31, 2009, the date of acquisition.  The operating
results were primarily reflected as part of the Strativa segment. MDRNA,
Inc. On March 31,
2009, the Company acquired certain assets and liabilities from MDRNA, Inc.,
mainly in order to facilitate the acquisition of the rights to Nascobal® Nasal
Spray, described below.  The assets acquired will be primarily used in
the production of Nascobal® Nasal
Spray.  The purchase price of the acquisition was $0.8 million in cash paid
at closing.  The purchase was funded from the Companys cash on
hand. The
acquisition has been accounted for as a bargain purchase under SFAS No.
141(R).  The purchase price of the acquisition has been allocated to
the net tangible and intangible assets acquired, with the excess of the fair
value of assets acquired over the purchase price recorded as a gain.  The
gain is mainly attributed to MDRNAs plans to exit its contract manufacturing
business.  The acquired intangible asset has no tax basis.  The
Company allocated the purchase price based on input from third party appraisals.
 From March 31, 2009, the date of acquisition, the financial impact of the
assets and liabilities acquired from MDRNA were immaterial to total revenues and
operating income of the Company.   28    ($ amounts in  thousands)

Estimated
Fair Value

Estimated
Useful LifeInventory related to a generic product

$
1,121

N/AProperty, plant, and equipment


1,300

4 to 10 yearsIntangible asset related to a generic
product


1,400

2 yearsNet tangible and intangible assets


3,821Purchase price


800Gain on Bargain Purchase

$
3,021 Nascobal® On March 31,
2009, the Company acquired the rights to Nascobal® Nasal Spray
from QOL Medical, LLC for $54.5 million in cash and the assumption of certain
liabilities.  Nascobal® Nasal Spray is an FDA-approved
prescription vitamin B12 treatment indicated for maintenance of remission in
certain pernicious anemia patients, as well as a supplement for a variety of B12
deficiencies.  Under the terms of the Asset Purchase Agreement, the Company
deposited $2 million of the purchase price into escrow as security for potential
indemnification claims that the Company may have against the
seller.  After 12 months, any amounts remaining in escrow will be
turned over to QOL Medical.  The Company funded the purchase from cash
on hand.  The Company has determined that the acquired intangible asset
will be tax deductible.  The Company recorded $2.2 million of revenue from
sales of Nascobal® Nasal Spray
during the three months ended June 27, 2009 as part of the Strativa segment
(refer to Note 16  Segment Information).  The Company does not track
operating income (or operating loss) at the product level.  The operating
loss of the Strativa segment, which includes the Nascobal® Nasal
Spray results, for the three and six month periods ended June 27, 2009 are
disclosed in Note 16. The purchase
price of the acquisition has been allocated to the net tangible and intangible
assets acquired on the basis of estimated fair values based on input from third
party appraisals, as follows: ($ amounts in  thousands)

Estimated
Fair Value

Estimated
Useful LifeInventory

$
700

N/AIntangible assets


54,721

12 yearsAccounts receivable reserves


(921)

N/ANet tangible and intangible assets

$
54,500  Pro
Forma Information (unaudited) Since the
Company acquired Nascobal® from QOL
Medical and certain assets and liabilities from MDRNA on March 31, 2009, there
are no differences between actual operating results and pro forma results for
the three month period ended June 27, 2009.  The following unaudited pro
forma information for the six months ended June 27, 2009, assumes the
acquisitions occurred as of January 1, 2009 and the unaudited pro forma
information for six months ended June 28, 2008, assumes the acquisitions
occurred as of January 1, 2008: Six months ended

Six months ended(In thousands, except per share data)

