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: October 3,
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 October 29, 2009: 34,819,289          TABLE OF CONTENTS PAR PHARMACEUTICAL
COMPANIES, INC. FORM 10-Q FOR THE FISCAL QUARTER
ENDED OCTOBER 3, 2009  PAGE  PART I FINANCIAL
INFORMATION   Item 1. Condensed
Consolidated Financial Statements (unaudited)  Condensed
Consolidated Balance Sheets as of October 3, 2009 and December
31, 2008 3  Condensed
Consolidated Statements of Operations for the three months and nine months ended
October 3, 2009 and September 27, 2008 4  Condensed
Consolidated Statements of Cash Flows for the nine months ended
October 3, 2009 and September 27, 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 48  Item 4. Controls
and Procedures 49   PART II OTHER
INFORMATION  Item 1. Legal
Proceedings 49  Item 1A. Risk
Factors 53  Item 2. Unregistered
Sales of Equity Securities and Use of Proceeds 53  Item 6. Exhibits 53  SIGNATURES 54             2   PART I - FINANCIAL
INFORMATION ITEM 1.  FINANCIAL STATEMENTS PAR
PHARMACEUTICAL COMPANIES, INC. CONDENSED CONSOLIDATED BALANCE
SHEETS (In Thousands, Except Share Data) (Unaudited)  October 3,

December 31,2009

2008ASSETSCurrent assets:Cash and cash
equivalents

$170,686

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

39,767

93,097Accounts receivable, net

104,851

83,408Inventories

75,361

42,504Prepaid expenses and other
current assets

16,593

20,040Deferred income tax
assets

37,474

53,060Income taxes
receivable

15,311

35,397Total current assets

460,043

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

75,862

79,439Available for sale marketable debt and equity
securities

1,600

1,949Intangible assets, net

74,108

35,208Goodwill

63,729

63,729Deferred financing costs and other assets

434

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

67,934

68,618Total assets

$743,710

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

$74,373

$130,141Accounts payable

35,286

22,879Payables due to
distribution agreement partners

53,980

91,451Accrued salaries and
employee benefits

16,328

11,850Accrued expenses and other
current liabilities

37,438

38,352Total current
liabilities

217,405

294,673Long-term debt, less current portion

-

-Other long-term liabilities

42,866

41,581Commitments and contingencies

-

-Stockholders' equityCommon Stock, par value
$0.01 per share, authorized 90,000,000 shares; issued37,620,354
and 37,392,469 shares

375

374Additional paid-in
capital

326,042

319,976Retained earnings

225,698

159,470Accumulated other
comprehensive gain

1,132

122Treasury stock, at cost
2,802,266 and 2,716,010 shares

(69,808)

(67,959)Total stockholders'
equity

483,439

411,983Total liabilities and stockholders equity

$743,710

$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

Nine Months EndedOctober 3,

September 27,

October 3,

September 27,2009

2008

2009

2008Revenues:Net product sales
$290,961

$144,765

$891,333

$404,291Other product related
revenues
3,841

4,202

11,505

12,541Total revenues
294,802

148,967

902,838

416,832Cost of goods sold
202,664

97,505

660,223

290,741Gross margin
92,138

51,462

242,615

126,091Operating expenses:Research and
development
6,458

13,784

19,567

46,897Selling, general and
administrative
45,306

30,664

122,383

98,701Settlements and loss
contingencies, net
62

4,592

(3,253)

4,592Restructuring costs
(230)

-

1,252

-Total operating expenses
51,596

49,040

139,949

150,190Gain on sale of product rights and other
1,835

2,200

3,200

4,325Operating income (loss)
42,377

4,622

105,866

(19,774)Gain on bargain purchase
-

-

3,021

-Gain on extinguishment of senior subordinated
convertible notes
1,615

-

2,364

-Equity in loss of joint venture
-

-

-

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

(2,507)

(55)

(2,940)Interest income
504

2,285

2,328

7,428Interest expense
(1,773)

(3,579)

(6,935)

(10,633)Income (loss) from continuing operations before
provision     (benefit) for income taxes
42,723

821

106,589

(26,249)Provision (benefit) for income taxes
16,209

196

39,833

(7,298)Income (loss) from continuing operations
26,514

625

66,756

(18,951)Discontinued operations:Gain from discontinued operations
-

-

-

505Provision for income taxes
176

150

528

863Gain (loss) from discontinued operations
(176)

(150)

(528)

(358)Net income (loss)
$26,338

$475

$66,228

($19,309)Basic earnings (loss) per share of common
stock:Income (loss) from continuing operations
$0.79

$0.01

$1.98

($0.56)Gain (loss) from discontinued operations
(0.01)

(0.00)

(0.02)

(0.01)Net income (loss)
$0.78

$0.01

$1.96

($0.57)Diluted earnings (loss) per share of common
stock:Income (loss) from continuing operations
$0.77

$0.01

$1.97

($0.56)Gain (loss) from discontinued operations
(0.01)

(0.00)

(0.02)

(0.01)Net income (loss)
$0.76

$0.01

$1.95

($0.57)Weighted average number of common shares
outstanding:Basic
33,710

33,322

33,647

33,282Diluted
34,245

33,366

33,930

33,282 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) Nine Months EndedOctober 3,

September 27,2009

2008Cash flows
from operating activities:Net income
(loss)
$66,228

($19,309)Deduct: Loss
from discontinued operations, net of tax
(528)

(358)Income (loss)
from continuing operations
66,756

(18,951)Adjustments to
reconcile net income to net cash (used in) provided by operating
activities:Deferred
income taxes
15,651

3,164Non-cash
interest expense
3,824

5,632Depreciation
and amortization
27,723

22,966Loss
on marketable securities and other investments, net
55

2,940Equity
in loss of joint venture
-

330Allowances
against accounts receivable
1,877

(43,472)Share-based
compensation expense
10,566

10,257Loss
on disposal of fixed assets
938

170Gain
on extinguishment of senior subordinated convertible notes
(2,364)

-Gain
on bargain purchase
(3,021)

-Other,
net
69

(76)Changes
in assets and liabilities:(Increase)
decrease in accounts receivable
(24,241)

19,931(Increase)
decrease in inventories
(31,036)

35,975Decrease
in prepaid expenses and other assets
3,453

3,061Increase
(decrease) in accounts payable, accrued expenses and other
liabilities
17,505

(5,210)(Decrease)
increase in payables due to distribution agreement partners
(37,471)

7,829Increase
in income taxes receivable/payable
19,314

(8,391)Net
cash provided by operating activities
69,598

36,155Cash flows
from investing activities:Capital
expenditures
(6,747)

