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                                                                    Exhibit 10.3

                        PHARMACEUTICAL RESOURCES, INC.
                              One Ram Ridge Road
                            Spring Valley, New York
                                   USA 10977

                             AMENDED AND RESTATED

January 21, 1999.


Genpharm Inc.,
85 Advance Road,
Etobicoke, Ontario,
M8Z 2S9.

Attention:     Ian Jacobson
               Executive Vice-President

Dear Sirs:

Re:            Development, Supply and Marketing Agreement made as of the 30th
               day of December, 1998 between Mylan Pharmaceuticals, Inc. and
               Genpharm Inc. relating to the development, supply and marketing
               of the products described in Schedule "A" annexed hereto (the
               "Fifteen Product Agreement")

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

We acknowledge that you have entered into the Fifteen Product Agreement with
Mylan Pharmaceuticals, Inc. ("Mylan"), the terms of which are confidential as
between yourselves and Mylan and that, accordingly, you are unable to deliver a
copy of the Fifteen Product Agreement to us or to disclose to us the terms
thereof without Mylan's consent (which, as of the date hereof, has not been
received). We further acknowledge and agree that the Fifteen Product Agreement
includes and applies to pharmaceutical products other than the Products (as that
term is defined below) and that our rights and participation herein contemplated
are confined to the Products only and do not extend to or include any other
products which are now or which may hereafter be included in the Fifteen Product
Agreement.

Finally, we also acknowledge and agree that nothing herein contained (i) creates
or is intended to create any contractual relationship between Pharmaceutical
Resources, Inc. and Mylan or (ii) assigns or attempts to assign to
Pharmaceutical Resources, Inc. any of Genpharm's rights under the Fifteen
Product Agreement or any interest of Genpharm in such agreement.
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For purposes of this letter agreement the terms "Affiliates" (in relation to
Genpharm or Mylan in connection with the Fifteen Product Agreement), "ANDA",
"Development Costs", "Deductible Listing Fees", "Gross Margin", "Legal
Expenses", "Manufacturing Cost", "Net Sales", "Normal Course Legal Expenses",
"Royalty Amounts", "Territory" and "Transfer Price" shall have the meaning
attributed thereto in Schedule "B" annexed hereto. In addition, words
parenthetically defined elsewhere in this agreement shall, throughout this
agreement, have the meaning therein provided. Defined terms shall be used in the
singular or the plural, as sense shall require.

In consideration of the rights herein granted Pharmaceutical Resources, Inc.
("PRI") hereby agrees to pay to Genpharm Inc. ("Genpharm"), upon execution and
return of a duplicate copy of this letter agreement (or such later date as
Genpharm may agree upon), a non-refundable fee of US$2,500,000.00, which fee
shall be deemed to have been fully earned by Genpharm by execution of this
letter agreement and shall not be refundable notwithstanding that any of the
products contemplated on Exhibit "A" hereto (such products or any products for
which they are substituted under the Fifteen Product Agreement being hereinafter
referred to as a "Product" and collectively the "Products") have not been
successfully developed and are registered by Genpharm or its Affiliates or that
the Fifteen Product Agreement has been terminated by mutual consent of Genpharm
and Mylan or otherwise in respect of any of the Products whether prior to or
subsequent to obtaining an FDA approval for such Product.

Subject to the provisions of the following paragraphs, Genpharm shall pay to
PRI, within 5 business  days of the receipt of payment of same from Mylan under
the Fifteen Product Agreement, an amount equal to [****] of the amount on
account of Gross Margin paid by Mylan to Genpharm with respect to each Product
pursuant to the Fifteen Product Agreement. For greater certainty it is
understood and agreed that PRI shall not have the right to receive or
participate in any payments made by Mylan to Genpharm under the Fifteen Product
Agreement with respect to a Product on account of Transfer Price, Development
Costs, Legal Expenses (including Normal Course Legal Expenses) and/or Royalty
Amounts or to compensate Genpharm or its Affiliates for any recall expenses
which they incur or for any amounts payable to Genpharm pursuant to the
indemnification provisions contained in the Fifteen Product Agreement (except to
the extent only that such latter payment is to compensate Genpharm for loss of
Gross Margin as a result of any wilful material breach by Mylan of its
obligations with respect to a Product under the Fifteen Product Agreement).