June 27, 2009

June 28, 2008Total revenues

$
611,285

$
269,563Income (loss) from continuing operations


39,412


(19,786)Income (loss) from continuing operations per diluted
share

$
1.17

$
(0.59) The unaudited
pro forma information does not purport to be indicative of the results that
actually would have been achieved had the operations been combined during the
periods presented, nor is it intended to be a projection of future results or
trends.  Note 20  Recent Accounting
Pronouncements: In May 2009, the FASB issued SFAS
165, Subsequent Events,(SFAS 165), which established general standards
of accounting for and disclosure of events that occur after the balance sheet
date but prior to the issuance of the financial statements.  SFAS 165
distinguishes events requiring recognition in the financial statements and those
that may require disclosure in the financial statements.  Furthermore, SFAS
165 requires disclosure of the date through which subsequent events were
evaluated.  SFAS 165 is effective for interim and annual periods after
June 15, 2009. We have adopted SFAS 165 for the quarter ended June 27,
2009.  The Company has evaluated the period after the balance sheet date up
through August 4, 2009, which is the date that the condensed   29   consolidated financial
statements were issued, and determined that there were no subsequent events or
transactions that required recognition or disclosure in the condensed
consolidated financial statements, except as disclosed in Note 21. In April 2009, the FASB issued FASB Staff
Position FAS 157-4,Determining Whether a Market Is Not Active
and a Transaction Is Not Distressed,or FSP FAS 157-4; FSP FAS 157-4
provides guidelines for making fair value measurements more consistent with the
principles presented in SFAS 157.  FSP FAS 157-4 provides
additional authoritative guidance in determining whether a market is active or
inactive, and whether a transaction is distressed, is applicable to all assets
and liabilities (i.e. financial and nonfinancial) and will require enhanced
disclosures.  This FASB Staff Position is effective for periods ending
after June 15, 2009.  The adoption of FSP FAS 157-4 did not have a
material impact on Pars financial position, results of operation, or cash
flows. In April 2009, the FASB issued FASB Staff
Position FAS 115-2, and FAS 124-2,Recognition and Presentation of
Other-Than-Temporary Impairments, or FSP FAS 115-2, and FAS 124-2;
and FSP FAS 115-2, and FAS 124-2 provides additional guidance to
provide greater clarity about the credit and noncredit component of an
other-than-temporary impairment event and to more effectively communicate when
an other-than-temporary impairment event has occurred. This FSP applies to debt
securities. This FASB Staff Position is effective for periods ending after
June 15, 2009.  The adoption of FSP FAS 115-2, and FAS 124-2
did not have a material impact on Pars financial position, results of
operation, or cash flows. In April 2009, the FASB issued FASB Staff
Position FAS 107-1 and APB 28-1,Interim Disclosures about Fair Value of
Financial Instruments, or FSP
FAS 107-1 and APB 28-1. FSP FAS 107-1 and APB 28-1, amends FASB
Statement No. 107,Disclosures about Fair Value of Financial
Instruments, to require
disclosures about fair value of financial instruments in interim as well as in
annual financial statements. This FSP also amends APB Opinion No. 28,Interim Financial
Reporting, to require those
disclosures in all interim financial statements. This FASB Staff Position is
effective for periods ending after June 15, 2009.  The adoption of FSP
FAS 107-1 and APB 28-1 did not have a material impact on Pars financial
statements as the required disclosures had historically been presented during
interim periods. In April 2009, the FASB issued FASB Staff
Position FSP FAS 141(R)-1,Accounting for Assets Acquired and
Liabilities Assumed in a Business Combination That Arise from
Contingencies, or FSP
FAS 141(R)-1. FSP FAS 141(R)-1, amends FASB Statement No. 141
(R),BusinessCombinations, to state a contingency acquired in a
business combination should be measured at fair value if the acquisition-date
value of that asset or liability can be determined during the measurement
period.   This FASB Staff Position is effective as of January 1, 2009.
 Our acquisitions of the worldwide rights to Nascobal® (Cyanocobalamin,
USP) Nasal Spray from QOL Medical LLC and the related assets acquired and
operating leases assumed from MDRNA, Inc. in the second quarter of 2009 was
accounted for under SFAS 141R.  Refer to Note 19  Acquisitions.  In June 2008, the FASB issued EITF 07-5,Determining Whether an
Instrument (or Embedded Feature) Is Indexed to an Entitys Own
Stock.  EITF 07-5
provides that an entity should use a two step approach to evaluate whether an
equity-linked financial instrument (or embedded feature) is indexed to its own
stock, including evaluating the instrument's contingent exercise and settlement
provisions.  EITF 07-5 was effective as of the beginning of our 2009 fiscal
year.  The adoption of EITF 07-5 did not have a material impact on our
financial position, results of operation, or cash flows. In December 2007, the FASB ratified
Emerging Issue Task Force Issue No. 07-1 (EITF 07-1), Accounting for
Collaborative Arrangements.  A contractual arrangement falls within the
scope of EITF 07-1 if the arrangement requires the parties to be active
participants and the arrangement exposes the parties to significant risks and
rewards that are tied to the commercial success of the endeavor.  Costs
incurred and revenue generated on sales to third parties should be reported in
the statement of operations based on the guidance in EITF Issue No. 99-19,
Reporting Revenue Gross as a Principal versus Net as an Agent.  The
equity method of accounting should not be applied to a collaborative arrangement
within the scope of this issue without the creation of a separate legal entity
for the arrangement.  Payments between parties to the collaborative
arrangement should be presented in the statement of operations based on the
nature of the arrangement and each entity's business operations, the contractual
terms of the arrangement as well as if existing GAAP is applicable.  EITF
07-1 requires companies to disclose the nature and purpose of the arrangement,
its rights and obligations under the arrangement, the accounting policy applied
to the arrangement, and the amounts attributable to transactions between other
participants to the collaborative arrangement and where in the statement of
operations these amounts have been classified.  EITF 07-1 requires that
companies comply in its first fiscal year beginning after December 15, 2008 and
transition to the guidance in this issue by retrospectively applying the
guidance to all periods presented for all arrangements existing at the effective
date, unless it is impracticable to do so.  The impracticability assessment
should be made on an arrangement-by-arrangement basis and certain disclosures
would be required if a company utilizes the impracticability exception.
 The adoption of EITF 07-1 did not have a material impact on our financial
position, results of operation, or cash flows.  In December
2007, the FASB issued FASB Statement No. 141 (Revised 2007) (SFAS 141R),Business Combinations.  SFAS 141R will significantly change the
accounting for business combinations.  Under SFAS 141R, an acquiring entity
will be required to recognize all the assets acquired and liabilities assumed in
a transaction at the acquisition date fair value with limited exceptions.
 SFAS 141R will change the accounting treatment for certain specific items,
including; acquisition costs will be generally expensed as incurred, minority
interests will be valued at fair value at the acquisition date, acquired
contingent liabilities will be recorded at fair value at the acquisition date
and subsequently measured at either the higher of such amount or the amount
determined under existing guidance for non-acquired contingencies, in-process
research and development will be recorded at fair value as an indefinite-lived   30   intangible
asset at the acquisition date, restructuring costs associated with a business
combination will be generally expensed subsequent to the acquisition date, and
changes in deferred tax asset valuation allowances and income tax uncertainties
after the acquisition date generally will affect income tax expense.  SFAS
141R also includes a substantial number of new disclosure requirements.
 SFAS 141R applies prospectively to business combinations for which the
acquisition date is on or after the beginning of the first annual reporting
period beginning on or after December 15, 2008.  Earlier adoption was
prohibited. Our acquisitions of the worldwide rights to Nascobal®
(Cyanocobalamin, USP) Nasal Spray from QOL Medical LLC and the related assets
acquired and operating leases assumed from MDRNA, Inc. in the second quarter of
2009 was accounted for under SFAS 141R.  Refer to Note 19  Acquisitions. In December 2007, SFAS
No. 160, Noncontrolling Interests in Consolidated Financial Statements 
an amendment of ARB No. 51(SFAS 160), was issued. SFAS 160 requires
entities to report noncontrolling (minority) interests as a component of
stockholders equity on the balance sheet; include all earnings of a
consolidated subsidiary in consolidated results of operations; and treat all
transactions between an entity and noncontrolling interest as equity
transactions between the parties.  SFAS 160 was effective for Pars fiscal
year beginning 2009 and adoption is prospective only; however, presentation and
disclosure requirements described above must be applied retrospectively.
 The adoption of SFAS 160 did not have a material impact on our financial
position, results of operation, or cash flows.  In September 2006, the FASB issued SFAS No.
157Fair Value
Measurements(SFAS
157).  SFAS 157 establishes a common definition for fair value to be
applied to GAAP guidance requiring use of fair value, establishes a framework
for measuring fair value, and expands disclosure about such fair value
measurements.  SFAS 157 applies to fair value measurements that are already
required or permitted by other accounting standards, except for measurements of
share-based payments and measurements that are similar to, but not intended to
be, fair value.  The FASB has previously concluded in those accounting
pronouncements that fair value is the relevant measurement attribute.
 Accordingly, this Statement does not require any new fair value
measurements.  SFAS 157 is effective for fiscal years beginning after
November 15, 2007.  Pars adoption of SFAS 157 with respect to financial
assets and liabilities as of January 1, 2008 did not have a material impact on
its consolidated financial statements.  Refer to Note 5, Fair Value
Measurements.  The effective date of SFAS 157 with regard to non-financial
assets and liabilities was January 1, 2009 for Par.  These non-financial
assets and liabilities include goodwill.  The adoption of SFAS 157 for
our nonfinancial assets and liabilities that are remeasured at fair value on a
non-recurring basis did not impact our financial position or results of
operations; however, SFAS 157 could have an impact in future periods.  In
addition, we may have additional disclosure requirements in the event we
complete an acquisition or incur impairment of our assets in future periods.   Note 21  Subsequent
Events: In July 2009, Par repurchased senior
subordinated convertible notes that were to mature on September 30, 2010 in the
aggregate principal amount of $35.5 million for approximately $34.0 million,
including accrued interest.  The notes bore interest at an annual rate of
2.875%.  As of August 4, 2009, the notes had an outstanding aggregate
principal amount of $92.7 million.  Watson Pharmaceuticals announced on
August 3, 2009 that the FDA had approved two of its ANDAs for metoprolol.
 Par will no longer be the sole distributor for those two SKUs (packaging
sizes).  Par anticipates that its sales volume and unit price for
metoprolol will be adversely impacted.   31      ITEM 2.  MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS.  Forward-Looking Statements Certain statements in this Report
constitute forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995, including those concerning
managements expectations with respect to future financial performance, trends
and future events, particularly relating to sales of current products and the
development, approval and introduction of new products.  To the extent that
any statements made in this Quarterly Report contain information that is not
historical, such statements are essentially forward-looking.  These
statements are often, but not always, made using words such as estimates,
plans, projects, anticipates, continuing, ongoing, expects,
intends, believes, forecasts or similar words and phrases.  Such
forward-looking statements are subject to known and unknown risks, uncertainties
and contingencies, many of which are beyond our control, which could cause
actual results and outcomes to differ materially from those expressed in this
Quarterly Report.  Risk factors that might affect such forward-looking
statements include those set forth in Item 1A (Risk Factors) of our Annual
Report on Form 10-K for the year ended December 31, 2008, in Item 1A of this and
our subsequent Quarterly Reports on Form 10-Q, and from time to time in our
other filings with the SEC, including Current Reports on Form 8-K, and on
general industry and economic conditions.  Any forward-looking statements
included in this Quarterly Report are made as of the date of this Quarterly
Report only, and, subject to any applicable law to the contrary,  we assume
no obligation to publicly update any forward-looking statements, whether as a
result of new information, future events or otherwise.  The following discussion should be
read in conjunction with Pars Condensed Consolidated Financial Statements and
related Notes to Condensed Consolidated Financial Statements contained elsewhere
in this Quarterly Report on Form 10-Q.  OVERVIEW The introduction of new manufactured
and distributed products at selling prices that generate adequate gross margins
is critical to our ability to generate economic value and ultimately the
creation of adequate returns for our stockholders.  In late 2008 and early
2009, we resized our generic products division as part of an ongoing strategic
assessment of our businesses.  This initiative is intended to enable us to
optimize our current generic product portfolio and our pipeline of
first-to-file/first-to-market generic products.  As a result, we believe we
are better positioned to compete in the generic marketplace over the long term.
 We significantly reduced our research and development expenses by
decreasing levels of internal research and development activities in an effort
to focus on completing products currently in development.  Also, we will
continue seeking additional generic products for sale through new and existing
distribution agreements or acquisitions of complementary products and
businesses, additional first-to-file opportunities and unique dosage forms to
differentiate our products in the marketplace.  We pay a percentage of the
gross or net profits or sales to our strategic partners on sales of products
covered by our distribution agreements.  Generally, products that Par has
developed internally, and as to which it is not required to split any profits
with strategic partners, contribute higher gross margins than products covered
by distribution agreements.  To continue the development of our brand
pharmaceutical segment, Strativa Pharmaceuticals (Strativa), on March 31,
2009, we acquired the worldwide rights to Nascobal® Nasal Spray.
 Nascobal® Nasal Spray is an FDA-approved prescription vitamin
B12 treatment indicated for maintenance of remission in certain pernicious
anemia patients, as well as a supplement for a variety of B12 deficiencies.
 It is the first and currently only once-weekly, self-administered
alternative to B12 injections. Sales and
gross margins of our products depend principally on the: (i) introduction of
other generic drug manufacturers products in direct competition with our
significant products; (ii) ability of generic competitors to quickly enter the
market after patent or exclusivity period expire, or during exclusivity periods
with authorized generic products, diminishing the amount and duration of
significant profits to Par from any one product; (iii) pricing practices of
competitors and the removal of competing products from the market; (iv)
continuation of existing distribution agreements; (v) introduction of new
distributed generic products and brand products; (vi) consolidation among
distribution outlets through mergers, acquisitions and the formation of buying
groups; (vii) willingness of generic drug customers, including wholesale and
retail customers, to switch among generic pharmaceutical manufacturers; (viii)
approval of ANDAs, introduction of new Par manufactured products, and future new
product launches; (ix) granting of potential marketing exclusivity periods; (x)
extent of market penetration for the existing product line; (xi) level, quality
and amount of customer service; and (xii) market acceptance of our recently
introduced branded product (Nascobal®) and the successful development
to commercialization of our in-licensed branded product pipeline.  Net sales and gross margins derived
from generic pharmaceutical products often follow a pattern based on regulatory
and competitive factors that are believed by management to be unique to the
generic pharmaceutical industry.  As the patent(s) for a brand name product
and the related exclusivity period(s) expire, the first generic manufacturer to
receive regulatory approval from the FDA for a generic equivalent of the product
is often able to capture a substantial share of the market.  At that time,
however, the branded company may license an authorized generic product to a
competing generic company.  As additional generic manufacturers receive
regulatory approvals for competing products, the market share and the price of
that product have typically declined, often significantly, depending on several
factors, including the number of competitors, the price of the brand product and
the pricing strategy of the new competitors.   32    GENERIC
BUSINESS Our strategy
for our generic division is to continue to differentiate ourselves by carefully
choosing opportunities with minimal competition (i.e., first-to-file and
first-to-market products).  By leveraging our expertise in research and
development, manufacturing and distribution, we are able to effectively and
efficiently pursue these opportunities and support our partners. In the
three-month and six-month periods ending June 27, 2009, our generic business net
revenues and gross margin were concentrated in a few products, including two
products that were launched subsequent to the first quarter of 2008.  The
top 5 generic products accounted for approximately 86% of total consolidated
revenues and approximately 63% of total consolidated gross margins in the second
quarter of 2009.  The top 5 generic products accounted for approximately
81% of total consolidated revenues and approximately 58% of total consolidated
gross margins in the year-to-date period of 2009. We began
selling metoprolol succinate ER (metoprolol) in the fourth quarter of 2006 as
the authorized generic distributor pursuant to a supply and distribution
agreement with AstraZeneca.  There had been two competitors marketing
generic metoprolol until the fourth quarter of 2008, when those two
companies stopped selling metoprolol due to violations of the FDAs current
Good Manufacturing Practices.  Throughout the second quarter and
year-to-date periods of 2009, we did not have competition for sales of the four
SKUs (packaging sizes) of metoprolol that we sell, which resulted in increased
volume of units sold coupled with a price increase commensurate with being the
sole generic distributor.  Watson Pharmaceuticals announced on August
3, 2009, however, that the FDA had approved two of its ANDAs for metoprolol, and
accordingly, we will no longer be the sole distributor for those two SKUs.
 We anticipate that our sales volume and unit price for metoprolol will be
adversely impacted.  Additionally, the two competitors that previously sold
metoprolol could remedy the violations cited in their respective manufacturing
operations by the FDA and reenter the market, which
could also adversely impact our metoprolol revenues.  In
addition to new competition, supply issues could also adversely impact our
future sales of metoprolol. In the fourth
quarter of 2008, we launched generic versions of Imitrex®
(sumatriptan) injection 4mg and 6mg starter kits and 4mg and 6mg prefilled
syringe cartridges pursuant to a supply and distribution agreement with
GlaxoSmithKline plc.  Throughout the second quarter and year-to-date
periods of 2009, we remained the sole generic distributor of 3 SKUs with one
competitor for a single SKU. In thethird quarter of
2008, we launched dronabinol in 2.5mg, 5mg and 10mg strengths in soft gel
capsules.  We share net product margin, as contractually defined, on sales
of dronabinol with SVC Pharma LP, an affiliate of Rhodes Technologies. We marketed
meclizine prior to an explosion at the manufacturing facility of our API
supplier in February 2008.  Subsequently, we qualified a new API source and
received the appropriate approval of our abbreviated new drug application to
manufacture and market meclizine utilizing our new supplier.  We
reintroduced meclizine HCl tablets in 12.5mg and 25mg strengths in the third
quarter of 2008.  Throughout the second quarter and year-to-date periods of
2009, we believe we were the exclusive supplier of this generic product.   In addition, our investments in
generic development are expected to yield approximately 6 to 9 new product
launches during the remainder of 2009 and 2010 based on one or more of the
following: expiry of the relevant 30-month stay period; patent expiry date; and
expiry of regulatory exclusivity.  However, such dates may change due to
various circumstances, including extended litigation, outstanding citizens
petitions, other regulatory requirements set forth by the FDA, and stays of
litigation.  These launches will be significant mileposts for Par as we
expect many of these products to be first-to-file/first-to-market opportunities
with gross margins in excess of our current portfolio.  Par or our
strategic partners currently have approximately 37 ANDAs pending with the FDA,
which includes 14 first-to-file and/or first-to-market opportunities.  No
assurances can be given that we or any of our strategic partners will
successfully complete the development of any of these products either under
development or proposed for development, that regulatory approvals will be
granted for any such product, that any approved product will be produced in
commercial quantities or that any approved product will be sold profitably.  STRATIVA For Strativa,
we will continue to invest in the marketing and sales of our promoted products
and prepare for the commercialization of our licensed products.   In
addition, we will continue to seek new licenses and acquisitions that accelerate
the growth of our branded business. In July 2005, we received FDA approval
for our first New Drug Application (NDA), filed pursuant to Section 505(b)(2)
of the Federal Food, Drug and Cosmetic Act, and immediately began marketing
megestrol acetate oral suspension NanoCrystal® Dispersion (Megace® ES).
 Megace® ES is indicated for the treatment of anorexia, cachexia or any
unexplained significant weight loss in patients with a diagnosis of AIDS and is
utilizing the Megace® brand name that the company has licensed from
Bristol-Myers Squibb Company.  The net book value of the trademark was $5.5
million at June 27, 2009 and will be amortized over approximately 3.5 years.
 We have promoted Megace® ES as our primary brand product since 2005
through March 2009.  With the acquisition of Nascobal®, Strativa will focus
on marketing both Megace® ES and Nascobal®.   33   In
September 2006, we entered into an extended-reach agreement with Solvay
Pharmaceuticals, Inc. that provides for our branded sales force to co-promote
Androgel® for a period of six years.  As compensation for our marketing and
sales efforts, we will receive up to $10 million annually, paid quarterly, for
the six-year period.  On January 30, 2009, the FTC filed a lawsuit against
us in the U.S. District Court for the District of Central California alleging
violations of antitrust laws stemming from our court-approved settlement in the
patent litigation with Solvay Pharmaceuticals.  On April 9, 2009, the U.S.
District Court of Central California granted our motion to transfer the lawsuit,
along with three class action lawsuits that had been filed in the same court, to
the United States District Court for the Northern District of Georgia, the
jurisdiction in which our consent judgment in connection with the original
patent litigation had been entered.  On April 17, 2009 and April 21, 2009,
two additional class action plaintiffs filed complaints in the United States
District Court for the District of New Jersey alleging antitrust law violations.
 On June 29, 2009, an additional class action complaint was filed in the
United States District Court for the District of Pennsylvania also alleging
antitrust violations.  We believe we have complied with all applicable laws
in connection with the court-approved settlement and intend to vigorously defend
these actions. In July 2007,
we entered into an exclusive licensing agreement with BioAlliance Pharma to
acquire the U.S. commercialization rights to BioAlliance's miconazole,
mucoadhesive bucccal tablets,
which is marketed under the brand name Loramyc® in Europe, an antifungal therapy
in development for the treatment of oropharyngeal candidiasis, an opportunistic
infection commonly found in immunocompromised patients, including those with HIV
and cancer.  BioAlliance submitted an NDA for the product in February 2009,
and on April 9, 2009, we announced that the NDA was not accepted based on the
lack of an imprint code on the tablet.  BioAlliance developed a debossed
tablet and resubmitted the NDA on June 16, 2009.  If the product
receives FDA approval, we will pay BioAlliance $20.0 million and commercialize
the product, which will be supplied by BioAlliance.  In addition to paying
BioAlliance royalties on net sales, BioAlliance may receive milestone payments
if commercial sales achieve specified sales targets. In August
2007, we acquired the North American commercial rights to ZensanaTM
(ondansetron HCl) Oral Spray from Hana Biosciences, Inc.  Ondansetron is
indicated for the prevention of nausea and vomiting associated with
chemotherapy, radiotherapy, and the post-operative period.  Par and its
development partner in this program, NovaDel Pharma, Inc., are collaborating in
the reformulation of ZensanaTM.  In 2008, bioequivalence to the
reference drug was achieved in certain studies and not achieved in others.
 We are working with NovaDel to further evaluate the results in order to
determine the next steps for the ZensanaTM program.  In June 2008,
we entered into an exclusive licensing agreement with MonoSol Rx to acquire the
U.S. commercialization rights to MonoSols orally dissolving film strip
formulation of ondansetron, which is being developed for the prevention of
nausea and vomiting associated with chemotherapy, radiotherapy, and the
post-operative period.  On April 7, 2009, we submitted an NDA for the
product and on June 10, 2009 we announced that the FDA accepted the NDA for
review.  If the product receives FDA approval, we will pay MonoSol $2.5
million and commercialize the product, which will be supplied by MonoSol. 
In addition to royalties on net sales, MonoSol may receive milestone payments if
commercial sales achieve specified sales targets. In January 2008, we entered into an
exclusive licensing agreement with Alfacell Corporation to acquire the U.S.
commercialization rights to Alfacells Onconase® (ranpirnase), then in
development for the treatment of unresectable malignant mesothelioma.  In
May 2008, Alfacell reported that the preliminary data from its Phase III
clinical trial did not meet statistical significance for the primary endpoint of
overall survival in unresectable malignant mesothelioma.  On January 27,
2009, Alfacell reported that, at a pre-NDA meeting with the FDA, the FDA
recommended that an additional clinical trial be conducted prior to submitting
an NDA.  We have no obligation to provide Alfacell with any additional
funding to conduct another clinical trial, and we understand that Alfacells
current financial situation does not allow it to pursue an additional clinical
trial until other sources of capital are secured and that Alfacell is exploring
strategic alternatives and sources of additional capital.  Due to these
developments, we no longer consider this contract to be material to us. On March
31, 2009, we acquired the worldwide rights to Nascobal®
(Cyanocobalamin, USP) Nasal Spray from QOL Medical, LLC.
 Nascobal® Nasal Spray is an FDA-approved prescription vitamin
B12 treatment indicated for maintenance of remission in certain pernicious
anemia patients, as well as a supplement for a variety of B12 deficiencies.
 Under the terms of the all cash transaction, we paid QOL Medical $54.5
million for the worldwide rights to Nascobal® Nasal Spray. 
Nascobal® Nasal Spray will be manufactured by Par with assets
acquired on March 31, 2009 from MDRNA, Inc.  OTHER CONSIDERATIONS In addition to
the substantial costs of product development, we may incur significant legal
costs in bringing certain products to market. Litigation concerning patents and
proprietary rights is often protracted and expensive. Pharmaceutical companies
with patented brand products increasingly are suing companies that produce
generic forms of their patented brand products for alleged patent infringement
or other violations of intellectual property rights, which could delay or
prevent the entry of such generic products into the market. Generally, a generic
drug may not be marketed until the applicable patent(s) on the brand name drug
expires. When an ANDA is filed with the FDA for approval of a generic drug, the
filing person may certify either that the patent listed by the FDA as covering
the branded product is about to expire, in which case the ANDA will not become
effective until the expiration of such patent, or that the patent listed as
covering the branded drug is invalid or will not be infringed by the
manufacture, sale or use of the new drug   34   for
which the ANDA is filed.  In either case, there is a risk that a branded
pharmaceutical company may sue the filing person for alleged patent infringement
or other violations of intellectual property rights.  Because a substantial
portion of our current business involves the marketing and development of
generic versions of brand products, the threat of litigation, the outcome of
which is inherently uncertain, is always present.  Such litigation is often
costly and time-consuming, and could result in a substantial delay in, or
prevent, the introduction and/or marketing of products, which could have a
material adverse effect on our business, financial condition, prospects and
results of operations.  RESULTS OF
OPERATIONS Revenues Total revenues of our top selling products
were as follows:  Three months ended