(13,015)Purchases
of intangibles
(1,000)

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

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

(98,903)Proceeds
from maturity and sale of available for sale marketable debt and
            equity
securities
65,253

67,825Proceeds
from settlement with liquidated fund
-

1,667Capital
contributions to joint venture
-

(2,182)Net
cash used in investing activities
(7,794)

(64,608)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
515

346Proceeds
from the issuance of common stock under the Employee Stock
            Purchase
Program
170

223Excess
tax benefits on exercise of nonqualified stock options
133

205Purchase
of treasury stock
(1,850)

(1,335)Reductions
in principal due to repurchases of senior subordinated convertible
notes
(60,715)

-Net
cash used in financing activities
(61,747)

(561)Net increase
(decrease) in cash and cash equivalents
57

(28,509)Cash and cash
equivalents at beginning of period
170,629

200,132Cash and cash
equivalents at end of period
$170,686

$171,623Supplemental
disclosure of cash flow information:Cash paid
(received) during the period for:Income taxes,
net
$4,666

($2,276)Interest
$3,665

$5,750Non-cash
transactions:Capital
expenditures incurred but not yet paid
$461

$2,335 The accompanying notes are an integral part
of these condensed consolidated financial statements.  5   PAR
PHARMACEUTICAL COMPANIES, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS October 3, 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), although we also distribute several oral suspension
products, nasal spray products, products in the semi-solid form of a cream and a
transdermal patch.  Note 1- Basis of Presentation:  In June, 2009,
the Financial Accounting Standards Board (FASB) issued the Accounting
Standards Codification (ASC) as the single source of authoritative accounting
principles generally accepted in the United States (U.S. GAAP) recognized by
the FASB to be applied by nongovernmental entities in preparation of financial
statements in conformity with U.S. GAAP.  Rules and interpretive releases
of the Securities and Exchange Commission (the SEC) under federal securities
laws are also sources of authoritative U.S. GAAP for SEC registrants.  The
ASC became effective for financial statements issued for interim periods ended
after September 15, 2009.  All content within the ASC carries the same
level of authority.  While the adoption of the ASC as of fiscal period
ended October 3, 2009 changes how Par references accounting standards, the
adoption did not have an impact on the Companys financial position, results of
operations, or cash flows. The accompanying condensed
consolidated financial statements at October 3, 2009 and for the three-month and
nine month periods ended October 3, 2009 and September 27, 2008 are unaudited;
in the opinion of Pars management, however, such statements include all normal
recurring 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 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 FASB ASC 470-20 Debt  Debt with
Conversion and Other Options.  Pursuant to accounting requirements of
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 U.S. 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.  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 accordance with FASB ASC 470-20,
the new rules for convertible debt instruments that may be settled entirely or
partially in cash upon conversion, Par separately accounted for the liability
and equity components of its senior subordinated convertible notes in a manner
that reflects our economic interest cost.  Previous guidance provided for
accounting of this type of convertible debt instruments entirely as debt.
 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.  FASB ASC 470-20 was effective as of January 1, 2009,
with retrospective application required.  For instruments subject to the
scope of FASB ASC 470-20, 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 $31 million equity
component.   6   The table
below sets forth the effect of the adjustments on the applicable line items
within Pars condensed consolidated statement of operations for the three-month
and nine month periods ended September 27, 2008 ($ amounts in thousands):  Three months ended September 27,
2008As previously reported

Adjustments

As adjustedInterest expense
($1,667)

($1,912)

($3,579)Income (loss) from continuing operations before
provision     (benefit) for income taxes
$2,733

($1,912)

$821Provision (benefit) for income taxes
$923

($727)

$196Income (loss) from continuing operations
$1,810

($1,185)

$625Net income (loss)
$1,660

($1,185)

$475Basic earnings (loss) per share
of common stock:Income (loss) from
continuing operations
$0.05

($0.04)

$0.01Net income
(loss)
$0.05

($0.04)

$0.01Diluted earnings (loss) per
share of common stock:Income (loss) from
continuing operations
$0.05

($0.04)

$0.01Net income
(loss)
$0.05

($0.04)

$0.01   Nine months ended September 27,
2008As previously reported

Adjustments

As adjustedInterest expense
($5,001)

($5,632)

($10,633)Loss from continuing operations before benefit for
income taxes
($20,617)

($5,632)

($26,249)Benefit for income taxes
($5,158)

($2,140)

($7,298)Loss from continuing operations
($15,459)

($3,492)

($18,951)Net loss
($15,817)

($3,492)

($19,309)Basic earnings (loss) per share
of common stock:Loss from continuing
operations
($0.46)

($0.10)

($0.56)Net loss
($0.47)

($0.10)

($0.57)Diluted earnings (loss) per
share of common stock:Loss from continuing
operations
($0.46)

($0.10)

($0.56)Net loss
($0.47)

($0.10)

($0.57)   The table below sets forth the effect of the adjustments
on the applicable line items within Pars condensed consolidated statements of
cash flows for the nine month period ended September 27, 2008 ($ amounts in
thousands):  Nine months ended September 27,
2008As previously reported

Adjustments

As adjustedCash flows from operating activities:Net loss
($15,817)

($3,492)

($19,309)Loss from continuing operations
($15,459)

($3,492)

($18,951)Adjustments to reconcile net income to net cash
provided by operating activities:Deferred income
taxes
5,304

($2,140)

$3,164Non-cash interest
expense
-

$5,632

$5,632Net cash provided by
operating activities
$36,155

-

$36,155   7    Note 3 - Share-Based
Compensation: Par accounts for share-based
compensation as required by FASB ASC 718-10 Compensation  Stock Compensation.
 FASB ASC 718-10 requires companies to recognize compensation expense in
the amount equal to the fair value of all share-based payments granted to
employees.  Under FASB ASC 718-10, Par recognizes share-based compensation
ratably over the service period applicable to the award.  FASB ASC 718-10
also amended FASB ASC 230-10 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 FASB ASC 718-10, $0.1 million and
$0.2 million of excess tax benefits for the nine months ended October 3, 2009
and September 27, 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 October 3, 2009, there were
approximately 4.7 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 October 3, 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 nine
For the ninemonths ended
months ended
months ended
months endedOctober 3,
September 27,
October 3,
September 27,2009
2008
2009
2008Risk-free interest rate
2.7%
n/a
1.9%
3.0%Expected life (in years)
6.3
n/a
6.3
6.3Expected Volatility
45.5%
n/a
43.9%
48.5%Dividend
0%
n/a
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 few of Pars existing options have reached their full 10-year term, and
also because a significant portion 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 FASB ASC
718-10-S99 Compensation  Stock Compensation  SEC Materials.  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.  FASB
ASC 718-10 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 October
3, 2009 was $7.18.  The Company did not grant any options in the three
month period ended September 27, 2008.  The weighted average per share fair
value of options granted in the nine month periods ended October 3, 2009 and
September 27, 2008 were $5.82 and $9.92.   8    Set forth below is the impact on Pars
results of operations of recording share-based compensation from its stock
options for the three-month and nine month periods ended October 3, 2009 and
September 27, 2008 ($ amounts in thousands):  For the three months
ended