Where Genpharm is required to make any payment to Mylan in relation to a Product
pursuant to the Fifteen Product Agreement or to any Third Party with respect to
recall expenses or otherwise (other
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than on account of Legal Expenses or pursuant to the indemnification provisions
contained in the Fifteen Product Agreement as a result of a wilful material
breach by Genpharm of its obligations

under the Fifteen Product Agreement in relation to a Product), PRI shall bear
[****] of such amount, PRI's share thereof to be deducted out of the amount to
be paid to it by Genpharm pursuant hereto (whether on account of the Product in
question or in respect of any other Product).

It is further understood and agreed that PRI shall have no obligation to
contribute to past or future Development Costs or any Legal Expenses incurred by
Genpharm or its Affiliates in connection with the performance of its obligations
under the Fifteen Product Agreement with respect to the Products.

In the event that, during the term of the Fifteen Product Agreement applicable
to a Product, Genpharm or its Affiliates enters into any lawful agreement with a
third party or third parties (the "Third Party Agreement") which affects the
marketing of any of the Products in the Territory by Mylan or Genpharm's ability
to supply Mylan with Products under the Fifteen Product Agreement without
breaching (or causing its Affiliates to breach) such Third Party Agreement,  PRI
shall be entitled to receive [****] of any funds received by Genpharm as well as
[****] of the benefit received by Genpharm of any right or other property (other
than funds) received by Genpharm under such Third Party Agreement (after
deducting amounts to be paid or other rights or property to be transferred to
Mylan pursuant to the Fifteen Product Agreement in relation to the Third Party
Agreement).

PRI covenants and agrees that it will not (and will not authorize or permit any
of its affiliates [as that term is defined in the Genpharm PRI Distribution
Agreement referred to below] to) file an ANDA or otherwise seek or obtain an
approval from the FDA to sell or market any generic pharmaceutical  product in
the same dosage form and which has the same active ingredient, the same strength
and is for the same indication as a Product (a "competing product") in the
Territory so long as Genpharm is developing or has obligations to develop the
Product under the Fifteen Product Agreement and will not market or distribute or
permit or suffer any of its affiliates to market or distribute a competing
product in the Territory during the term of the Fifteen Product Agreement
applicable to  such Product.

Genpharm shall enforce the provisions of the Fifteen Product Agreement to
receive the Gross Margin payable to it by Mylan thereunder in relation to the
Products. Notwithstanding the foregoing Genpharm may, in its discretion, waive
any of its rights under the Fifteen Product Agreement in relation to the
Products notwithstanding that such waiver may adversely affect the Gross Margin
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which would otherwise be payable to it in respect of a Product or Products;
provided however, that as between Genpharm and PRI, the amount on account of
Gross Margin to be paid by Genpharm to PRI hereunder shall be calculated as if
Genpharm had not waived (but had enforced) such right (unless PRI similarly
consents to waive such right).

In the event that the Fifteen Product Agreement is terminated by Genpharm or
otherwise with respect to a Product and Genpharm desires to continue to
distribute such Product in the Territory, Genpharm shall, prior to or within 15
days of the effective termination of the Fifteen Product Agreement to such
Product offer to PRI in writing the opportunity to distribute such product (from
the date that the Fifteen Product Agreement terminates with respect to such
Product or the timely acceptance by PRI of the opportunity herein contemplated,
which ever is later) under and in accordance with the provision of the
Distribution Agreement made as of the 25th day of March, 1998  between PRI and
Genpharm. PRI shall have a period of 15 days from receipt of such notice from
Genpharm to advise Genpharm in writing that it wishes to add such Product to
such Distribution Agreement (and failing receipt of such notice of acceptance by
Genpharm within such 15 day period PRI shall be conclusively deemed to have
declined such opportunity and Genpharm shall be free to distribute such Product
or to licence any third party to distribute such product in the Territory
without any right of PRI to participate in any amounts earned by Genpharm in
connection with the distribution of such Product in the Territory).