Six months endedJune
27,

June
28,



June
27,

June
28,Product

2009

2008

$ Change

2009

2008

$ ChangeGenericMetoprolol succinate ER
    (Toprol-XL®)

$306,349

$39,011

$267,338

$418,563

$82,309

$336,254Sumatriptan succinate
    injection (Imitrex®)

21,824

-

21,824

37,844

-

37,844Meclizine Hydrochloride
   (Antivert®)

8,905

-

8,905

18,725

6,426

12,299Dronabinol (Marinol®)

5,502

-

5,502

12,503

-

12,503Propranolol HCl ER
    (Inderal LA®)

3,209

3,469

(260)

7,210

8,924

(1,714)Cabergoline (Dostinex®)

3,100

4,613

(1,513)

6,875

12,595

(5,720)Cholestyramine Powder
    (Questran®)

2,985

1,904

1,081

4,358

4,340

18Tramadol HCl and
     acetaminophen
tablets    (Ultracet®)

2,192

563

1,629

3,720

472

3,248Fluoxetine (Prozac®)

2,171

1,357

814

3,187

3,374

(187)Methimazole (Tapazole®)

2,019

2,204

(185)

4,394

5,223

(829)Fluticasone (Flonase®)

1,235

10,529

(9,294)

5,392

28,291

(22,899)Various amoxicillin
    products (Amoxil®)

250

3,201

(2,951)

373

8,789

(8,416)Other product related
    revenues

1,352

2,006

(654)

2,664

3,054

(390)Other

21,074

24,044

(2,970)

44,440

58,988

(14,548)Total Generic Revenues

$382,167

$92,901

$289,266

$570,248

$222,785

$347,463StrativaMegace® ES

$17,136

$17,394

($258)

$30,590

$39,795

($9,205)Nascobal® Nasal Spray

2,198

-

2,198

2,198

-

2,198Other product related
    revenues

2,500

2,642

(142)

5,000

5,285

(285)Total Strativa Revenues

$21,834

$20,036

$1,798

$37,788

$45,080

($7,292)   Three months endedPercentage of Total
Revenues($ in
thousands)

June
27,
2009

June
28,
2008

$Change

%
Change

June
27,
2009

June
28,
2008Revenues:Generic

$382,167

$92,901

$289,266

311.4%

94.6%

82.3%Strativa

21,834

20,036

1,798

9.0%

5.4%

17.7%Total revenues

$404,001

$112,937

$291,064

257.7%

100.0%

100.0%  The increase
in generic segment revenues in the second quarter of 2009 was primarily due to
the lack of competition for sales of metoprolol.  The consequence of the
lack of competition was a proportional increase of both volume of units sold
coupled with a price increase commensurate with being the sole distributor of
the generic product in the second quarter of 2009.  We also launched
various sumatriptan SKUs in the fourth quarter of 2008.  Throughout the
second quarter of 2009, we remained the sole distributor of 3 sumatriptan SKUs
with one competitor for a single SKU.  In thethird quarter of
2008, we launched multiple strengths of dronabinol.  We also commenced
shipment of meclizine HCl tablets in 12.5mg and 25mg strengths in the third
quarter of 2008.  We believe we   35   were
the exclusive supplier of this generic product throughout the second quarter of
2009.  These gains were tempered by lower sales of fluticasone, as the
supply agreement with GlaxoSmithKline plc was not extended and we had sold all
available inventories as of June 27, 2009.  In addition, cabergoline
sales were negatively impacted by the loss of key customers and pricing pressure
due to additional competition.  The decrease in sales of amoxicillin was
due to its discontinuation in the fourth quarter of 2008.  Products
aggregated in Other also declined principally due to the generic segments
resizing that included the trimming of the generic product portfolio to only
retain those marketed products that deliver acceptable gross margins, coupled
with pricing pressures on the remaining products. Net sales of distributed products,
which consist of products manufactured under contract and licensed products,
were $346.0 million or 86% of the Companys total product revenues for the three
month period ended June 27, 2009 and $67.0 million or 59% of our total product
revenues for the three month period ended June 28, 2008.  The increase in
the percentage is primarily driven by higher sales of metoprolol, dronabinol,
and sumatriptan.  We are substantially dependent upon distributed products
for our overall sales and any inability by our suppliers to meet demand could
adversely affect our future results of operations.  The increase in Strativa segment
revenues in the second quarter of 2009 was primarily due to the acquisition of
Nascobal® Nasal Spray and the associated relaunch of the product by
Strativa.  Six months endedPercentage of Total
RevenuesJune 27,

June 28,





June 27,

June 28,($
in thousands)

2009

2008

$ Change

%Change

2009

2008Revenues:Generic

$570,248

$222,785

$347,463

156.0%

93.8%

83.2%Strativa

37,788

45,080

(7,292)

(16.2%)

6.2%

16.8%Total revenues

$608,036

$267,865

$340,171

127.0%

100.0%

100.0%  Net sales of distributed products,
which consist of products manufactured under contract and licensed products,
were $491.0 million or 82% of the Companys total product revenues for the six
month period ended June 27, 2009 and $156.0 million or 58% of our total product
revenues for the six month period ended June 28, 2008. The net sales
decline of Megace® ES in the year-to-date period of 2009 is primarily
attributed to the timing of trade buying patterns.   In December 2007,
the trade delayed its Megace® ES purchases until after the holidays
to the benefit of the 2008 year-to-date period.  In December 2008, the
trade accelerated its Megace® ES purchases before the holidays to the
detriment of the 2009 year-to-date period.  Megace® ES also
experienced higher returns during the 2009 year-to-date period as compared to
the comparable prior year-to-date period.  Gross Revenues to Total
Revenues Deductions Generic drug pricing at the wholesale
level can create significant differences between our invoice price and net
selling price.  Wholesale customers purchase product from us at invoice
price, then resell the product to specific healthcare providers on the basis of
prices negotiated between us and the providers, and the wholesaler submits a
chargeback credit to us for the difference.  We record estimates for these
chargebacks as well as sales returns, rebates and incentive programs, and the
sales allowances for all our customers at the time of sale as deductions from
gross revenues, with corresponding adjustments to our accounts receivable
reserves and allowances.  As detailed above, we have the
experience and the access to relevant information that we believe necessary to
reasonably estimate the amounts of such deductions from gross revenues.
 Some of the assumptions we use for certain of our estimates are based on
information received from third parties, such as wholesale customer inventory
data and market data, or other market factors beyond our control.  The
estimates that are most critical to the establishment of these reserves, and
therefore would have the largest impact if these estimates were not accurate,
are estimates related to expected contract sales volumes, average contract
pricing, customer inventories and return levels.  We regularly review the
information related to these estimates and adjust our reserves accordingly if
and when actual experience differs from previous estimates.  With the
exception of the product returns allowance, the ending balances of account
receivable reserves and allowances generally are eliminated during a two- to
four-month period, on average.  We recognize revenue for product sales
when title and risk of loss have transferred to our customers and when
collectability is reasonably assured.  This is generally at the time that
products are received by the customers.  Upon recognizing revenue from a
sale, we record estimates for chargebacks, rebates and incentives, returns, cash
discounts and other sales reserves that reduce accounts receivable.   36   Our gross
revenues before deductions for chargebacks, rebates and incentive programs
(including rebates paid under federal and state government Medicaid drug
reimbursement programs), sales returns and other sales allowances were as
follows:  June 27, 2009

Percentage of Gross
Revenues

June 28,2008

Percentage of Gross
Revenues($ thousands)


($ thousands)Gross
revenues

$799,770



$553,100Chargebacks

(81,724)

10.2%

(199,535)

36.1%Rebates and incentive programs

(53,225)

6.7%

(44,084)

8.0%Returns

(15,294)

1.9%

(4,030)

0.7%Cash discounts and other

(30,161)

3.8%

(23,428)

4.2%Medicaid rebates and rebates due
    under other US Government
    pricing programs

(11,330)

1.4%

(14,158)

2.6%Total
deductions

(191,734)

24.0%

(285,235)

51.6%Total
revenues

$608,036

76.0%

$267,865

48.4%  The total
gross-to-net sales adjustments as a percentage of gross sales decreased for the
six months ended June 27, 2009, compared to the six months ended June 28, 2008,
primarily due to a significant reduction of chargebacks.  This decrease was
driven primarily by the increase in metoprolol sales during the first half of
2009.  Metoprolol sales increase was driven by lack of competition that
resulted in increased volume to retail chains which do not result in a
chargeback as well as a price increase, commensurate with being the sole
distributor of the generic product throughout the six months ended June 27,
2009, which reduces the chargebacks that we pay to wholesalers.  This was
coupled with lower overall volume of sales of products that carry higher than
average chargeback rates, including lower fluticasone sales, and the
discontinuation of other lower margin products.  The decrease of rebates
and incentive programs as a percentage of gross sales was driven by the lack of
incentive programs in the first half of 2009 related to certain discontinued
products such as fluticasone.  Refer to the June 28, 2008 accounts
receivable reserves activity table below for details of the prior period returns
reduction amount. The following tables summarize the
activity for the six months ended June 27, 2009 and June 28, 2008 in the
accounts affected by the estimated provisions described above:  For the Six Month Period Ended June
27, 2009Accounts receivable reserves

Beginning balance

Provision recorded for current
period sales

(Provision) reversal recorded for
prior period sales

Credits processed

Ending balanceChargebacks

($32,738)

($81,289)

($435)
(1)
$90,854

($23,608)Rebates and incentive programs

(27,110)

(53,382)

157

45,233

(35,102)Returns

(38,128)

(14,482)

(812)

14,226

(39,196)Cash discounts and other

(13,273)

(30,161)

-

23,644

(19,790)Total

($111,249)

($179,314)

($1,090)

$173,957

($117,696)Accrued liabilities(2)

($21,912)

($12,133)

$803

$9,183

($24,059)   37      For the Six Month Period Ended June
28, 2008****
Accounts receivable
reserves

Beginning balance

Provision recorded for current
period sales

(Provision) reversal recorded for
prior period sales

Credits processed

Ending balanceChargebacks

($46,006)

($198,996)

($539)
(1)
$214,412

($31,129)Rebates and incentive
    programs

(42,859)

(42,513)

(1,571)
(3)
63,129

(23,814)Returns

(47,102)

(8,323)

4,293
(4)
12,234

(38,898)Cash discounts and other

(16,158)

(23,777)

349

28,442

(11,144)Total

($152,125)

($273,609)

$2,532

$318,217

($104,985)Accrued liabilities(2)

($17,684)

($13,966)

($192)