For the nine months
endedOctober 3,

September 27,

October 3,

September 27,2009

2008

2009

2008Cost of goods sold

$120

$67

$364

$205Research and development

-

168

-

514Selling, general and
administrative

1,078

606

3,272

1,852Total, pre-tax

$1,198

$841

$3,636

$2,571Tax effect of
share-based cmpensation

(455)

(320)

(1,382)

(977)Total, net of tax

$743

$521

$2,254

$1,594  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

1,223

12.90Exercised

(54)

9.45Forfeited

(741)

37.63Balance at October 3, 2009

4,493

$26.06

5.9

$15,854Exercisable at October 3, 2009

2,618

$34.85

3.8

$1,254Vested and expected to vest at October 3,
2009

4,313

$26.59

4.9

$14,367  The total fair
value of shares vested during the three-month period ended October 3, 2009 was
$0.6 million and $0.8 million for the three-month period ended September 27,
2008.  The total fair value of shares vested during the nine month period
ended October 3, 2009 was $3.2 million and $6.8 million for the nine month
period ended September 27, 2008.  As of October 3, 2009, the total
compensation cost related to all non-vested stock options granted to employees
but not yet recognized was approximately $9.1 million, net of estimated
forfeitures.  This cost will be amortized on a straight-line basis over the
remaining weighted average vesting period of 2.7 years.  Restricted Stock/Restricted Stock
Units  Outstanding restricted stock and
restricted stock units generally vest ratably over four years.  The related
share-based compensation expense is recorded over the requisite service period,
which is the vesting period.  The fair value of restricted stock is based
on the market value of Pars common stock on the date of grant.  The impact on Pars results of
operations of recording share-based compensation from restricted stock for the
three-month and nine month periods ended October 3, 2009 and September 27, 2008
was as follows ($ amounts in thousands):  For the three months
ended

For the nine months
endedOctober 3,

September 27,

October 3,

September 27,2009

2008

2009

2008Cost of goods sold

$159

$125

$546

$449Research and development

-

312

-

1,121Selling, general and
administrative

1,428

1,125

4,916

4,035Total, pre-tax

$1,587

$1,562

$5,462

$5,605Tax effect of stock-based
compensation

(603)

(594)

(2,076)

(2,130)Total, net of tax

$984

$968

$3,386

$3,475  9      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

218

12.99Vested

(209)

26.15Forfeited

(69)

18.06Non-vested balance at October 3,
2009

804

$17.56

$17,123  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

68

13.16Vested and shares issued

(62)

19.46Forfeited

-

-Unvested restricted stock unit balance at
   October 3, 2009

112

$18.83

$2,435Vested awards not issued

95

$24.01

$2,054Total restricted stock unit balance at October 3,
2009

207

$21.20

$4,489  As of October 3, 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 $10.3
million, net of estimated forfeitures; this cost will be amortized on a
straight-line basis over the remaining weighted average vesting period of
approximately 2.0 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 555 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 five 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 five 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
$24.78.   10   The
following table summarizes the components of Pars stock-based compensation
related to its restricted stock grants with market conditions recognized in our
financial statements for the three-month and nine month periods ended October 3,
2009 and September 27, 2008 ($ amounts in thousands):  For the three months
ended

For the nine months
endedOctober 3,

September 27,

October 3,

September 27,2009

2008

2009

2008Cost of goods sold

$54

$56

$147

$166Research and development

-

140

-

416Selling, general and
administrative

483

505

1,320

1,498Total, pre-tax

$537

$701

$1,467

$2,080Tax effect of
stock-based compensation

(204)

(266)

(557)

(790)Total, net of tax

$333

$435

$910

$1,290 As
of October 3, 2009, $2.5 million of total unrecognized compensation cost,
net of estimated forfeitures, related to restricted stock grants with market
condition vesting, is expected to be recognized over a weighted average period
of approximately 1.25 years.  The following is a summary of Pars
restricted stock grants with market condition vesting (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 October 3,
2009

261

$24.78

$5,566  Employee Stock Purchase Program:  Par maintains an Employee Stock
Purchase Program (the Program).  The Program is designed to qualify as an
employee stock purchase plan under Section 423 of the Internal Revenue Code of
1986, as amended.  It enables eligible employees to purchase shares of
Pars common stock at a 5% discount to the fair market value.  An aggregate
of 1,000,000 shares of common stock has been reserved for sale to employees
under the Program.  Employees
purchased 3,000 shares during the three-month period ended October 3, 2009 and
7,000 shares during the three-month period ended September 27, 2008.
 Employees purchased 12,000 shares during the nine month period ended
October 3, 2009 and 15,000 shares during the nine month period ended September
27, 2008.   Note 4- Available for Sale Marketable Debt and
Equity Securities: At October 3, 2009 and December 31,
2008, all of Pars investments in marketable debt and equity securities were
classified as available for sale and, as a result, were reported at their
estimated fair values on the condensed consolidated balance sheets.  Refer
to Note 5 - Fair Value Measurements.  The following is a summary of
amortized cost and estimated fair value of Pars marketable debt and equity
securities available for sale at October 3, 2009 ($ amounts in thousands):  EstimatedUnrealized

FairCost

Gain

(Loss)

ValueSecurities issued by government agencies

$16,300

$105

$ -

$16,405Debt securities issued by various state and local
    municipalities and agencies

9,668

103

-

9,771Other debt securities

13,197

394

-

13,591Available for sale
marketable debt securities

39,165

602

-

39,767Marketable equity securities available for sale
   Hana Biosciences, Inc.