Genpharm acknowledges and agrees that PRI shall have the exclusive right to
distribute the Products in Israel and to receive [****] of the Gross Margin
earned by PRI in connection with the distribution of such Products in Israel (as
well as such marketing fee, if any as Genpharm and PRI may hereafter mutually
agree upon in respect of all or any of the Products), it being understood and
agreed that PRI shall be responsible for the payment of all development and
registration costs to permit such Products to be distributed in Israel and all
legal fees incurred in connection with the registration or distribution of the
Products (including without limitation, any legal fees or expenses incurred in
connection with patent infringement opinions and/or litigation), subject to the
right of PRI to recover all out-of-pocket expenses on account of such
development, registration or legal actions as a priority distribution of Gross
Margin. Genpharm and PRI shall, within 120 days of the execution and return of
this side letter agreement negotiate, execute, and exchange a distribution
agreement for Israel relating to the Products based upon the foregoing and
containing such terms and conditions are as mutually satisfactory to PRI and
Genpharm (which agreement, when executed and exchanged shall supersede and
replace the rights and obligations of the parties contained herein with respect
to the distribution of such products in Israel).
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For the same consideration Genpharm hereby agrees that PRI shall be entitled to
receive [****] of the Gross Margin earned and received by Genpharm in connection
with the distribution of products XY (as that product is defined and identified
in a separate writing exchanged between the parties and referencing this letter
agreement) in the Territory.

If, for any reason whatsoever, any term, covenant or provision of this agreement
or the application thereof to any party or circumstance or in any jurisdiction
is to any extent held or rendered invalid, unenforceable or illegal, then such
term, covenant or condition (a) is deemed to be independent of the remainder of
this agreement and to be severable and divisible therefrom and its validity,
unenforceability or illegality shall not affect, impair or invalidate the
remaining provisions hereof; and (b) continue to be applicable and enforceable
to the fullest extent permitted by law in every other jurisdiction and against
any party and circumstances other than those as to which or in respect of which
it has been held or rendered unenforceable or illegal. To the extent permitted
by applicable law, Genpharm and PRI hereby waive any provision of law which
renders any provision of this agreement prohibited or unenforceable in any
respect. Should any provision of this agreement be so held to be unenforceable,
such provision, if permitted by law, shall be considered to have been superseded
by a legally permissible and enforceable clause which corresponds most closely
to the intent of the parties as evidenced by the provision held to be
unenforceable.

It is understood and agreed that this letter agreement shall be governed by and
interpreted in accordance with the laws in the Province of Ontario.

This letter agreement amends and restates the letter agreement made and accepted
on the 31st day of December, 1998 between Genpharm and PRI with respect to the
Fifteen Product Agreement.
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Kindly confirm your agreement to the foregoing by signing and returning the
enclosed duplicate copy of this letter agreement. Notwithstanding that this
agreement shall be effective as of and from December 31, 1998 either party may
terminate its rights and obligations hereunder on or before January 30, 1999 if
the execution and exchange of this letter agreement is not ratified and
confirmed by appropriate action of the directors and/or shareholders of such
party.

                         PHARMACEUTICAL RESOURCES, INC.


                         Per: /s/ Kenneth Sawyer
                              -----------------------------------
                              Kenneth Sawyer


Acknowledged and agreed.


                         GENPHARM INC.


                         Per: /s/ Ian Jacobson
                              -----------------------------------
                              Ian Jacobson
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                                 SCHEDULE "A"

                             EXHIBIT "A" PRODUCTS

           Product               Dosage Form     Strength(s) (mg)

                                    [****]
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                                 SCHEDULE "B"


Affiliate"  means any company, 50% or more of whose voting stock is owned or
controlled, directly or indirectly by Genpharm or Mylan, any company which owns
or controls, directly or indirectly, 50% or more of the voting stock of Genpharm
or Mylan and any majority-owned subsidiary of such company; provided, however,
that Somerset Pharmaceuticals, Inc. shall not be treated as an Affiliate of
Mylan;

"ANDA(s)" means, in respect of any Product, the new drug application or
abbreviated new drug application, as the case may be, filed with the FDA by
Genpharm or its Affiliate with respect to such Product;

"Development Costs" means, in relation to a Product, the costs incurred by
Genpharm and/or its Affiliates to conduct the bioavailability studies/clinical
trials conducted by or on behalf of Genpharm or its Affiliates in connection
with the ANDA filed or to be filed by Genpharm or its Affiliate with respect to
such Product, whether such bioavailability study/clinical trial is conducted
prior to or subsequent to the date of this agreement, and the costs incurred by
Genpharm and/or its Affiliates to acquire the raw materials used to produce the
Product batches used in such bioavailability studies/clinical trials for the
Territory.