$8,183

($23,659)  (1) Unless
specific in nature, the amount of provision or reversal of reserves related to
prior periods for chargebacks is not determinable on a product or customer
specific basis; however, based upon historical analysis and analysis of activity
in subsequent periods, we have determined that our chargeback estimates remain
reasonable. (2) Includes
amounts due to customers for which no underlying accounts receivable exists and
is principally comprised of Medicaid rebates and rebates due under other U.S.
Government pricing programs. (3) The
changes in accounts receivable reserves recorded for prior period sales related
to rebates and incentives programs are principally comprised of the finalization
of contract negotiations with a certain customer that resulted in an adjustment
of ($2.3) million to our rebates and incentive programs for sales made to that
customer in the fourth quarter of 2007.  With the exception of the
foregoing factor, there were no other factors that were deemed to be material
individually or in the aggregate. (4) The changes in
accounts receivable reserves recorded for prior period sales related to returns
principally comprised of the successful resolution in the six-month period ended
June 28, 2008 of a customer dispute over invalid customer deductions taken in
prior periods of $1.5 million, and an update to managements prior period
returns estimates of $2.8 million relating to the loss of a customer for certain
products and new returns information that became available during the six-month
period ended June 28, 2008.  Use of Estimates in
Reserves  We believe that our reserves,
allowances and accruals for items that are deducted from gross revenues are
reasonable and appropriate based on current facts and circumstances. It is
possible, however, that other parties applying reasonable judgment to the same
facts and circumstances could develop different allowance and accrual amounts
for items that are deducted from gross revenues. Additionally, changes in actual
experience or changes in other qualitative factors could cause Pars allowances
and accruals to fluctuate, particularly with newly launched or acquired
products.  We review the rates and amounts in our allowance and accrual
estimates on a quarterly basis. If future estimated rates and amounts are
significantly greater than those reflected in our recorded reserves, the
resulting adjustments to those reserves would decrease our reported net
revenues; conversely, if actual product returns, rebates and chargebacks are
significantly less than those reflected in our recorded reserves, the resulting
adjustments to those reserves would increase our reported net revenues. If we
were to change our assumptions and estimates, our reserves would change, which
would impact the net revenues that we report.  We regularly review the
information related to these estimates and adjust our reserves accordingly, if
and when actual experience differs from previous estimates.  Gross Margin We consider
gross margin to be a key performance indicator of our profitability.  Three months endedPercentage of Total
RevenuesJune 27,

June 28,



June 27,

June 28,($ in thousands)

2009

2008

$ Change

2009

2008Gross margin:Generic

$70,701

$9,228

$61,473

18.5%

9.9%Strativa

15,707

15,880

(173)

71.9%

79.3%Total gross margin

$86,408

$25,108

$61,300

21.4%

22.2%   38      Our increase
in gross margin dollars for the three months ended June 27, 2009 is primarily
due to higher sales of metoprolol coupled with the launches of sumatriptan and
dronabinol and higher sales of meclizine.  These four products, along with
propranolol and cabergoline, totaled approximately $57 million gross margin
dollars and a margin percentage of approximately 16% for the second quarter of
2009.  Gross margin related to all other revenues (approximately $14
million and a margin percentage of approximately 41%) benefited from the generic
segments resizing which began in the fourth quarter of 2008 that included the
trimming of the generic product portfolio to only retain those marketed products
that deliver acceptable gross margins, royalties, the first quarter launch of
alprazolam that has a high gross margin percentage, and additional tramadol
business due to loss of a competitor that had to exit the market during the
second quarter of 2009.   The increase in generic gross margin
percentage can be primarily attributed to the discontinuation of sales of many
products that faced pricing pressures in the second quarter of 2008 and were
eliminated as part of our restructuring in the fourth quarter of 2008 coupled
with the launches of sumatriptan and dronabinol and higher sales of meclizine. Strativa gross margin dollars
decreased for the three months ended June 27, 2009, primarily due to lower sales
of Megace® ES.  Strativas gross margin percentage deteriorated due mainly
to lower margin Nascobal® Nasal Spray sales.   The gross
margin percentage of Nascobal® Nasal Spray was negatively impacted by
purchase price adjustments associated with inventory acquired and sold in the
second quarter of 2009.  Six months endedPercentage of Total
RevenuesJune 27,

June 28,



June 27,

June 28,($ in thousands)

2009

2008

$ Change

2009

2008Gross margin:Generic

$122,732

$39,360

$83,372

21.5%

17.7%Strativa

27,745

35,269

(7,524)

73.4%

78.2%Total gross margin

$150,477

$74,629

$75,848

24.7%

27.9%  Our increase in gross margin dollars
for the six months ended June 27, 2009 is primarily due to higher sales of
metoprolol coupled with the launches of sumatriptan and dronabinol and higher
sales of meclizine.  These four products, along with propranolol and
cabergoline, totaled approximately $92 million gross margin dollars and a margin
percentage of approximately 18% for the 2009 year-to-date period.  Gross
margin related to all other revenues (approximately $31 million and a margin
percentage of approximately 45%) benefited from the generic segments resizing
which began in the fourth quarter of 2008 that included the trimming of the
generic product portfolio to only retain those marketed products that deliver
acceptable gross margins, royalties, the first quarter launch of alprazolam that
has a high gross margin percentage and additional tramadol business due to loss
of a competitor that had to exit the market during the second quarter of 2009. Strativa gross
margin dollars decreased for the six months ended June 27, 2009, primarily due
to lower sales of Megace® ES.  Operating Expenses  Research and Development  Three months endedPercentage of Total Revenues($ in
thousands)

June 27,
2009

June 28,
2008

$
Change

% Change

June 27,
2009

June 28,
2008Research and
development:Generic

$4,972

$13,332

($8,360)

(62.7%)

1.3%

14.4%Strativa

965

2,623

(1,658)

(63.2%)

4.4%

13.1%Total research
and
    development

$5,937

$15,955

($10,018)

(62.8%)

1.5%

14.1%  Generic: In October 2008, we announced plans to
resize our generic unit as part of an ongoing strategic assessment of our
businesses.  In conjunction with this action, we significantly reduced our
internal Generic research and development effort during the first quarter of
2009.  These actions led to reduced second quarter 2009 expenditures of
$8.4 million driven by a $2.5 million reduction in employment related costs on
headcount reductions of approximately 65 employees.  The remainder of the
savings was achieved through lower development and biostudy costs as we
concentrate our efforts on completing a more focused portfolio of generic
products.   39    Strativa: The decrease in Strativa research and
development expenditures principally reflects: · the non-recurrence of a $1.25 million
initial milestone to MonoSol Rx in June of 2008 when Strativa acquired the
commercialization rights in the United States and its territories to the orally
dissolving film strips (ODFS) formulation of ondansetron. · the non-recurrence of approximately
$1.1 million of costs related to the development of ZensanaTM, an
oral spray formulation of ondansetron, which was acquired in the latter half of
2007.  These reductions were tempered by FDA
filing fees associated with the New Drug Application for ODFS formulation of
ondansetron incurred in the second quarter of 2009. Six months endedPercentage of Total Revenues($ in thousands)

June 27,
2009

June 28,
2008

$ Change

% Change

June 27,
2009

June 28,
2008Research and
development:Generic

$10,862

$25,032

($14,170)

(56.6%)

1.9%

11.2%Strativa

2,247

8,081

(5,834)

(72.2%)

5.9%

17.9%Total research
and     development

$13,109

$33,113

($20,004)

(60.4%)

2.2%

12.4%  Generic: As cited above, we significantly
reduced our internal Generic research and development effort during the first
half of 2009.  Expenditures were reduced by $14.2 million driven by a $4.8
million reduction in employment related costs.  The remainder of the
savings was achieved through lower development and biostudy costs as we
concentrate our efforts on completing a more focused portfolio of generic
products.  Strativa: In addition to the drivers cited for
the three month period ended June 27, 2009 above, the decrease in Strativa
research and development for the year-to-date period principally reflects: · the non-recurrence of a $5 million
initial cash payment made to Alfacell Corporation in the first quarter of 2008
under an exclusive licensing agreement with Alfacell to acquire the
commercialization rights to Onconase® in the United States. · a $1.0 million milestone payment
triggered by MonoSol Rx in January 2009 upon successful completion of
bioequivalence reports for ODFS which indicated successful completion of all
clinical studies and all applicable clinical end-points necessary to file an NDA
for the product with the FDA.  Based upon these studies, on April 7, 2009,
Strativa submitted an NDA for ODFS to the FDA seeking approval in 8 mg and 4 mg
strengths for the prevention of nausea and vomiting associated with
chemotherapy, radiotherapy, and the post-operative period.  To date,
Strativa has paid MonoSol Rx a total of $3.5 million for the completion of
certain milestones; the next milestone payment is payable upon FDA approval of
the NDA.  Although there can be no such
assurance, total research and development expenses for 2009, including payments
to be made to unaffiliated companies, and expected milestone payments under
currently executed brand licensing arrangements (refer to Notes to Condensed
Consolidated Financial Statements  Note 17  Research and Development
Agreements) are expected to decrease by approximately 50% to 60% from 2008.  Selling, General and Administrative
Expenses Three months endedPercentage of Total Revenues($ in thousands)

June 27,
2009

June 28,
2008

$ Change

% Change

June 27,
2009

June 28,
2008Selling, general
and
    administrative

$44,117

$36,690

$7,427

20.2%

10.9%

32.5%  The net increase in SG&A
expenditures principally reflects: · an increase of $6.8 million related
to our on-going expenditures supporting Strativa sales and marketing, driven
primarily by an increase in the field force of approximately 60 additional
employees and other expenses and activities related to the relaunch of Nascobal®
Nasal Spray, as well as development costs of other products; · $0.7 million of
increased allocations of stock based compensation costs driven by the
significant downsizing of the Research and Development organization (total stock
based compensation costs for Par are essentially flat versus prior year)
and;   40   · an increase in
employment costs of $0.4 million, driven by higher estimated bonus costs.  These increases were tempered by
lower legal costs of $0.8 million.  Six months endedPercentage of Total Revenues($
in
thousands)

June 27,
2009

June 28,
2008

$ Change

%Change

June 27,
2009

June 28,
2008Selling, general
and
     administrative

$77,077

$68,037

$9,040

13.3%

12.7%

25.4%  The net increase in SG&A
expenditures principally reflects: · an increase of $6.8 million related
to Pars on-going expenditures supporting Strativa sales and marketing, driven
primarily by an increase in the field force of approximately 60 additional
employees and other expenses and activities related to the relaunch of Nascobal®
Nasal Spray, as well as development costs for other products;  · an increase in
employment costs of $1.4 million, driven by higher estimated bonus costs
and; · $1.4 million of
increased allocations of stock based compensation costs driven by the
significant downsizing of the Research and Development organization (total stock
based compensation costs for Par are essentially flat versus prior year.) These
increases were tempered by lower legal costs of $0.3 million.  Settlements and Loss Contingencies, net  Three months ended

Six months endedJune 27,

June 28,

June 27,

June 28,($
in thousands)

2009

2008

2009

2008Settlements and loss contingencies, net

$61

$ -

($3,315)

$ -  Settlements
and loss contingencies, net, of $3.3 million during the six months ended June
27, 2009, is principally comprised of a net $3.4 million gain related to the
final resolution of our litigation with Pentech Pharmaceuticals, Inc. which
occurred in the first quarter of 2009.  On February 9, 2009, following a
bench trial, the United States District Court for the Northern District of
Illinois entered a judgment in favor of Pentech and against Par in the amount of
$70.0 million.  This action had alleged that we breached our contract with
Pentech relating to the supply and marketing of paroxetine (Paxil®) and that we
breached fiduciary duties allegedly owed to Pentech.  As a result of the
courts decision, we recorded $45 million in settlements and loss contingencies,
net, on the consolidated statements of operations for the year ended December
31, 2008.  Subsequently, in March 2009, Par and Pentech entered into a
settlement agreement and release under which the parties fully resolved all
disputes, claims, and issues in connection with this litigation for $66.1
million.  We paid $66.1 million in cash and recorded a $3.9 million gain
related to this settlement, net of $0.5 million of interest accrued from January
1, 2009. Restructuring
Costs Three months ended

Six months endedJune 27,

June 28,

June 27,

June 28,($
in thousands)

2009

2008

2009

2008Restructuring costs

$81

$ -

$1,482

$ -  In October 2008, we announced our
plans to resize our generic products division as part of an ongoing strategic
assessment of our businesses.  In conjunction with this plan, we have taken
steps to reduce our research and development expenses by decreasing internal
generic research and development effort.  Under this plan, we are
continuing to concentrate our efforts on completing a more focused portfolio of
generic products and will continue to look for opportunities with external
partners.  In addition, during the fourth quarter of 2008, we initiated
actions to trim our generic product portfolio in an effort to retain only those
marketed products that deliver acceptable profit.  These actions resulted
in a workforce reduction of approximately 190 positions in manufacturing,
research and development, and general and administrative functions.  In
connection with these actions, we incurred expenses for severance and other
employee-related costs.  In addition, as part of our plans to resize our
generic products division, we determined to abandon or sell certain assets that
resulted in asset impairments, and accelerated depreciation expense. During the
first half of 2009, we incurred additional restructuring costs as we continued
to execute this plan, principally driven by charges for one-time termination
benefit costs recognized in the first quarter.   41   The following table summarizes the restructuring costs in the first half of 2009
and the remaining related restructuring liabilities balance (included in accrued
expenses and other current liabilities on the condensed consolidated balance
sheet) as of June 27, 2009 ($ amounts in thousands): Restructuring Activities

Initial Charge

Liabilities at December
31,2008

Cash
Payments

Additional Charges

Reversals, Reclass or Transfers

Liabilities at June
27,2009Severance and employee
    benefits to be paid in cash

$6,254

$6,254

$2,989

$1,309

$ -

$4,574Severance related to
share-   based compensation

3,291

-

-

-

-

-Asset impairments and other

5,907

60

173

173

-

$60Total

$15,452

$6,314

$3,162

$1,482

$ -

$4,634 We previously disclosed that we had expected to record $4 million of accelerated
depreciation related to assets that were held and used as of December 31, 2008
and were expected to be idled or sold in late 2009.  During the first
quarter of 2009, and in conjunction with our acquisition of Nascobal®
and MDRNA (refer to Notes to Condensed Consolidated Financial Statements  Note
19  Acquisitions), we have reevaluated our plan for these assets.  Under
our revised plans, these assets will be held and used for the life of the asset,
and therefore we had resumed depreciating these assets in the first quarter of
2009 in accordance with their expected useful life.  We accounted for these
actions as a change in estimate in accordance with U.S. GAAP.  Gain on Sale of Product Rights and other Three months ended