375

1,225

-

1,600Total

$39,540

$1,827

$ -

$41,367  11      All available for sale debt securities
are classified as current on Pars condensed consolidated balance sheet as of
October 3, 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. 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.  Par recorded a
$0.8
million unre
alized
gain through equity
on the
condensed consolidated balance sheet

during the second quarter of 2009 .
During the three months ended
October 3, 2009, Par has recorded a
n additional
$0.4

million unre
alized gain through equity
on the

condensed consolidated balance sheet.  As of
October 3, 2009
the total amount of unrealized gain which is reflected as part of
stockholders equity totaled
$1.2 million .  The following is a summary of
amortized cost and estimated fair value of Pars investments in debt and
marketable equity securities available for sale at December 31, 2008 ($ 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)

$95,046  The following is a summary of the
contractual maturities of Pars available for sale debt securities at October 3,
2009 ($ amounts in thousands):   October 3, 2009Estimated FairCost

ValueLess than one year

$16,417

$16,610Due between 1-2 years

22,748

23,157Total

$39,165

$39,767   Note 5  Fair Value
Measurements: As described in Note 20 Recent
Accounting Pronouncements, Par adopted FASB ASC 820-10 Fair Value Measurements
and Disclosures with respect to financial assets and liabilities as of January
1, 2008.  FASB ASC 820-10 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.  FASB ASC
820 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.  12   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 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 as of October
3, 2009 were as follows ($ amounts in thousands):  Estimated Fair Value atOctober
3, 2009

Level 1

Level 2

Level 3Securities issued by government agencies (Note
4)

$16,405

$ -

$16,405

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

9,771

-

9,771

-Other debt securities (Note 4)

13,591

-

13,591

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

1,600

1,600

-

-Total investments in debt and marketable
equity    securities

$41,367

$1,600

$39,767

$ -  The fair value of Pars financial
assets and liabilities measured at fair value on a recurring basis as of
December 31, 2008 were as follows ($ amounts in thousands):  Estimated Fair Value at
December 31,2008

Level 1

Level 2

Level 3Securities issued by government agencies (Note
4)

$41,541

$ -

$41,541

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

28,585

-

28,585

-Other debt securities (Note 4)

24,320

-

24,320

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

600

600

-

-Total investments in debt and marketable
equity     securities

$95,046

$600

$94,446

$ -   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.  13   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):  October 3,

December 31,2009

2008Gross trade accounts receivable

$218,902

$194,661Chargebacks

(13,245)

(32,738)Rebates and incentive programs

(43,344)

(27,110)Returns

(40,049)

(38,128)Cash discounts and other

(17,412)

(13,273)Allowance for doubtful accounts

(1)

(4)Accounts receivable, net

$104,851

$83,408   Allowance for doubtful accounts

For the nine-month period
endedOctober 3,

September 27,2009

2008Balance at beginning of period

($4)

($20)Additions  charge to expense

-

(3)Adjustments and/or deductions

3

20Balance at end of period

($1)

($3)   The following tables summarize the
activity for the nine months ended October 3, 2009 and the nine months ended
September 27, 2008,  in the accounts affected by the estimated provisions
described below ($ amounts in thousands):  For the Nine Month Period Ended
October 3, 2009Accounts receivable reserves

Beginning balance

Provision recorded for current
period sales

(Provision) reversal recorded for
prior period sales

Credits processed

Ending balanceChargebacks

($32,738)

($126,538)

($435)
(1)
$146,466

($13,245)Rebates and incentive programs

(27,110)

(91,904)

157

75,513

(43,344)Returns

(38,128)

(22,010)

77

20,012

(40,049)Cash discounts and other

(13,273)

(63,548)

-

59,409

(17,412)Total

($111,249)

($304,000)

($201)

$301,400

($114,050)Accrued liabilities(2)

($21,912)

($22,780)

$2,197
(5)
$14,820

($27,675)   For the Nine Month Period Ended
September 27, 2008Accounts receivable reserves

Beginning balance

Provision recorded for current
period sales

(Provision) reversal recorded for
prior period sales

Credits processed

Ending balanceChargebacks

($46,006)

($286,435)

($539)
(1)
$302,642

($30,338)Rebates and incentive programs

(42,859)

(63,864)

(1,571)
(3)
82,014

(26,280)Returns

(47,102)

(13,049)

3,868
(4)
16,610

(39,673)Cash discounts and other

(16,158)

(35,095)

349

38,525

(12,379)Total

($152,125)

($398,443)

$2,107

$439,791

($108,670)Accrued liabilities(2)

($17,684)

($17,365)

($192)

$12,129

($23,112)  14      (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 nine month period
ended September 27, 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
nine month period ended September 27, 2008. (5) The change in
accrued liabilities recorded for prior period sales is principally comprised of
a $1.4 million credit from the Medicaid drug rebate program related to a
positive settlement based upon the finalization of a negotiation in the third
quarter of 2009 pertaining to prior years.  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 53% of our net product sales were derived from the wholesale
distribution channel for the three months ended October 3, 2009 and 74%for the three months ended September 27, 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 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 between six months prior to, and 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  15   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. 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  October 3,

December 31,2009

2008McKesson Corporation

22%

36%AmerisourceBergen Corporation

16%

17%Cardinal Health, Inc.

14%

13%Wal-Mart Stores, Inc.

10%

5%Other customers

38%

29%Total gross accounts receivable

100%

100%   Note 7- Inventories: ($ amounts in thousands)  October 3,

December 31,2009

2008Raw materials and supplies

$14,888

$13,760Work-in-process

5,059

4,495Finished goods

55,414

24,249$75,361

$42,504  Inventory write-offs (inclusive of
pre-launch inventories detailed below) were $0.2 million for the quarter ended
October 3, 2009 and $3.0 million for the quarter ended September 27, 2008.
Inventory write-offs were $4.8 million for the year-to-date period ended October
3, 2009 and $7.9 million for the year-to-date period ended September 27, 2008.  16     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 October 3, 2009, Par had approximately $1.2
million in inventories related to products that were not yet available to be
sold.  The amounts in
the table below are also included in the total inventory balances presented
above. Pre-Launch Inventories ($ amounts in thousands) October 3,

December 31,2009

2008Raw materials and supplies

$902

$577Work-in-process

175

542Finished goods

118

474$1,195

$1,593  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 three quarters of 2009 and replenishing
raw materials of anticipated future launches. Write-offs of pre-launch
inventories, net of partner allocation, were $0.1 million for the quarter ended
October 3, 2009 and $1.5 million for the quarter ended September 27, 2008.
Write-offs of pre-launch inventories, net of partner allocation, were $0.4
million for the year-to-date period ended October 3, 2009 and $3.5 million for
the year-to-date period ended September 27, 2008.   Note 8  Property, Plant and Equipment, net: ($ amounts in thousands) October 3,