"Deductible Listing Fees" means, in respect of  any Product, listing fees and
other similar up-front payments paid by Mylan to third party customers in
consideration for such customer agreeing to buy such Product for a specified
period of time to the exclusion of other generic pharmaceutical products in the
same dosage form which have the same active ingredient, are for the same
indication and have the same strength as such Product, provided that where such
fee or other payment to a customer exceeds US$500,000.00 the payment of same
shall have been previously agreed upon by Mylan and Genpharm.

"Gross Margin" means, for a Product in respect of any period, Mylan's Net Sales
of such Product in such period less the aggregate of the following:

(a)  the Transfer Price to Mylan of such Product sold by Mylan and its Affiliate
     to third party customers in such period (determined in accordance with U.S.
     generally accepted accounting principals, consistently applied), sales
     taxes, customs duties and other like governmental charges imposed upon
     Mylan on the purchase or importation of such Product so sold (to the extent
     not included in the Transfer Price, and net of any rebate, credit or other
     recovery of same) and freight and insurance paid by Mylan to transport such
     Product so sold from Genpharm's or the Manufacturer's manufacturing
     facility to Mylan's designated warehouse destination in the Territory;

(b)  the marketing fee applicable to such Product to be retained by Mylan under
     the Fifteen Product Agreement, or balance thereof not previously deducted
     by Mylan in calculating Gross Margin for any prior period;

(c)  the Development Costs applicable to such Product which are payable to
     Genpharm, or the balance thereof not previously deducted by Mylan in
     calculating Gross Margin for any prior period;
<PAGE>
 
(d)  the Royalty Amount payable to Genpharm in respect of such period;

(e)  the Normal Course Legal Expenses applicable to such Product which are
     payable to Genpharm, or the balance thereof not previously deducted by
     Mylan in calculating Gross Margin for any prior period.

For greater certainty, where Product sold by Mylan or its Affiliates to a third
party customer has been returned by such customer to Mylan or such Affiliate and
the costs and expenses contemplated in (a) above with respect to such Product
has been deducted by Mylan in calculating Gross Margin in that period or a prior
period, such costs and expenses shall not be deducted a second time when the
returned Product is resold by Mylan or its Affiliates to a third party customer.

"Legal Expenses" shall include, in relation to a Product, all out-of-pocket
legal fees and expenses (including, without limitation, reasonable costs of the
initial patent opinion regarding the enforcement, validity and non-infringement
of such Product) incurred  Genpharm or its Affiliates in connection with the
patent certifications made by or to be made by Genpharm or its Affiliates in the
ANDA submitted or to be submitted for such Product or to defend any claim or
action made upon or instituted against Genpharm or its Affiliates based upon an
allegation such Product as developed by Genpharm or its Affiliates infringes or
potentially infringes any patent enforceable in the Territory (or to institute
any action challenging the validity of any patent applicable to the Product and
allegedly enforceable in the Territory or to protect or defend Genpharm's or its
Affiliate's proprietary rights with respect to such Product) or to appeal any
decision relating to such claim or action and any out-of-pocket legal fees and
expenses incurred to initiate or intervene in any citizen petition filed with
the FDA by Genpharm or its Affiliates or by a Third Party seeking a period of
market exclusivity for Genpharm or its Affiliates or such Third Party and to
participate in any appeal of any such decision by the FDA or any court order
related thereto.

"Manufacturing Cost" shall mean, in respect of a Product, the cost to Genpharm
or its Affiliate in whose name the ANDA is registered (the "Manufacturer") to
manufacture (including quality control and testing) and package such Product
including, without limitation, the landed cost of raw materials and packaging
materials (including, without limitation, the cost to manufacture the active
ingredient used in the manufacture such Product, determined in accordance with
the costing methods currently employed by Genpharm or such Manufacturer in the
manufacture of all products produced in the facility or facilities in which
active ingredient is so manufactured), component costs, energy, labor (salary
and benefits) and reasonable overhead charges relating to the manufacture of a
specified quantity of such Product, and other direct and allocable indirect
costs to manufacture such Product including, but not limited, to manufacturing
charges for material adjustments, for off grade or defective material, handling
losses, physical adjustments, salvage and start-up costs, consistently applied
in accordance with the costing methods currently employed by such manufacturer
in the manufacture of all products produced in the facility or facilities in
which such Product is manufactured. If all or any portion of the manufacturing
or packaging of such Product is subcontracted by Genpharm or the Manufacturer to
any person the Manufacturing Costs shall include the amount paid to such person.
The Manufacturing Cost of the Product shall be established on the date that the
ANDA for such Product is acquired by Genpharm or the Manufacturer and on the
first day of each calendar quarter thereafter, which amount shall be used to
determine the Transfer Price of such Product manufactured by Genpharm or the
Manufacturer for Mylan during the period until 
<PAGE>
 