Six months endedJune 27,

June 28,

June 27,

June 28,($ in thousands)

2009

2008

2009

2008Gain on sale of product rights and other

$265

$500

$1,365

$2,125  During the three-month periods ended
June 27, 2009 and June 28, 2008, we recognized a gain on the sale of product
rights of $0.3 million and $0.5 million, related to the sale of multiple ANDAs.  During the
six-month periods ended June 27, 2009 and June 28, 2008, we recognized a gain on
the sale of product rights of $1.4 million and $1.5 million, related to the sale
of multiple ANDAs.  In November 2007, we entered into an
agreement to provide certain information and other deliverables related to
Megace®ESto enable the formal technology transfer to a
third party seeking to commercialize Megace®ESoutside of
the U.S.  We recorded $0.6 million in the quarter ended June 28, 2008, when
our obligations were fulfilled related to this agreement.  Operating Income (Loss)  Three months ended

Six months ended($
in thousands)

June 27,
2009

June 28,
2008

$ Change

June 27,
2009

June 28,
2008

$ ChangeOperating income (loss):Generic

$44,862

($26,119)

$70,981

$76,240

($24,440)

$100,680Strativa

(8,385)

(918)

(7,467)

(12,751)

44

(12,795)Total operating income (loss)

$36,477

($27,037)

$63,514

$63,489

($24,396)

$87,885  Our increased operating income in the
second quarter of 2009 was mainly due to the increase in gross margins for the
generic segment as discussed above, coupled with the decrease in research and
development expenditures, somewhat tempered by sales and marketing expenditures
in support of Strativas relaunch of Nascobal® Nasal Spray.   Gain on Bargain Purchase Three months ended

Six months endedJune 27,

June 28,

June 27,

June 28,($
in thousands)

2009

2008

2009

2008Gain on bargain purchase

$3,021

$ -

$3,021

$ -   42      During the
three-month period ended June 27, 2009, we recorded a $3.0 million gain related
to the acquisition of certain assets and certain operating leases from MDRNA,
Inc.  The acquisition has been accounted for as a bargain purchase
under SFAS No. 141(R).  The purchase price of the acquisition has been
allocated to the net tangible and intangible assets acquired, with the excess of
the fair value of assets acquired over the purchase price recorded as a gain.
 The gain is mainly attributed to MDRNAs plans to exit its contract
manufacturing business.   Gain on Extinguishment of Senior Subordinated
Convertible Notes Three months ended

Six months endedJune 27,

June 28,

June 27,

June 28,($
in thousands)

2009

2008

2009

2008Gain on extinguishment of senior subordinated
     convertible notes

$504

$ -

$749

$ -  In June 2009, we repurchased senior
subordinated convertible notes that were to mature on September 30, 2010 in the
aggregate principal amount of $11.3 million for approximately $10.8 million,
including accrued interest.  The notes bore interest at an annual rate of
2.875%.  The repurchase also resulted in the write-off of approximately
$0.07 million of deferred financing costs in the second quarter of 2009.
 We recorded a gain of approximately $0.5 million in the second quarter of
2009 related to this debt extinguishment. In March 2009,
we repurchased senior subordinated convertible notes in the aggregate principal
amount of $2.5 million for approximately $2.3 million, including accrued
interest.  The repurchase also resulted in the write-off of approximately
$0.02 million of deferred financing costs.  We recorded a gain of
approximately $0.25 million, in the first quarter of 2009 related to this debt
extinguishment.   Interest Income Three months ended

Six months endedJune 27,

June 28,

June 27,

June 28,($
in thousands)

2009

2008

2009

2008Interest income

$667

$2,129

$1,824

$5,143  Interest income principally includes
interest income derived primarily from money market and other short-term
investments.  Our return on investments was negatively impacted by the
overall decline in yields available on reinvested funds, coupled with a lower
average portfolio balance principally due to the cash settlement to Pentech and
the purchase price related to our acquisition of Nascobal and certain assets
from MDRNA.  Interest Expense Three months ended

Six months endedJune 27,

June 28,

June 27,

June 28,($
in thousands)

2009

2008

2009

2008Interest expense

($2,595)

($3,544)

($5,162)

($7,054)  Interest expense principally includes
interest payable on our senior subordinated convertible notes due 2010 and is
lower primarily due to our repurchase of notes in the aggregate principal amount
of $71.8 million during October 2008, March 2009 and June 2009.   As
further detailed in Note 2  Change in Accounting Principle and Related
Adjustments to Previously Issued Financial Statements of the accompanying
condensed consolidated financial statements, on January 1, 2009, Par adopted the
provisions of FASB Staff Position No. APB 14-1, Accounting for Convertible
Debt Instruments That May Be Settled in Cash Upon Conversion (Including Partial
Cash Settlement)(FSP APB 14-1) and restated second quarter 2008 interest
expense to $3.5 million.  Income Taxes Three months ended

Six months endedJune 27,

June 28,

June 27,

June 28,($
in thousands)

2009

2008

2009

2008Provision for income taxes

$14,087

($8,236)

$23,624

($7,495)Effective tax rate

37%

28%

37%

28%  The provisions were based on the
applicable federal and state tax rates for those periods (see Notes to condensed
consolidated financials statements - Note 10  Income Taxes).    43   Discontinued
Operations  Three months ended

Six months endedJune 27,

June 28,

June 27,

June 28,($
in thousands)

2009

2008

2009

2008Gain from discontinued operations

$ -

$ -

$ -

$505Provision for income taxes

176

268

352

713(Loss) gain from discontinued operations

($176)

($268)

($352)

($208)  In January 2006, we announced the
divestiture of FineTech Laboratories, Ltd (FineTech), effective December 31,
2005.  We transferred the business for no proceeds to Dr. Arie Gutman,
president and chief executive officer of FineTech.  Dr. Gutman also
resigned from our Board of Directors.  The results of FineTech operations
have been classified as discontinued for all periods presented because we had no
continuing involvement in FineTech.  In January 2008, Dr. Gutman sold
FineTech to a third party.  Under the terms of the divestiture, we received
$0.5 million during the first quarter of 2008 which represents our share of the
net proceeds of the sale transaction.  This $0.5 million has been
classified as discontinued operations on the condensed consolidated statement of
operations for the six month period ended June 28, 2008.   FINANCIAL CONDITION  Liquidity and Capital Resources  Six months endedJune 27,($
in thousands)

2009Cash and cash equivalents at beginning of
period

$170,629Net cash provided by operating activities

12,136Net cash used in investing activities

(28,975)Net cash used in financing activities

(14,431)Net decrease in cash and cash equivalents

($31,270)Cash and cash equivalents at end of period

$139,359  Cash and cash equivalents at June 27,
2009 decreased from December 31, 2008.  Cash provided by operations for the
six months ended June 27, 2009, reflects the cash generated by operations
partially offset by cash paid to Pentech in connection with the unfavorable
court decision of approximately $66 million.  Cash flows used by investing
activities were primarily driven by the acquisitions of Nascobal®
from QOL Medical, LLC and certain assets and liabilities from MDRNA, Inc. for
approximately $55 million offset by the liquidation of net investments in
available for sale debt securities to fund the acquisitions and the payment of
the unfavorable court decision related to Pentech.  Cash used in financing
activities in the six-month period ended June 27, 2009 mainly represented the
repurchase of approximately $14 million (face value) of senior subordinated
convertible notes.  Our working capital, current assets
minus current liabilities, of $327 million at June 27, 2009 increased
approximately $123 million from $203 million at December 31, 2008, which
reflects the reclassification of our senior subordinated convertible notes to
long-term due to the June 2009 dismissal of the related litigation (see Note
14).  The working capital ratio, which is calculated by dividing current
assets by current liabilities, was 2.22x at June 27, 2009 compared to 1.69x at
December 31, 2008.  We believe that our working capital ratio indicates the
ability to meet our ongoing and foreseeable obligations for the next 12 fiscal
months.   44   Sources
of Liquidity   Our primary
source of liquidity is cash received from customers.  In the second quarter
of 2009, we collected approximately $276 million with respect to net product
sales as compared to approximately $150 million in the second quarter of 2008.
 For year-to-date 2009, we collected approximately $437 million with
respect to net product sales as compared to approximately $290 million in the
comparable year-to-date period in 2008.  The increase can be attributed to
our improved sales performance in the second quarter and year-to-date period of
2009 as compared to the prior year comparable periods, which, as discussed
above, was driven primarily by metoprolol sales, the revenue from which
increased dramatically in 2009 due to a lack of competitive products in the
market.  Our ability to continue to generate cash from operations is
predicated not only on our ability to maintain a sustainable amount of sales of
our current product portfolio, but also our ability to monetize our product
pipeline and future products that we may acquire.  Our generic product
pipeline included 14 first-to-file and/or first-to-market opportunities (a total
of 37 ANDAs pending with the FDA) and our Strativa pipeline had 3 brand drugs in
active development as of June 27, 2009.  Our future profitability depends,
to a significant extent, upon our ability to introduce, on a timely basis, new
generic products that are either the first to market (or among the first to
market) or otherwise can gain significant market share.  Commercializing
brand pharmaceutical products is more costly than generic products.  We
cannot be certain that our expenditures will result in the successful
development or launch of brand products that will prove to be commercially
successful or will improve the long-term profitability of our business. We also filed
a shelf registration statement during the second quarter of 2009.  Under
the shelf registration, we may sell any combination of common stock, preferred
stock, debt securities, or warrants from time to time for an aggregate offering
price of up to $150 million.  We have no current plans to raise capital via
the shelf registration statement. Uses of Liquidity Our uses of
liquidity and future and potential uses of liquidity include the following: · Cash paid for the acquisitions of
Nascobal® from QOL
Medical, LLC and certain assets and liabilities from MDRNA, Inc. for
approximately $55 million during the second quarter of 2009. · Cash paid to Pentech in connection
with the unfavorable court decision of approximately $66 million in the first
quarter of 2009. · Cash paid for inventory purchases was
approximately $57 million for the second quarter of 2009 as compared to
approximately $38 million for prior year quarter.  Cash paid for inventory
purchases was approximately $94 million for the year-to-date period in 2009 as
compared to approximately $69 million for prior year year-to-date period.
 The increase is mainly due to our 2009 sales performance improvement,
which resulted in improved inventory turns. · Cash paid to all other suppliers and
third parties was approximately $171 million for the second quarter of 2009 as
compared to approximately $92 million for the prior year quarter.  Cash
paid to all other suppliers and third parties was approximately $274 million for
the year-to-date period in 2009 as compared to approximately $149 million for
the prior year comparable period.  The increase is mainly due to our 2009
sales performance improvement of distributed products that resulted in higher
amounts paid to partners. · Cash compensation paid to employees
was approximately $15 million for the second quarter of 2009 as compared to
approximately $15 million for the prior year quarter.  Cash compensation
paid to employees was approximately $35 million for the year-to-date period in
2009 as compared to approximately $43 million for the prior year year-to-date
period.  The decrease for the year-to-date period was mainly due to the
resizing of our generic products division begun in October 2008, which resulted
in a workforce reduction of approximately 190 positions coupled with lower bonus
payments in 2009. · The payment of the senior
subordinated convertible notes with a face amount of $128.2 million at June 27,
2009 by September 2010 or sooner. · Potential liabilities related to the
outcomes of audits by regulatory agencies like the IRS or the Office of
Inspector General of the Department of Veterans Affairs.  We accrued for a
loss contingency estimated at approximately $4.9 million, including interest, as
of June 27, 2009 related to a routine post award contract review of our
Department of Veterans Affairs contract for the periods 2004 to 2007 that is
being conducted by the Office of Inspector General of the Department of Veterans
Affairs.  In the event that our loss contingency is ultimately determined
to be higher than originally accrued, the recording of the additional liability
may result in a material impact on our liquidity or financial condition when
such additional liability is paid. · 2009 capital expenditures are
expected to total approximately $8 million. · Expenditures related to current
business development and product acquisition activities.  As of June 27,
2009, the total potential future payments that ultimately could be due under
existing agreements related to products in various stages of development were
approximately $50 million. This amount is exclusive of contingencies tied to the
achievement of sales milestones, which will be funded through future revenue
streams.   45   · Normal course payables due to
distribution agreement partners of approximately $177 million as of June 27,
2009 related primarily to amounts due under profit sharing agreements.  We
expect to pay substantially all of the $177 million during the first two months
of the third quarter of 2009.  The risk of lower cash receipts from
customers due to potential decreases in revenues associated with competition or
supply issues related to partnered products, in particular metoprolol, would be
mitigated by proportional decreases in amounts payable to distribution agreement
partners. We believe
that we will be able to monetize our current product portfolio, our product
pipeline, and future product acquisitions and generate sufficient operating cash
flows and that along with existing cash, cash equivalents and available for sale
securities will allow us to meet our financial obligations over the foreseeable
future.  We expect to continue to fund our operations, including our
research and development activities, capital projects, in-licensing product
activity and obligations under our existing distribution and development
arrangements discussed herein, out of our working capital.  Our future
product acquisitions may require additional debt and/or equity financing; there
can be no assurance that we will be able to obtain any such additional financing
when needed on acceptable or favorable terms.  In 2004, our Board authorized the
repurchase of up to $50 million of our common stock.  Repurchases are made,
subject to compliance with applicable securities laws, from time to time in the
open market or in privately negotiated transactions.  Shares of common
stock acquired through the repurchase program are available for general
corporate purposes.  On September 28, 2007, we announced that our Board
approved an expansion of our share repurchase program allowing for the
repurchase of up to $75 million of our common stock, inclusive of the $17.8
million remaining from the 2004 authorization.  We repurchased 1.6 million
shares of our common stock for approximately $31.4 million pursuant to the
expanded program in the fourth quarter of 2007.  The authorized amount
remaining for stock repurchases under the repurchase program was approximately
$43.6 million, as of June 27, 2009.  We do not currently anticipate
utilizing additional available authorization under the repurchase program.  In addition to our cash and cash
equivalents, we had approximately $63 million of available for sale debt
securities classified as current assets on the condensed consolidated balance
sheet as of June 27, 2009.  These available for sale debt securities were
all available for immediate sale.  We intend to continue to use our current
liquidity to support the expansion of our Strativa business, enter into product
license arrangements, potentially acquire other complementary businesses and
products, and for general corporate purposes.  Contractual Obligations as of
June 27, 2009 The dollar
values of our material contractual obligations and commercial commitments as of
June 27, 2009 were as follows, in $ thousands:  Amounts Due by PeriodObligation