December 31,2009

2008Land

$1,882

$1,882Buildings

25,578

25,571Machinery and equipment

46,888

44,027Office equipment, furniture and
fixtures

4,578

4,774Computer software and hardware

44,457

29,179Leasehold improvements

12,084

11,548Construction in progress

4,078

16,462139,545

133,443Less accumulated depreciation and
amortization

63,683

54,004$75,862

$79,439 Depreciation
and amortization expense related to property, plant and equipment was $4.0
million for the three months ended October 3, 2009 and $3.2 million for the
three months ended September 27, 2008.   Depreciation and amortization
expense related to property, plant and equipment was $9.5 million for the nine
months ended October 3, 2009 and $10.1 million for the nine months ended
September 27, 2008.   17   Note 9- Intangible Assets,
net: ($ amounts in thousands)  October 3,

December 31,2009

2008QOL Medical, LLC Asset Purchase
Agreement, net of accumulated amortization of $2,280

$52,441

$ -Spectrum Development and
Marketing Agreement, net of accumulated amortization of
        $18,404 and
$6,839

6,596

18,161Trademark licensed from
Bristol-Myers Squibb Company, net of accumulated
        amortization of $5,275
and $3,850

4,726

6,151Paddock Licensing Agreement, net
of accumulated amortization of $3,000 and $2,250

3,000

3,750Genpharm, Inc. Distribution
Agreement, net of accumulated amortization of
$8,124       and $7,582

2,709

3,251SVC Pharma LP License and
Distribution Agreement, net of accumulated amortization
        of $1,784 and
$1,106

1,900

2,578MDRNA, Inc. Asset Purchase
Agreement, net of accumulated amortization of $55

1,345

-Other intangible assets, net of
accumulated amortization of $5,360 and $5,216

888

32FSC Laboratories Agreement, net
of accumulated amortization of $5,319 and $4,816

503

1,006Bristol-Myers Squibb Company
Asset Purchase Agreement, net of accumulated
        amortization of
$11,699 and $11,420

-

279$74,108

$35,208  Par recorded amortization expense
related to intangible assets of $5.1 million for the three months ended October
3, 2009 and $8.3 million for the three months ended September 27, 2008.
 Par recorded amortization expense related to intangible assets of $18.2
million for the nine months ended October 3, 2009 and $12.9 million for the nine
months ended September 27, 2008.  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 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 $1.4 million and will be
amortized over its estimated useful life of 2 years.  Refer to MDRNA,
Inc. in Note 19, Acquisitions.  Estimated Amortization Expense  EstimatedAmortization($ in thousands)

Expense2009

$4,8782010

13,5342011

10,2552012

7,2192013

5,1612014 and thereafter

33,061$74,108   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 October 3, 2009, Par believes its net intangible assets are
recoverable.    18   Note 10- Income Taxes:  Three months ended

Nine months endedOctober 3,

September 27,

October 3,

September 27,($ in thousands)

2009

2008

2009

2008Effective tax rate

38%

24%

37%

28%  The Companys effective tax rate for
the three and nine month periods ended September 27, 2008 includes the impact of
permanent tax items and reflects a $2.7 million charge, recorded in the third
quarter of 2008 related to the Companys revised filing position on certain tax
credits related to prior years. The IRS is
currently examining Pars 2007 federal income tax return.  Periods prior to
2004 have either been audited or are no longer subject to IRS audit.  Par
is currently under audit by two state jurisdictions for the years
2003-2008.  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
October 3, 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
October 3, 2009 and December 31, 2008 consisted of the tax benefit related to
acquired in-process research and development and timing differences primarily
related to intangible assets and stock options.  The Company believes that it is
reasonably possible that approximately $14 million of our current unrecognized
tax positions may be recognized within the next twelve months as a result of
settlements or a lapse of the statute of limitations.  Par reflects
interest and penalties attributable to income taxes, to the extent they arise,
as a component of its income tax provision or benefit.   Note 11 -
Long-Term Debt: Long-Term Debt ($ amounts in thousands) October 3,

December 31,2009

2008Senior subordinated convertible
notes

$74,373

$130,141Less current portion

(74,373)

(130,141)$-

$-  On October 3, 2009, Pars outstanding
senior subordinated convertible notes had a face value of $78.6 million and a quoted market value
of approximately $77.0 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. In March 2009,
Par repurchased senior subordinated convertible notes in the aggregate principal
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. During the
third quarter of 2009, Par repurchased senior subordinated convertible notes
that were to mature on September 30, 2010 in the aggregate principal amount of
$49.6 million for approximately $47.6 million, including accrued interest.
 Par recorded a gain of approximately $1.6 million in the third quarter of
2009 related to this debt extinguishment.  Par reflected the obligations as
a current liability, in accordance with the September 30, 2010 maturity date of
the notes, on the condensed consolidated balance sheet as of October 3, 2009. Subsequent to
October 3, 2009, Par commenced a Modified Dutch Auction tender offer for up to
$65 million of the senior subordinated convertible notes due September 30, 2010
that remains outstanding.  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 FASB ASC 470-20.  19     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 nine month period ended October 3, 2009 were as follows
(share amounts and $ amounts in thousands):  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

-

-

-

1,010Exercise of stock options

55

-

515

-Tax benefit from exercise of stock options

-

-

133

-Tax deficiency related to vesting of restricted
stock

-

-

(1,530)

-Issuance of common stock under the Employee Stock
    Purchase Program

-

-

170

-Forfeitures of restricted stock

(77)

(1)

1

-Issuances of restricted stock

250

2

(2)

-Compensatory arrangements

-

-

10,566

-Other (1)

-

-

(3,787)

-Balance, October 3, 2009

37,620

$375

$326,042

$1,132  (1) The balance primarily relates to the
repurchases of senior subordinated convertible notes and the proportionate
derecognition of the associated equity component that was recorded as a
reduction of stockholders equity under the provisions of FASB ASC 470-20-40
Debt  Debt with Conversion and Other Options  Derecognition.  ($ amounts in thousands) Comprehensive Income
(Loss)

Three months ended

Nine months endedOctober 3,

September 27,

October 3,

September 27,2009

2008

2009

2008Net income
(loss)

$26,338

$475

$66,228

($19,309)Other comprehensive income
(loss):Unrealized gain (loss) on marketable securities,
net of tax

316

(722)

976

(1,897)Less: reclassification adjustment for net losses
included     in net income, net of tax

-

1,554

34

2,856Comprehensive income (loss)