the next Manufacturing Cost determination date. Provided that where, during a
period between Manufacturing Cost determination dates, the variable costs
incurred by Genpharm or the Manufacturer to manufacture such Product (and which
are included in the Manufacturing Cost) have, in the aggregate, increased or
decreased by more than 5 %, a pro rata adjustment will be made to the
Manufacturing Cost of such Product manufactured during such period as agreed
upon by Genpharm and Mylan or, failing agreement, as determined by arbitration
between Mylan and Genpharm (and/or the Manufacturer) pursuant to the Fifteen
Product Agreement. In determining changes in Manufacturing Cost due to changesin
the variable costs incurred by Genpharm or the Manufacturer for raw materials
and components including active ingredient, such materials shall be used and
costed on a first in, first out basis in accordance with Canadian (in the case
of Genpharm) or other applicable (in the case of a Manufacturer) generally
accepted accounting principles, consistently applied, and no adjustment herein
contemplated will prejudice Genpharm or the Manufacturer in respect of active
ingredient or work in progress manufactured or in the process of being
manufactured by Genpharm or the anufacturer.

"Net Sales" means, in respect of a Product for a period, the gross amount
invoiced by Mylan and its Affiliates in such period to third party customers on
account of the sale of such Product (excluding amounts for freight, postage,
insurance, sales tax and other governmental charges imposed upon such sale which
are included in the gross amount invoiced and shown separately on such invoice)
plus any other form of revenue or expense reimbursement or recovery recognized
by Mylan or its Affiliates in such period in accordance with generally accepted
accounting principles as a result of commercial arrangements relating to such
Product less, without duplication:

        (i)            credits issued or payments made by Mylan and its
                    Affiliates to third party customers for or on account of,
                    without duplication, bona fide rebates granted and customary
                    trade discounts actually allowed by Mylan or its Affiliates
                    to such customers in the ordinary course of business (except
                    rebates or discounts granted wholly or partially in
                    consideration of such customer's agreement to purchase any
                    service or any product other than the Product unless such
                    rebates or discounts are across-the-board rebates or
                    discounts applied uniformly to the Product and other
                    products or services as part of an overall program of
                    rebates or discounts established by Mylan covering
                    substantially all of its products);

        (ii)        out-of-pocket costs for freight, postage and insurance
                    incurred by Mylan or its Affiliates in the period to deliver
                    the Product to third party customers to the extent that such
                    amount is not charged to such customer;

        (iii)       payments made by Mylan and its Affiliates for administrative
                    fees, reimbursements or similar payments to or for Medicaid
                    or any other government programs, hospitals, health
                    maintenance organizations, insurance carriers, or other
                    similar arm's length entity or entities in connection with
                    the purchase or utilization of the Product;

        (iv)        Deductible Listing Fees paid by Mylan or its Affiliates in
                    such period;

        (v)         credits, rebates and/or adjustments allowed or given to
                    third party customers by reason of rejections or permitted
                    returns (subject to the limitations contemplated 
<PAGE>
 
                    below), or retroactive price reductions or programs with
                    wholesalers or other distributors or resellers according to
                    which they are entitled to charge back rebates, credits
                    (credits for returns to be subject to the limitations
                    contemplated below) or adjustments;

        (vi)        bad debts actually incurred in that period by Mylan relating
                    to outstanding accounts receivable arising out of  Net Sales
                    of the Product;

It is understood and agreed that:

(a)  except as specifically contemplated above, in calculating Net Sales no
     other deductions from the gross amount invoiced or other revenue recognized
     shall be made or taken for any amount which is a selling, promotion,
     marketing or general or administrative expense.