Total Monetary

2009

2010 to

2012 to

2014 andObligations


2011

2013

thereafter

OtherOperating leases

$10,807

$2,435

$6,682

$1,337

$353

$ -Convertible notes (1)

128,175

-

128,175

-

-

-Interest payments (2)

4,649

1,888

2,761

-

-

-Purchase obligations (3)

145,980

145,980

-

-

-

-Long-term tax liability (4)

41,259

-

-

-

-

41,259Severance payments

4,069

4,069

-

-

-

-Other

372

372

-

-

-

-Total obligations

$335,311

$154,744

$137,618

$1,337

$353

$41,259  (1) The Senior
Subordinated Convertible Notes mature on September 30, 2010, unless earlier
converted or repurchased.  During July 2009, we also repurchased an
additional $35.5 million (face value) of the Senior Subordinated Convertible
Notes. (2) Interest
payments represent the total interest due under the Notes until their
contractual maturity on September 30, 2010.  A portion of these amounts
would not be payable if the Notes are earlier converted, accelerated or
repurchased. (3) Purchase
obligations consist of both cancelable and non-cancelable inventory and
non-inventory items.  Approximately $97 million of the total purchase
obligations at June 27, 2009 related to metoprolol. (4) The difference between a tax position
taken or expected to be taken in a tax return and the benefit recognized and
measured pursuant to FIN 48 represents an unrecognized tax
benefit.  An unrecognized tax benefit is a liability that represents a
potential future obligation to the taxing authorities.  As of June 27,
2009, the amount represents unrecognized tax benefits, interest and penalties
based on evaluation of tax positions and concession on tax issues challenged by
the IRS.  We do not expect to make a significant tax payment related to
these long-term liabilities within the next year; however, we cannot estimate in
which period   46   thereafter
such tax payments may occur.  For presentation on the table above, we
included the related long-term liability in the Other column.  Financing  At June 27,
2009, our total outstanding short and long-term debt, including the current
portion, had a face value of $128.2 million.  The amount consisted of
Senior Subordinated Convertible Notes that we sold in 2003 pursuant to Rule 144A
under the Securities Act of 1933, as amended.  The Notes bear interest at
an annual rate of 2.875%, payable semi-annually on March 30 and September 30 of
each year.  The Notes are convertible into shares of common stock at an
initial conversion price of $88.76 per share, only upon the occurrence of
certain events.  Upon redemption, we have agreed to satisfy the conversion
obligation in cash in an amount equal to the principal amount of the Notes
converted.  The Notes mature on September 30, 2010, unless earlier
converted or repurchased.  We may not redeem the Notes prior to the
maturity date. In conjunction with the adoption of
FSP APB 14-1, we allocated a portion of the Senior Subordinated Convertible
Notes between liability and equity components of the instrument in a manner that
reflects the issuers economic interest cost.  Previous guidance provided
for accounting of our type of convertible debt instruments entirely as debt.
 The effect of FSP APB 14-1 for our type of convertible debt instrument is
that the equity component is included in the additional paid-in capital section
of stockholders equity on Pars condensed consolidated balance sheet and the
value of the equity component is treated as original issue discount for purposes
of accounting for the debt component of the convertible debt instruments.
 FSP APB 14-1 was effective as of January 1, 2009, with retrospective
application required.  Higher interest expense will result through the
accretion of the discounted carrying value of the debt instruments to their face
amount over their term.  Prior period interest expense was also higher than
previously reported due to retrospective application.  As of June 27, 2009,
our condensed consolidated balance sheet reflects the debt amount of $120.0
million, a related deferred tax liability amount of $3.2 million and an equity
component of $5.0 million.  Critical Accounting Policies and Use of
Estimates  Our critical accounting policies are
set forth in our Annual Report on Form 10-K for the fiscal year ended December
31, 2008 and our Current Report on Form 8-K dated June 19, 2009 that contains
updated historical financial statements and financial data included in our 2008
Annual Report on Form 10-K for accounting adjustments related to the adoption of
FSP APB 14-1.  There has been no change, update or revision to our critical
accounting policies subsequent to the filing of our Annual Report on Form 10-K
for the fiscal year ended December 31, 2008 and our Current Report on Form 8-K
dated June 19, 2009.  Subsequent Events In July 2009, we repurchased senior
subordinated convertible notes that were to mature on September 30, 2010 in the
aggregate principal amount of $35.5 million for approximately $34.0 million,
including accrued interest.  The notes bore interest at an annual rate of
2.875%.  As of August 4, 2009, the notes had an outstanding aggregate
principal amount of $92.7 million.    ITEM
3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Available
for sale debt securities The primary objectives for our
investment portfolio are liquidity and safety of principal. Investments are made
with the intention to achieve the best available rate of return on traditionally
low risk investments.  We do not buy and sell securities for trading
purposes.  Our investment policy limits investments to certain types of
instruments issued by institutions with investment-grade credit ratings, the
U.S. government and U.S. governmental agencies.  We are subject to market
risk primarily from changes in the fair values of our investments in debt
securities including governmental agency and municipal securities, and corporate
bonds.  These instruments are classified as available for sale securities
for financial reporting purposes.  A ten percent increase in interest rates
on June 27, 2009 would have caused the fair value of our investments in
available for sale debt securities to decline by approximately $0.2 million as
of that date.  Additional investments are made in overnight deposits and
money market funds. These instruments are classified as cash and cash
equivalents for financial reporting purposes, generally have lower interest rate
risk relative to investments in debt securities and changes in interest rates
generally have little or no impact on their fair values.  For cash, cash
equivalents and available for sale debt securities, a ten percent decrease in
interest rates would decrease the interest income we earned by approximately
$0.2 million on an annual basis.   47   The
following table summarizes the carrying value of available for sale securities
that subject Par to market risk at June 27, 2009 and December 31, 2008 ($
amounts in thousands): June 27,

December 31,2009

2008Securities issued by government agencies
$16,437

$41,541Debt securities issued by various state and local
municipalities and agencies
28,078