$26,654

$1,307

$67,238

($18,350)  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 1.6 million shares of its common stock for
approximately $31.4 million pursuant to the expanded program in 2007.  The
authorized amount remaining for stock repurchases under the repurchase program
was $43.6 million, as of October 3, 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 FASB ASC 470-20.    20   Note 13-
Earnings Per Share: The following is a reconciliation of
the amounts used to calculate basic and diluted earnings per share (share
amounts and $ amounts in thousands, except per share amounts): Three months ended

Nine months endedOctober 3,

September 27,

October 3,

September 27,2009

2008

2009

2008Income (loss) from continuing operations

$26,514

$625

$66,756

($18,951)Gain from discontinued operations

-

-

-

505Provision for income taxes

176

150

528

863Gain (loss) from discontinued operations

(176)

(150)

(528)

(358)Net income (loss)

$26,338

$475

$66,228

($19,309)Basic:Weighted average number of common shares
outstanding

33,710

33,322

33,647

33,282Income (loss) from continuing operations

$0.79

$0.01

$1.98

($0.56)Gain (loss) from discontinued operations

(0.01)

(0.00)

(0.02)

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

$0.78

$0.01

$1.96

($0.57)Assuming dilution:Weighted average number of common shares
outstanding

33,710

33,322

33,647

33,282Effect of dilutive securities

535

44

283

-Weighted average number of common and common
   equivalent shares outstanding

34,245

33,366

33,930

33,282Income (loss) from continuing operations

$0.77

$0.01

$1.97

($0.56)Gain (loss) from discontinued operations

(0.01)

(0.00)

(0.02)

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

$0.76

$0.01

$1.95

($0.57)  Outstanding options of 2.7 million as
of October 3, 2009 and 4.0 million as of September 27, 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 nine months ended October 3, 2009, restricted stock grants
with market condition vesting 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
October 3, 2009 and September 27, 2008.  The warrants related to the senior
subordinated convertible notes are exercisable for an aggregate of 885 thousand
shares of common stock at an exercise price of $105.20 per share and expire in
September 2010, unless the notes are repurchased earlier than their maturity.
 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 and expire in June 2011.   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 the
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.  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
Exchange Act , by issuing false and misleading statements concerning Pars
financial  21   condition and results of
operations.  The class actions are pending in the U.S. District Court for
the 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.  On September 30, 2009, the Court granted the motion to dismiss
all claims as against Kenneth Sawyer but denied the motion as to the Company,
Dennis OConnor, and Scott Tarriff.  The time for the Company and Messrs.
OConnor and Tarriff (the Individual Defendants) to file answers expires on
October 30, 2009.  Par and the Individual Defendants intend to vigorously
defend the consolidated class action.  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.  On July 10, 2008, the PTO rejected with finality
all claims pending in both the 392 and 981 patents.  On September 28,
2009, the USPTO Board of Appeals affirmed the Examiners rejection of all claims
in the 981 patent.  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 (the Paddock
litigation).  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 the testosterone 1% gel, and the Paddock litigation 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. The Bureau of Competition for the Federal Trade Commission
(FTC) is investigating whether the settlement of the Paddock 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 Central District of California
alleging violations of antitrust laws stemming from Pars court-approved
settlement in the Paddock litigation.  In February 2009, Meijer
Distribution, Inc., Rochester Drug Co-Operative, Inc. and Louisiana Wholesale
Drug Co., Inc. each filed class action complaints in the same district court.
 On April 9, 2009, the U.S. District Court for the Central District of
California granted Pars motion to transfer the FTC lawsuit, in the three
aforementioned class action suits to the U.S. District Court for the Northern
District of Georgia.  In April 2009 the Fraternal Order of Police, Fort
Lauderdale Lodge 31 Insurance Trust Fund and Raymond Scurto filed a class action
complaint naming Par in the U.S. District Court for the District of New Jersey
alleging antitrust violations.  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.  On July 20, 2009,
Par filed a motion to dismiss the FTCs case and on September 1, 2009, filed a
motion to dismiss the private plaintiffs cases in the U.S. District Court for
the Northern District of Georgia.  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, Propafenone HCl SR capsules.  Par has
answered and counterclaimed denying Reliants infringement allegations, and
asserted 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  22   submitted a Paragraph IV
certification to the FDA for approval of 200 mg extended release tablets
containing tramadol hydrochloride.  On May 30, 2007 and October 24, 2007,
the Complaint was amended to include claims of infringement of the 887 patent
by Pars 100 mg and 300 mg extended release tablets containing tramadol
hydrochloride, respectively. On April 22, 2009, Pars bench trial in the U.S.
District Court of Delaware concluded and Par filed post-trial briefs on May 23,
2009 and replies on June 15, 2009.   On August 14, 2009, the District
Court ruled in favor of Par on the issue of invalidity, while ruling in favor of
plaintiffs on the issues of infringement and inequitable conduct.  On
September 3, 2009, plaintiffs filed their notice of appeal to the Court of
Appeals for the Federal Circuit while Par filed its notice of cross appeal on
September 14, 2009.  Par intends to vigorously prosecute its appeal.  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 (the 874 patent) and 5,716,988 (the 988 patent) 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.  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 September
10, 2009, the Court of Appeals for the Federal Circuit reversed the New Jersey
District Court and remanded the case for further proceedings.  On September
24, 2009, Sanofi-Aventis filed a motion for preliminary injunction against
defendants who entered the market following the New Jersey District Courts
summary judgment ruling.  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 counterclaim 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
partners, 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 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.  On February 20, 2008,
the judge in the Delaware litigation consolidated four related cases pending in
Delaware. 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.  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 the Patent 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 were consolidated for all purposes.  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.  Par filed its proposed findings of fact
and conclusions of law with the Delaware court on 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.  On September 11, 2009, plaintiffs filed a motion for summary
judgment in the Delaware District Court.Par intends to defend
these actions vigorously and pursue its counterclaims against AstraZeneca
Pharmaceuticals, LP, AstraZeneca UK  23   Ltd., IPR Pharmaceuticals,
Inc. and Shionogi Seiyaku Kabushiki Kaisha.  On November 14, 2008, Pozen, Inc.
(Pozen) 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 (GSK) 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.  On
August 20, 2009, defendants entered into covenants-not-to-sue on the patents
covering nateglinide oral tablets and Par filed a notice of dismissal in the
district court on August 21, 2009.  On April 29, 2009, Pronova BioPharma
ASA (Pronova) 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 filed an Answer May 19, 2009 and the court has scheduled a
Markman hearing for October 22, 2010 and a two-week bench trial for March 28,
2011.  Par intends to defend this action vigorously and pursue its defenses
and counterclaims against Pronova.  On July 1, 2009, Alcon Research Ltd.
(Alcon) 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;
and 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 filed an Answer on August 21, 2009.
 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, 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 called upon to do so. Department
of Justice Matter  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.  24    Other 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 contract with the
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 FASB ASC 450-20 Contingencies  Loss 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.
Pars estimate of the probable loss is approximately $5.0 million, including
interest, which has been accrued as of October 3, 2009.  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.   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 September 27, 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 FASB ASC 280-10 Segment
Reporting.  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 ($ amounts in thousands):  Three months ended