(b)  deductions under (i), (ii), (iii), (iv) and (v) shall be limited to actual
     credits issued or payments made by Mylan and its Affiliates in such period
     (in excess of the amount previously accrued in respect thereof in any prior
     period and net of recoveries of prior excess accruals) and reasonable
     accruals for known or reasonably anticipated deductions as aforesaid taken
     in accordance with generally accepted accounting principals consistently
<PAGE>
 
     applied and in accordance with the practice of Mylan (and its Affiliates)
     as regards the customer in question in relation to other products
     manufactured and sold by Mylan or its Affiliates to such customer.

(c)  the deduction under (i) and (v) above  shall not include any recall
     expenses credited or paid to such customer or any amount paid or credited
     to the customer on returned or rejected Product to the extent of the
     Transfer Price of the Product returned or rejected (which amounts shall be
     dealt with in accordance with the provisions of the Fifteen Product
     Agreement);

(d)  credit returns actually granted in any year for returns of outdated and
     unsaleable Product shall not exceed 2% (or such greater percentage as
     is mutually agreed upon by Mylan and Genpharm) of Gross Sales of that
     Product in that year;

(e)  no credit or payment to a third party customer shall be deducted under (i)
     from the gross amount invoiced or other revenue recognized where such
     credit or payment is an attempt to directly or indirectly circumvent the
     restrictions or limitations contained herein as to the nature or quantum of
     the items which may be deducted hereunder in calculating Net Sales nor
     shall Mylan or its Affiliates reduce the selling price at which the Product
     is sold to a third party customer with a view to circumventing such
     restrictions or limitations; and

(f)  in respect of transfers of Product by Mylan to its Affiliates (or between
     Affiliates) for resale, the price at which such Product is resold by such
     Affiliate to third parties (other than other Affiliates) shall be included
     in Net Sales and the transfer price between Mylan and its Affiliates or
     between such Affiliates will be disregarded.

"Normal Course Legal Expenses" means, in relation to a Product, Legal Expenses
incurred by Genpharm or its Affiliates to obtain patent opinions regarding the
enforcement, validity and non-infringement of such Product to be used in
connection with the patent certifications made and to be made by Genpharm or its
Affiliates in the ANDA submitted or to be submitted for such Product or incurred
to initiate or intervene in any  citizen petition filed with the FDA by Genpharm
or its Affiliates or by a third party seeking a period of market exclusivity for
Genpharm or its Affiliates or such third party and to participate in any appeal
of any such decision by the FDA or any court order related thereto.

"Royalty Amount" means, in respect of a Product, the aggregate of:

        (i)             the royalty or other compensation (including, without
                    limitation, share of profits or sales) paid or payable by
                    Genpharm or its Affiliates for its or their right to use a
                    third party's product information in connection with the
                    development of a Product or for the right to market or
                    distribute such Product; and
<PAGE>
 
        (ii)            any other fee, profit participation or other amount
                    payable by Genpharm or its Affiliates to any third party
                    (other than PRI pursuant hereto) in connection with the
                    Product;

     arising out of the sale of such Product to Mylan, calculated in accordance
     with the agreement between such third party and Genpharm or its Affiliates
     relating thereto;

"Territory" shall mean the United States of America and its territories and
possessions, including Puerto Rico.

"Transfer Price" means the Manufacturing Cost of the Product supplied by or on
behalf of Genpharm to Mylan pursuant to the Fifteen Product Agreement.
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                                ACKNOWLEDGEMENT

RE:  Letter Agreement dated December 31, 1998 between Genpharm Inc. and
     Pharmaceutical Resources, Inc. relating to a Development, Supply and
     Marketing Agreement made as of the 30th day of December, 1998 between Mylan
     Pharmaceuticals, Inc. and Genpharm Inc. relating to the development, supply
     and marketing of the products described in Schedule "A" to such letter
     agreement (the "Letter Agreement")

The undersigned acknowledge and agree that the products XY referred to in the
Letter Agreement are [****]

DATED this 31st day of December, 1998.

GENPHARM INC.                       PHARMACEUTICAL RESOURCES, INC.


Per: /s/ Ian Jacobson                         Per:/s/ Kenneth Sawyer 
     ---------------------------                  ---------------------------
         Ian Jacobson                                  Kenneth Sawyer