28,585Other debt securities
18,465

24,320Marketable equity securities available for
sale
1,150

600Total
$64,130

$95,046  Senior Subordinated
Convertible Notes The outstanding face value of our
Senior Subordinated Convertible Notes on June 27, 2009 was $128.2 million and
they bear fixed interest at an annual rate of 2.875%.  The Notes mature on
September 30, 2010, unless earlier converted or repurchased.  On June
27, 2009, the Senior Subordinated Convertible Notes had a quoted market value of
approximately $122.4 million, which was higher than the quoted market value as
of December 31, 2008.  We do not have any financial
obligations exposed to significant variability in interest rates.    ITEM 4. CONTROLS AND PROCEDURES  Disclosure Controls and Procedures  We maintain
disclosure controls and procedures that are designed to ensure that information
required to be disclosed in our filings with the SEC is recorded, processed,
summarized and reported within the time period specified in the SECs rules and
forms, and that such information is accumulated and communicated to our
management, including our Chief Executive Officer (CEO) and Chief Financial
Officer (CFO), as appropriate, to allow timely decisions regarding required
disclosure based on the definition of  disclosure controls and procedures
as defined in Rule 13a-15(e) promulgated under the Securities Exchange Act of
1934, as amended (the Exchange Act).  In designing and evaluating
disclosure controls and procedures, we have recognized that any controls and
procedures, no matter how well designed and operated, can provide only
reasonable assurance of achieving the desired control objectives, and management
is required to apply judgment in evaluating our controls and procedures.
 An evaluation was performed under the supervision and with the
participation of Company management, including the CEO and the CFO, to assess
the effectiveness of the design and operation of its disclosure controls and
procedures (as defined under the Exchange Act) as of June 27, 2009.  Based
on that evaluation, our management, including our CEO and the CFO, concluded
that our disclosure controls and procedures were effective as of June 27,
2009.   Changes in Internal Control
over Financial Reporting  Par completed the implementation of
its new revenue management (contracts and pricing) system during the quarter
ended June 27, 2009.  As a result there have been changes to our business
processes; however, there have been no material changes to our internal controls
over financial reporting. There
have been no other changes identified during the quarter ended June 27, 2009
that have materially affected, or are reasonably likely to materially affect,
our internal control over financial reporting.    PART II. OTHER INFORMATION   ITEM 1. LEGAL PROCEEDINGS Contractual Matters On May 3, 2004, Pentech
Pharmaceuticals, Inc. (Pentech) filed an action against Par in the United
States District Court for the Northern District of Illinois.  This action
alleged that Par breached its contract with Pentech relating to the supply and
marketing of paroxetine (Paxil®) and that Par breached fiduciary duties
allegedly owed to Pentech.  On February 9, 2009, following a bench trial,
the district court entered a judgment in favor of Pentech and against Par in the
amount of $70 million.  Subsequently, on March 5, 2009, in order to avoid
any further costs, burdens or distractions of litigation, Par entered into a
Settlement Agreement with Pentech pursuant to which Par paid Pentech an amount
of approximately $66 million.  Pursuant to the terms of the agreement, a
stipulation dismissing the appeal of judgment and Pentechs satisfaction of
judgment was filed with the District Court.    48   Corporate Litigation Par and certain of its former
executive officers have been named as defendants in consolidated class action
lawsuits filed on behalf of purchasers of common stock of Par between July 23,
2001 and July 5, 2006. The lawsuits followed Pars July 5, 2006 announcement
regarding the restatement of certain of its financial statements and allege that
Par and certain members of its then management engaged in violations of the
Securities Exchange Act of 1934, as amended (the Exchange Act), by issuing
false and misleading statements concerning Pars financial condition and results
of operations. The class actions are pending in the United States District
Court, District of New Jersey.  On June 24, 2008, the Court dismissed
co-lead plaintiffs Consolidated Amended Complaint without prejudice with leave
to re-file.  On July 24, 2008, co-lead plaintiffs filed a Second
Consolidated Amended Complaint. Par and the individual defendants have filed a
motion to dismiss.  The motion has been fully briefed but not yet scheduled
for argument.  Par and the individual defendants intend to vigorously
defend the class action.  On
September 1, 2006, Par received a notice of default from the American Stock
Transfer & Trust Company, as trustee (the Trustee)  of Pars 2.875%
Senior Subordinated Convertible Notes due 2010 (the Notes). The Trustee
claimed, in essence, that Pars failure to include financial statements in its
Quarterly Report on Form 10-Q for the second quarter of 2006 constituted a
default under Section 6.2 of the Indenture, dated as of September 30,
2003 (the Indenture), between Par, as issuer, and the Trustee, relating to the
Notes.  Under the Indenture, Par is required only to provide the Trustee
with copies of its annual and other reports (or copies of such portions of such
reports as the SEC may by rules and regulations prescribe) that it is required
to file with the SEC pursuant to Section 13 or 15(d) of the Exchange Act within
15 calendar days after it files such annual and other reports with the SEC.
Moreover, Pars Indenture specifically contemplates providing the Trustee with
portions of reports. On August 24, 2006 (within 15 days of filing with the SEC),
Par provided to the Trustee a copy of its Quarterly Report on Form 10-Q for the
second quarter of 2006. Pars Form 10-Q did not include Pars financial
statements for the second quarter of 2006 and related Managements Discussion
and Analysis due to Pars work to restate certain of its past financial
statements, and, therefore, in accordance with SEC rules, Par filed a Form
12b-25 Notification of Late Filing disclosing the omissions. Pars Form 12b-25
also was provided to the Trustee on August 24, 2006. Accordingly, Par believes
that it complied with the Indenture provision in question. After Par communicated its position to
the Trustee, the Trustee filed a lawsuit, on October 19, 2006, on behalf of
the holders of the Notes, in the Supreme Court of the State of New York, County
of New York, alleging a breach of the Indenture and of an alleged covenant of
good faith and fair dealing. The lawsuit demanded, among other things, that Par
pay the holders of the Notes either the principal, any accrued and unpaid
interest and additional interest (as such term is defined in the Indenture), if
any, or the difference between the fair market value of the Notes on
October 2, 2006 and par, whichever the Trustee elects, or in the
alternative, damages to be determined at trial, alleged by the Trustee to exceed
$30.0 million. Par removed the lawsuit to the U.S. District Court for the
Southern District of New York and filed its answer to the complaint in that
Court. On January 19, 2007, the Trustee filed a motion for summary
judgment. On February 16, 2007, Par filed its response to the Trustees motion
for summary judgment and cross-moved for summary judgment in its favor.  On
June 19, 2009, the U.S. District Court for the Southern District of New York
dismissed the lawsuit.  On June 22, 2009, the Court issued its opinion and
order denying the Trustees motion for summary judgment and granting Pars
cross-motion for summary judgment.  The Court ruled that Pars actions
did not breach the Indenture and dismissed all of the Trustees claims.  Patent Related Matters  On April 28,
2006, CIMA Labs, Inc. (CIMA) and Schwarz Pharma, Inc. (Schwarz Pharma) filed
separate lawsuits against Par in the United States District Court for the
District of New Jersey.  CIMA and Schwarz Pharma each have alleged that Par
infringed U.S. Patent Nos. 6,024,981 (the 981 patent) and 6,221,392 (the
392 patent) by submitting a Paragraph IV certification to the FDA for
approval of alprazolam orally disintegrating tablets.  CIMA owns the 981
and 392 patents and Schwarz Pharma is CIMAs exclusive licensee.  The two
lawsuits were consolidated on January 29, 2007.  In response to the
lawsuit, Par has answered and counterclaimed denying CIMAs and Schwarz Pharmas
infringement allegations, asserting that the 981 and 392 patents are not
infringed and are invalid and/or unenforceable. All 40 claims in the 981 patent
were rejected in two non-final
office actions in a reexamination proceeding at the United States Patent and
Trademark Office (PTO) on February 24, 2006 and on February 24, 2007.
 The 392 patent is also the subject of a reexamination proceeding.
 As of July 10, 2008, the PTO has rejected with finality all claims pending
in both the 392 and 981 patents.  CIMA has moved to stay this lawsuit
pending the outcome of the reexamination proceedings and to consolidate this
lawsuit with another lawsuit in the same district involving the same patents
(CIMA Labs, Inc. et al. v. Actavis Group hf et al.). Par intends to vigorously
defend this lawsuit and pursue its counterclaims. Par entered
into a licensing agreement with developer Paddock Laboratories, Inc. (Paddock)
to market testosterone 1% gel, a generic version of Unimed Pharmaceuticals,
Inc.s (Unimed) product Androgel®.  Pursuant to this agreement, Par is
responsible for management of any litigation and payment of all legal fees
associated with this product.  The product, if successfully brought to
market, would be manufactured by Paddock and marketed by Par.  Paddock has
filed an ANDA (that is pending with the FDA) for the testosterone 1% gel
product.  As a result of the filing of the ANDA, Unimed and Laboratories
Besins Iscovesco (Besins), co-assignees of the patent-in-suit, filed a lawsuit
against Paddock in the United States District Court for the Northern District of
Georgia, alleging patent infringement on August 22, 2003.  Par has an
economic interest in the outcome of this litigation by virtue of its licensing
agreement with Paddock.  Unimed and Besins sought an injunction to prevent
Paddock from manufacturing the generic   49   product.
 On September 13, 2006, Par acquired from Paddock all rights to the ANDA
for testosterone 1% gel, a generic version of Unimeds product Androgel® for $6
million.  The lawsuit was resolved by a settlement and license agreement
that terminates all on-going litigation and permits Par to launch the generic
version of the product no earlier than August 31, 2015 and no later than
February 28, 2016, assuring Pars ability to market a generic version of
Androgel® well before the expiration of the patents at issue.  On March 7,
2007, Par was issued a Civil Investigative Demand seeking information and
documents in connection with the court-approved settlement in 2006 of the patent
infringement case, Unimed v. Paddock, in the U.S. District Court for Northern
District of Georgia.  The Bureau of Competition for the Federal Trade
Commission (FTC) is investigating whether the settlement of the litigation
constituted unfair methods of competition in a potential violation of Section 5
of the FTC Act.  On January 30, 2009, the FTC filed a lawsuit against the
company in the U.S. District Court for the District of Central California
alleging violations of antitrust laws stemming from Pars court-approved
settlement in the patent litigation.  On February 2, 2009, Meijer
Distribution, Inc. filed a class action complaint in the same district court
alleging antitrust violations and seeking treble damages. On February 3, 2009,
both Rochester Drug Co-Operative, Inc. and Louisiana Wholesale Drug Co., Inc.
filed class action complaints in the same district court.  On April 9,
2009, the U.S. District Court for Central California granted Pars motion to
transfer the FTC lawsuit, as well as the three aforementioned class action
suits, to the U.S. District Court for Northern Georgia, the jurisdiction in
which Pars original consent judgment relating to the patent litigation
settlement entered.  On April 10, 2009, the cases were transferred.
 On April 17, 2009 the Fraternal Order of Police, Fort Lauderdale Lodge 31
Insurance Trust Fund filed a class action complaint naming Par in the U.S.
District Court for the District of New Jersey and on April 21, 2009 Raymond
Scurto on behalf of another class, filed a second class action complaint naming
Par in the same court both alleging antitrust violations.  On May 28, 2009,
the FTC filed an amended complaint in the United States District Court, Northern
District of Georgia, realleging violations of antitrust laws stemming from Pars
court-approved settlement in the patent litigation but dropping its California
state claims as well as its first Sherman Act claim.  On June 18, 2009,
Rite Aid, Eckerd, and CVS, among others, filed a class action complaint naming
Par in the U.S. District Court for the Middle District of Pennsylvania alleging
antitrust violations.  On June 29, 2009, Walgreens, among others, filed a
class action complaint naming Par in the U.S. District Court for the Middle
District of Pennsylvania as well, alleging antitrust violations.  Par
believes it has complied with all applicable laws in connection with the
court-approved settlement and intends to vigorously defend these actions. On December 19, 2006, Reliant
Pharmaceuticals, Inc. (Reliant) filed a lawsuit against Par in the United
States District Court for the District of Delaware.  Reliant alleged, in
its Complaint, that Par infringed U.S. Patent No. 5,681,588 (the 588 patent)
by submitting a Paragraph IV certification to the FDA for approval to market
generic 325 mg Propafenone HCl SR capsules.  On January 26, 2007, Reliant
amended its complaint to add the additional allegation that Par infringed the
588 patent by submitting a Paragraph IV certification to the FDA for approval
to market generic 225 mg and 425 mgin addition to the 325 mgPropafenone HCl SR
capsules.  Par has Answered and Counterclaimed denying Reliants
infringement allegations, and asserting that the 588 patent is invalid and
unenforceable.  On April 17, 2009, a dismissal with prejudice was entered
in the case pursuant to a settlement agreement between the parties.  In
view of this agreement, Par will enter the market with generic Rythmol SR on
January 1, 2011 or earlier depending on certain circumstances.  On May 9, 2007, Purdue Pharma Products
L.P. (Purdue), Napp Pharmaceutical Group Ltd. (Napp), Biovail Laboratories
International SRL (Biovail), and Ortho-McNeil, Inc. (Ortho-McNeil) filed a
lawsuit against Par in the United States District Court for the District of
Delaware.  The complaint alleges infringement of U.S. Patent No. 6,254,887
(the 887 patent) because Par submitted a Paragraph IV certification to the
FDA for approval of 200 mg extended release tablets containing tramadol
hydrochloride.  On May 30, 2007, Par filed its Answer and Counterclaim to
the Complaint seeking a declaration of noninfringement and invalidity of the
'887 patent.  A subsequent Complaint was served on July 2, 2007 in the same
District Court.  The new Complaint alleges that Par's 100 mg and 200 mg
extended release tablets containing tramadol hydrochloride infringe the 887
patent.  Par filed its Answer and Counterclaim on July 23, 2007 and will
assert all available defenses in addition to seeking a declaration of
noninfringement and invalidity of the '887 patent.  On October 24, 2007,
plaintiffs filed an amended complaint in the Delaware District Court in view of
Par's amendment of its ANDA to include the 300 mg strength of extended release
tramadol. On April 22, 2009, Pars bench trial in U.S. District Court of
Delaware concluded and Par filed its post-trial briefs on May 23, 2009 and its
replies on June 15, 2009.   Par awaits the courts decision and
intends to defend this action vigorously and pursue its counterclaims against
the plaintiffs.  On July 6, 2007, Sanofi-Aventis and
Debiopharm, S.A. filed a lawsuit against Par and its development partner, MN
Pharmaceuticals ("MN"), in the United States District Court for the District of
New Jersey.  The complaint alleges infringement of U.S. Patent Nos.
5,338,874 and 5,716,988 because Par and MN submitted a Paragraph IV
certification to the FDA for approval of 50 mg/10 ml, 100 mg/20 ml, and 200
mg/40 ml oxaliplatin by injection.  Par and MN filed their Answer and
Counterclaims on October 10, 2007 and an amendment to it on October 22, 2007.
 On January 14, 2008, following MN's amendment of its ANDA to include
oxaliplatin injectable 5 mg/ml, 40 ml vial, Sanofi-Aventis filed a complaint
asserting infringement of the '874 and the '988 patents.  Par and MN filed
their Answer and Counterclaim on February 20, 2008.  The court has set an
expert discovery deadline of June 9, 2009, with all motions due by June 15,
2009.  On June 18, 2009, the U.S. District Court granted summary judgment
of non-infringement to several defendants including Par on the 874 patent but
has not rendered a summary judgment decision regarding the 988 patent to date.
 On June 15, 2009, Par filed motions for summary judgment concerning two
additional patents to accompany the Companys earlier filed summary judgment
motions on the 874 and 988 patents.  Par and MN intend to defend these
actions vigorously and pursue their counterclaims against Sanofi and
Debiopharm.   50    On September 21, 2007, Sanofi-Aventis
and Sanofi-Aventis U.S., LLC (Sanofi-Aventis) filed a lawsuit against Par and
its development partner, Actavis South Atlantic LLC ("Actavis"), in the United
States District Court for the District of Delaware.  The complaint alleges
infringement of U.S. Patent Nos. 4,661,491 and 6,149,940 because Par and Actavis
submitted a Paragraph IV certification to the FDA for approval of 10 mg
alfuzosin hydrochloride extended release tablets. Par has filed an Answer to the
Complaint and counterclaims that the patents asserted are not infringed and are
invalid.  On April 3, 2008, the judge ordered all actions in the case
stayed pending the plaintiffs motion for transfer and consolidation under the
rules governing multi-district litigation.  On June 9, 2008, the
Multi-District Litigation Panel granted plaintiffs motion for transfer and
consolidation and lifted the stay of litigation.  On December 24, 2008, Par
agreed to terminate its collaboration agreement with Actavis and, with it, all
obligations and all benefits related to Alfuzosin.  An order for stipulated
dismissal of Par from the litigation was entered May 9, 2009.  On October 1, 2007, Elan
Corporation, PLC (Elan) filed a lawsuit against Par and its development
partner, IntelliPharmaCeutics Corp., and IntelliPharmaCeutics Ltd. ("IPC") in
the United States District Court for the District of Delaware.  On October
5, 2007, Celgene Corporation (Celgene) and Novartis filed a lawsuit against
IPC in the United States District Court for the District of New Jersey.
 The Complaint in the Delaware case alleged infringement of U.S. Patent
Nos. 6,228,398 and 6,730,325 because Par submitted a Paragraph IV certification
to the FDA for approval of 5, 10, 15, and 20 mg dexmethylphenidate hydrochloride
extended release capsules.  The original Complaint in the New Jersey case
alleged infringement of U.S. Patent Nos. 6,228,398; 6,730,325; 5,908,850;
6,355,656; 6,528,530; 5,837,284; and 6,635,284 because Par and IPC submitted a
Paragraph IV certification to the FDA for approval of 5, 10, 15, and 20 mg
dexmethylphenidate extended release capsules.  Par and IPC filed an Answer
and Counterclaims in both the Delaware case and the New Jersey case.  Elan
filed a motion to consolidate the cases on January 2, 2008, and on February 20,
2008, the judge in the Delaware litigation consolidated all four related cases
pending in Delaware and entered a scheduling order providing for April 15, 2009
as the deadline for all discovery, June 29, 2009 as the date for a Markman
hearing, and August 17, 2009 as the date for a bench trial.  The Delaware
court has established a March 5, 2009 deadline for fact discovery and a June 15,
2009 deadline for expert discovery.  A Rule 16 conference was held for the
New Jersey litigation on March 4, 2008 setting a deadline of December 12, 2008
for all discovery with a Markman hearing scheduled for June 19, 2009.  The
New Jersey court has set a fact discovery deadline of March 1, 2009.  On
July 1, 2009, the Delaware district court removed the trial, pre-trial
conference, and claim construction hearing from the calendar with discovery due
November 6, 2009 and claim construction briefing due November 9, 2009.  Par
intends to defend these actions vigorously and pursue its counterclaims against
Elan, Celgene and Novartis.  On September 13, 2007, Santarus, Inc.
(Santarus), and The Curators of the University of Missouri (Missouri) filed
a lawsuit against Par in the United States District Court for the District of
Delaware.  The Complaint alleges infringement of U.S. Patent Nos.
6,699,885; 6,489,346; and 6,645,988 because Par submitted a Paragraph IV
certification to the FDA for approval of 20 mg and 40 mg omeprazole/sodium
bicarbonate capsules.  Par filed its Answer and Counterclaims on October
17, 2007.  A scheduling conference was held February 11, 2008, setting
September 8, 2008 as the date for the claim construction hearing and July 13,
2009 as the first day of the bench trial. On December 20, 2007, Santarus, Inc.,
and Missouri filed a second lawsuit against Par in the United States District
Court for the District of Delaware alleging infringement of U.S. Patent Nos.
6,699,885; 6,489,346; 6,780,882; and 6,645,988 because Par submitted a Paragraph
IV certification to the FDA for approval of 20 mg and 40 mg omeprazole/sodium
bicarbonate powders for oral suspension.  Par filed an Answer and
Counterclaims in this action as well.  On March 4, 2008, the cases
pertaining to Pars ANDAs for omeprazole capsules and omeprazole oral suspension
(see below) were consolidated for all purposes.  Par filed its claim
construction brief on August 22, 2008, and its answering brief on September 22,
2008, as the Court rescheduled the Markman hearing.  The Court held a
Markman hearing on November 5, 2008 and issued its claim construction order on
the same day.  The Delaware District Court conducted a bench trial from
July 13-17, 2009, and found for Santarus only on the issue of infringement,
while not rendering an opinion on the issues of invalidity and
unenforceability.  The parties will participate in post-trial briefing with
initial briefs due August 14, 2009.  Par intends to defend this action
vigorously and pursue its counterclaims against Santarus and Missouri.  On December 11, 2007, AstraZeneca
Pharmaceuticals, LP, AstraZeneca UK Ltd., IPR Pharmaceuticals, Inc. and Shionogi
Seiyaku Kabushiki Kaisha filed a lawsuit against Par in the United States
District Court for the District of Delaware.  The Complaint alleges patent
infringement because Par submitted a Paragraph IV certification to the FDA for
approval of 5 mg, 10 mg, 20 mg and 40 mg rosuvastatin calcium tablets.  Par
filed an Answer and Counterclaims, and on April 11, 2008, the court held a
scheduling conference setting the Markman hearing for March 10, 2009, the
pre-trial conference for January 11, 2010, and a bench trial for February 15,
2010. Par intends to defend these actions vigorously and pursue its
counterclaims against AstraZeneca Pharmaceuticals, LP, AstraZeneca UK Ltd., IPR
Pharmaceuticals, Inc. and Shionogi Seiyaku Kabushiki Kaisha.  On November 14, 2008, Pozen, Inc.
filed a lawsuit against Par in the United States District Court for the Eastern
District of Texas.  The Complaint alleges infringement of U.S. Patent Nos.
6,060,499; 6,586,458; and 7,332,183 because Par submitted a Paragraph IV
certification to the FDA for approval of 500 mg/85 mg naproxen
sodium/sumatriptan succinate oral tablets.  Par filed an Answer and
Counterclaims on December 8, 2008 and the court has scheduled a Markman hearing
for February 2010 and trial for October 2010.  On March 17, 2009, Par filed
an Amended Answer and Counterclaim in order to join GlaxoSmithKline as a
counterclaim defendant in this litigation.  On April 28, 2009, GSK was
dismissed from the case by the Court, but will be bound by its   51   decision and will be required
to produce witnesses and materials during discovery.  Par intends to defend
this action vigorously and pursue its counterclaims against Pozen.  On April 15, 2009, Par filed a
declaratory judgment Complaint against Novartis and Ajinomoto Co., Inc. in the
United States District Court for the Eastern District of Pennsylvania.  The
complaint seeks declaratory judgment of invalidity and non-infringement of U.S.
Patent Nos. 5,463,116; 5,488,150; 6,559,188; 6,641,841; 6,844,008; and 6,878,749
in view of Pars December 22, 2004 submission of a Paragraph IV certification to
the FDA for approval of 60 mg and 120 mg nateglinide oral tablets.  Par
intends to prosecute this action vigorously against Novartis and Ajinomoto.  On April 29, 2009, Pronova BioPharma
ASA filed a lawsuit against Par in the United States District Court for the
District of Delaware.  The complaint alleges infringement of U.S. Patent
Nos. 5,502,077 and 5,656,667 because Par submitted a Paragraph IV certification
to the FDA for approval of omega-3-acid ethyl esters oral capsules.  Par
intends to defend this action vigorously and pursue its defenses and
counterclaims against Pronova.  On July 1, 2009, Alcon Research Ltd.
filed a lawsuit against Par in the United States District Court for the District
of Delaware.  The complaint alleges infringement of U.S. Patent Nos.
5,510,383; 5,631,287; 5,849,792; 5,889,052; 6,011,062; 6,503,497; 6,849,253
because Par submitted a Paragraph IV certification to the FDA for approval of
0.004% travoprost ophthalmic solutions and 0.004% travoprost ophthalmic
solutions (preserved).  Par intends to defend this action vigorously and
pursue its defenses and counterclaims against Alcon.  Industry Related
Matters  Beginning in September 2003, Par,
along with numerous other pharmaceutical companies, has been named as a
defendant in actions brought by state Attorneys General and a number of
municipal bodies within the state of New York, as well as a federal qui tamaction brought on behalf of the United States by the pharmacy Ven-A-Care of
the Florida Keys, Inc. ("Ven-A-Care") alleging generally that the defendants
defrauded the state Medicaid systems by purportedly reporting Average Wholesale
Prices (AWP) and/or Wholesale Acquisition Costs that exceeded the actual
selling price of the defendants prescription drugs.  To date, Par has been
named as a defendant in substantially similar civil law suits filed by the
Attorneys General of Alabama, Alaska, Hawaii, Idaho, Illinois, Iowa, Kentucky,
Massachusetts, Mississippi, South Carolina, Texas and Utah, and also by the city
of New York, 46 counties across New York State and Ven-A-Care.  These cases
generally seek some combination of actual damages, and/or double damages, treble
damages, compensatory damages, statutory damages, civil penalties, disgorgement
of excessive profits, restitution, disbursements, counsel fees and costs,
litigation expenses, investigative costs, injunctive relief, punitive damages,
imposition of a constructive trust, accounting of profits or gains derived
through the alleged conduct, expert fees, interest and other relief that the
court deems proper. Several of these cases have been transferred to the AWP
multi-district litigation proceedings pending in the U.S. District Court for the
District of Massachusetts for pre-trial proceedings.  The case brought by
the state of Mississippi will be litigated in the Chancery Court of Rankin
County, Mississippi and the federal case brought by Ven-A-Care will be litigated
in the United States District of Massachusetts.  The other cases will
likely be litigated in the state or federal courts in which they were
filed.  In the Utah suit, the time for responding to the Complaint has not
yet elapsed.  In each of the remainder of these matters, Par has either
moved to dismiss the complaints or answered the complaints denying
liability.  Par intends to defend each of these actions vigorously. In
addition, at various times between 2006 and 2009, the Attorneys General of
Florida, Indiana and Virginia and the United States Office of Personnel
Management (the USOPM) issued subpoenas, and the Attorneys General of
Michigan, Tennessee and Texas issued civil investigative demands, to Par. 
The demands generally request documents and information relating to sales and
marketing practices that allegedly caused pharmacies to dispense higher priced
drugs when presented with prescriptions for certain products.  Par has
provided, or is in the process of providing, certain documents in response to
these subpoenas to the respective Attorneys General and theUSOPM and
will continue to cooperate with the Attorneys General and the USOPM in these
investigations if it is called upon to do so. Other  On March 19, 2009, Par was served with
a subpoena by the Department of Justice requesting documents related to
Strativas marketing of Megace® ES.  The subpoena indicated that the
Department of Justice is currently investigating promotional practices in the
sales and marketing of Megace® ES.  We intend to fully cooperate with the
Department of Justice's inquiry.  Par is, from time to time, a party to
certain other litigations, including product liability litigations.  Par
believes that these litigations are part of the ordinary course of its business
and that their ultimate resolution will not have a material adverse effect on
its financial condition, results of operations or liquidity.  Par intends
to defend or, in cases where Par is plaintiff, to prosecute these litigations
vigorously.  Contingency Par accrued for a loss contingency
related to a routine post award contract review of Pars Department of Veterans
Affairs contract (the VA Contingency) for the periods 2004 to 2007 that is
being conducted by the Office of Inspector General of the   52   Department of Veterans
Affairs.  The regulations that govern the calculations used to generate the
pricing-related information are complex and require the exercise of judgment.
 Should there be ambiguity with regard to how to interpret the regulations
that govern the calculations, and report these calculations, and even in the
absence of any such ambiguity, a governmental authority may take a position
contrary to the position that Par has taken.  In accordance with Statement
of Financial Accounting Standards No. 5, Accounting for
Contingencies, Par accrues for contingencies by a charge to income when it
is both probable that a loss will be incurred and the amount of the loss can be
reasonably estimated.  In the event that Pars loss contingency is
ultimately determined to be higher than originally accrued, the recording of the
additional liability may result in a material impact on Pars results of
operations, liquidity or financial condition when such additional liability is
accrued.  Pars estimate of the probable loss is approximately $4.9
million, including interest, which has been accrued as of June 27, 2009.     ITEM 1A.  RISK FACTORS In addition to the other information
set forth in this Report, you should carefully consider the factors discussed in
the Risk Factors section of our Annual Report on Form 10-K for the year ended
December 31, 2008, which could materially affect our business, results of
operations, financial condition or liquidity.  The risks described in our
Annual Report on Form 10-K for the year ended December 31, 2008 have not
materially changed.  The risks described in our Annual Report are not the
only risks facing us.  Additional risks and uncertainties not currently
known to us, or that we currently believe are immaterial, also may materially
adversely affect our business, results of operations, financial condition or
liquidity.    ITEM 2.  UNREGISTERED SALES OF EQUITY SECURITIES
AND USE OF PROCEEDS Issuer Purchases of Equity
Securities(1) Quarter Ending June
27, 2009 Period