Nine months endedOctober 3,

September 27,

October 3,

September 27,2009

2008

2009

2008Revenues:Generic

$269,442

$129,383

$839,690

$352,168Strativa

25,360

19,584

63,148

64,664Total revenues

$294,802

$148,967

$902,838

$416,832Gross margin:Generic

$72,934

$35,932

$195,666

$75,291Strativa

19,204

15,530

46,949

50,800Total gross margin

$92,138

$51,462

$242,615

$126,091Operating income (loss):Generic

$48,260

$4,117

$124,500

($20,323)Strativa

(5,883)

505

(18,634)

549Total operating income (loss)

$42,377

$4,622

$105,866

($19,774)Gain on bargain purchase

-

-

3,021

-Gain on extinguishment of senior
subordinated       convertible
notes

1,615

-

2,364

-Equity in loss of
joint venture

-

-

-

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

-

(2,507)

(55)

(2,940)Interest
income

504

2,285

2,328

7,428Interest
expense

(1,773)

(3,579)

(6,935)

(10,633)Provision (benefit)
for income taxes

16,209

196

39,833

(7,298)Income (loss) from continuing
operations

$26,514

$625

$66,756

($18,951)    Pars chief operating decision maker
does not review our assets, depreciation or amortization by business segment at
this time as they are not material to its branded operations.  Therefore,
such allocations by segment are not provided.  Total revenues of Pars top selling
products were as follows ($ amounts in thousands):  Three months ended

Nine months endedOct. 3,

Sept. 27,

Oct. 3,

Sept. 27,Product

2009

2008

2009

2008GenericMetoprolol succinate ER (Toprol-XL®)

$161,104

$41,003

$579,667

$123,311Clonidine TDS (Catapres TTS®)

20,393

-

20,393

-Sumatriptan succinate injection (Imitrex®)

16,669

-

54,513

-Meclizine Hydrochloride (Antivert®)

10,687

14,869

29,412

21,295Dronabinol (Marinol®)

6,570

7,960

19,073

7,960Nateglinide (Starlix®)

3,184

-

3,184

-Cabergoline (Dostinex®)

3,056

5,054

9,931

17,648Methimazole (Tapazole®)

3,039

2,818

7,433

8,041Cholestyramine Powder (Questran®)

2,960

2,491

7,318

6,831Propranolol HCl ER (Inderal LA®)

2,788

4,292

9,998

13,216Megestrol oral suspension (Megace®)

2,356

3,215

7,003

8,034Hydralazine Hydrochloride (Apresazide®)

2,046

2,636

6,319

6,840Various amoxicillin products (Amoxil®)

1,275

2,521

1,648

11,310Ibuprofen Rx (Advil®, Nuprin®, Motrin®)

755

3,489

4,614

9,321Fluticasone (Flonase®)

518

6,345

5,910

34,636Other (1)

30,701

31,130

69,269

79,111Other product related revenues (2)

1,341

1,560

4,005

4,614Total Generic Revenues

$269,442

$129,383

$839,690

$352,168  26    StrativaMegace® ES

$19,085

$16,942

$49,675

$56,737Nascobal® Nasal Spray (3)

3,775

-

5,973

-Other product related revenues (2)

2,500

2,642

7,500

7,927Total Strativa Revenues

$25,360

$19,584

$63,148

$64,664  (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 nine month
periods ended October 3, 2009 or September 27, 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 nine month period ended
October 3, 2009, Par recognized a gain on the sale of product rights of $3.2
million, and during the nine month period ended September 27, 2008, of $3.7
million, 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 buccal tablets, which is marketed in Europe under the brand name
Loramyc®, 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 buccal tablets.  On April 9, 2009, Par 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.  On August 19, 2009, Par announced that the FDA
accepted the NDA for review.  If the product receives FDA approval, Par
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, Par 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.  On June
10, 2009, Par announced that the FDA accepted the NDA for review.  If the
product receives FDA approval, Par 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. In January
2008, Par 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.  Due to these developments, this contract ceased to be
material to us.  On September 8, 2009, Par entered into a termination and
mutual release agreement with Alfacell, which terminated our commercial rights
and obligations under the licensing agreement, in exchange for a 2% royalty on
U.S. sales of any ranpirnase product commercialized by or on behalf of Alfacell
in the field of cancer.    27   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 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 nine months 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.  These charges
were somewhat tempered during the three months ended October 3, 2009, by a
revision in estimate of certain termination benefit costs. 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 October 3, 2009 ($ amounts in thousands):  Restructuring Activities

Initial Charge

Liabilities at December 31,
2008

Cash Payments

Additional Charges

Reversals, Reclass or
Transfers

Liabilities at October 3,
2009Severance and employee
    benefits to be paid in cash

$6,254

$6,254

$5,080

$1,309

($300)

$2,183Severance related to
share-   based compensation

3,291

-

-

-

-

-Asset impairments and other

5,907

60

243

243

-

60Total

$15,452

$6,314

$5,323

$1,552

($300)

$2,243  Par expects that approximately $6
million of the initial charge and $1.0 million of the additional charges will
result in cash expenditures through 2010. 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. Assets held
for sale as part of this restructuring charge were sold at their estimated
carrying value during the three months ended October 3, 2009.  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 FASB ASC 805 Business
Combinations.  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 used primarily in
the production of Nascobal® Nasal
Spray.  The purchase price of the acquisition was $0.8 million in cash paid
at closing.  The purchase was funded from the Companys cash on
hand.  28   The
acquisition has been accounted for as a bargain purchase under FASB ASC 805
Business Combinations.  The purchase price of the acquisition has been
allocated to the net tangible and intangible assets acquired, with the excess of
the fair value of assets acquired over the purchase price recorded as a gain.
 The gain is mainly attributed to MDRNAs plans to exit its contract
manufacturing business.  The acquired intangible asset has no tax basis.
 The Company allocated the purchase price based on input from third party
appraisals.  From March 31, 2009, the date of acquisition, the financial
impact of the assets and liabilities acquired from MDRNA were immaterial to
total revenues and operating income of the Company.  ($ 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 $3.8 million of revenue from
sales of Nascobal® Nasal Spray
during the three months ended October 3, 2009 as part of the Strativa segment
(refer to Note 16  Segment Information).  The Company does not track
operating income (or operating loss) at the product level.  The operating
loss of the Strativa segment, which includes the Nascobal® Nasal
Spray results, for the three and nine month periods ended October 3, 2009 are
disclosed in Note 16. The purchase
price of the acquisition has been allocated to the net tangible and intangible
assets acquired on the basis of estimated fair values based on input from third
party appraisals, as follows: ($ 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 October 3, 2009.  The following unaudited pro
forma information for the nine months ended October 3, 2009, assumes the
acquisitions occurred as of January 1, 2009 and the unaudited pro forma
information for nine months ended September 27, 2008, assumes the acquisitions
occurred as of January 1, 2008: Nine months ended