Total
Number of Shares of Common Stock Purchased (2)

Average
Price Paid per Share of Common Stock

Total
Number of Shares of Common Stock Purchased as Part of Publicly Announced
Plans or Programs

Maximum
Number of Shares of Common Stock that May Yet Be Purchased Under the Plans
or Programs (3)March
29, 2009 through May 2, 2009

966

N/A

-

-May
3, 2009 through May 30, 2009

372

N/A

-

-May
31, 2009 through June 27, 2009

1,256

N/A

-

2,991,697Total

2,594

N/A

- (1) In April 2004, the Board authorized
the repurchase of up to $50.0 million of Pars common stock.  Repurchases
are made, subject to compliance with applicable securities laws, from time to
time in the open market or in privately negotiated transactions, whenever it
appears prudent to do so.  Shares of common stock acquired through the
repurchase program are available for reissuance for general corporate purposes.
 On September 28, 2007, we announced that our Board approved an expansion
of its share repurchase program allowing for the repurchase of up to $75 million
of our common stock, inclusive of the $17.8 million remaining from the April
2004 authorization.  The authorized amount remaining for stock repurchases
under the repurchase program was $43.6 million, as of June 27, 2009.  The
repurchase program has no expiration date. (2) The total number of shares purchased
represents 2,594 shares surrendered to Par to satisfy tax withholding
obligations in connection with the vesting of restricted stock issued to
employees. (3) Based on the closing price of our
common stock on the New York Stock Exchange of $14.56 at June 26, 2009.     53   ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS  We held our Annual Meeting of
Stockholders on June 9, 2009 and the following matters were voted upon.  PROPOSAL 1  The stockholders voted in favor of the
proposal to elect our nominee for Class I director for a term expiring at the
Annual Meeting of Stockholders to be held in 2012.  VOTES VOTES FOR  WITHHELD  Peter S.
Knight 27,868,300 3,158,061  PROPOSAL 2  The firm of Deloitte & Touche LLP
was ratified as our independent registered public accounting firm for the 2009
fiscal year.  30,908,024 shares voted in favor of the ratification of the
selection of Deloitte & Touche LLP, 85,044 shares voted against, and 33,293
shares abstained.  PROPOSAL 3  Our non-binding advisory vote on Pars
2008 executive compensation programs and policies for our Named Executives (as
described in the Compensation Discussion and Analysis set forth in our Proxy
Statement filed with the SEC on April 21, 2009) was approved by the
stockholders.  28,867,001 shares voted in favor of the advisory vote,
2,100,735 shares voted against, and 58,625 shares abstained.    ITEM
6.  EXHIBITS  10.1 Asset Purchase Agreement by and among Par Pharmaceutical, Inc.,
QOL Medical, LLC and, solely with respect to certain provisions, the members of
QOL, dated as of March 31, 2009 (filed herewith).* 31.1 Certification of the Principal Executive Officer (filed
herewith). 31.2 Certification of the Principal Financial Officer (filed
herewith). 32.1 Certification
by the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (attached hereto). 32.2 Certification by the Chief Financial
Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002 (attached hereto).   * Indicates that portions of this
agreement have been omitted and filed separately with the SEC in a confidential
treatment request pursuant to Rule 24b-2 of the Exchange Act.   54     SIGNATURES     Pursuant to the
requirements of the Securities Exchange Act of 1934, the Company has duly caused
this report to be signed on its behalf by the undersigned thereunto duly
authorized.    PAR PHARMACEUTICAL
COMPANIES, INC. (Registrant)     Date:
 August 4, 2009 /s/ Patrick G.
LePore Patrick G. LePore Chairman, President
and Chief Executive Officer     Date:
 August 4, 2009 /s/ Lawrence A.
Kenyon Lawrence A. Kenyon Executive Vice
President and Chief Financial Officer     55   EXHIBIT
INDEX   Exhibit
Number Description  10.1 Asset Purchase Agreement by and among Par Pharmaceutical, Inc.,
QOL Medical, LLC and, solely with respect to certain provisions, the members of
QOL, dated as of March 31, 2009 (filed herewith).* 31.1 Certification of the Principal Executive Officer (filed
herewith). 31.2 Certification of the Principal Financial Officer (filed
herewith). 32.1 Certification
by the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (attached hereto). 32.2 Certification by the Chief Financial
Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002 (attached hereto).  * Indicates that portions of this
agreement have been omitted and filed separately with the SEC in a confidential
treatment request pursuant to Rule 24b-2 of the Exchange Act.   56