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

October 3, 2009

September 27, 2008Total revenues


$906,087


$418,530Income (loss) from continuing operations


65,926


(19,161)Income (loss) from continuing operations per diluted
share


$1.94


$(0.58) 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.   29   Note
20  Recent Accounting Pronouncements: The Company adopted the provisions of
FASB ASC 855-10 Subsequent Events, 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.  FASB ASC 855-10
distinguishes events requiring recognition in the financial statements and those
that may require disclosure in the financial statements.  Furthermore, FASB
ASC 855-10 requires disclosure of the date through which subsequent events were
evaluated.  FASB ASC 855-10 is effective for interim and annual periods
after June 15, 2009. We have adopted FASB ASC 855-10 during the quarter
ended June 27, 2009.  The Company has evaluated the period after the
balance sheet date up through November 6, 2009, which is the date that the
condensed 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. The Company adopted the provisions of FASB ASC
820-10-65-4 Fair Value Measurements and Disclosures; FASB ASC 820-10-65-4
provides guidelines for making fair value measurements more consistent with the
principles presented in FASB ASC 820-10.  FASB ASC 820-10-65-4 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 FASB ASC 820-10-65-4 did not
have a material impact on Pars financial position, results of operation, or
cash flows. The Company adopted the provisions of FASB ASC
320-10-65-1 Investments  Debt and Equity Securities; and FASB ASC 320-10-65-1
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 section of the FASB ASC applies to debt securities and is
effective for periods ending after June 15, 2009.  The adoption of
FASB ASC 320-10-65-1 did not have a material impact on Pars financial position,
results of operation, or cash flows. The Company adopted the provisions of FASB ASC
825-10-65-1 Financial Instruments. FASB ASC 825-10-65-1 requires disclosures
about fair value of financial instruments in interim as well as in annual
financial statements. This section of the FASB ASC requires those disclosures in
all interim financial statements.  This section of the FASB ASC was
effective for periods ending after June 15, 2009.  The adoption of
FASB ASC 825-10-65-1 did not have a material impact on Pars financial
statements as the required disclosures had historically been presented during
interim periods. The Company adopted the provisions of FASB ASC
805-20 Business Combinations  Identifiable Assets and Liabilities, and Any
Noncontrolling Interest.   FASB ASC 805-20 states 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 section of the FASB ASC was 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 FASB ASC 805.  Refer to Note 19 
Acquisitions. The Company adopted the provisions of FASB ASC
815-40 Derivatives and Hedging  Contracts in Entitys Own Equity.  FASB
ASC 815-40 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.  FASB ASC 815-40 was effective as of the beginning
of our 2009 fiscal year.  The adoption of FASB ASC 815-40 did not have a
material impact on our financial position, results of operation, or cash
flows. The Company adopted the provisions of
FASB ASC 808-10 Collaborative Arrangements.  A contractual arrangement
falls within the scope of FASB ASC 808-10 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 FASB
ASC 605-45 Revenue Recognition  Principal Agent Considerations.  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.  FASB
ASC 808-10 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.  FASB ASC
808-10 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 FASB ASC
808-10 did not have a material impact on our financial position, results of
operation, or cash flows.  The Company
adopted the provisions of FASB ASC 805 Business Combinations.  FASB ASC 805
significantly changed the accounting for business combinations.  Under FASB
ASC 805, 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.  FASB ASC 805 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  30   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
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.  FASB ASC 805 also includes a substantial number of new disclosure
requirements.  FASB ASC 805 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 FASB ASC 805.  Refer to Note 19 
Acquisitions. The Company adopted the
provisions of FASB ASC 810-10-65 Consolidation.  FASB ASC 810-10-65
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.  FASB ASC 810-10-65 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 FASB ASC 810-10-65 did not have a
material impact on our financial position, results of operation, or cash flows.  The Company adopted the provisions of FASB ASC
820-10 Fair Value Measurements and Disclosures.  FASB ASC 820-10
established a common definition for fair value to be applied to GAAP guidance
requiring use of fair value, established a framework for measuring fair value,
and expanded disclosure about such fair value measurements.  FASB ASC
820-10 applies to fair value measurements that are already required or permitted
by other sections of the FASB ASC, 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 sections of the FASB ASC
that fair value is the relevant measurement attribute.  Accordingly, this
section of the FASB ASC does not require any new fair value measurements.
 FASB ASC 820-10 was effective for fiscal years beginning after November
15, 2007.  Pars adoption of FASB ASC 820-10 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 FASB ASC 820-10 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
FASB ASC 820-10 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, FASB ASC 820-10 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: On October 14, 2009, Par commenced a
Modified Dutch Auction tender offer for a portion of its outstanding 2.875%
senior subordinated convertible notes due September 30, 2010.  Under the
Modified Dutch Auction procedure, Par is offering to purchase, for cash, up to
$65.0 millionaggregate principal amount of the outstanding convertible
notes.  As of October 14, 2009, there was approximately $78.6 million
aggregate principal amount of notes outstanding.  Par expects to fund the
purchase of convertible notes tendered in the tender offer with available cash
on hand.  On November 6, 2009, Par entered into
a product licensingagreement with a third
party pharmaceutical company and made an initial payment of $4 million.  A
subsequent milestone of $2 million is payable uponthe third party pharmaceutical companys demonstration of certain
manufacturing capabilities. The third
party pharmaceutical company will be responsible for manufacturing the product,
and Par will be responsible for marketing and distribution.  The parties
will share profits on any future sales.   31   ITEM 2.  MANAGEMENTS
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.  Forward-Looking Statements Certain statements in this Quarterly
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 other 2009 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.  Generally, products that we
have developed internally contribute higher gross margins than products that we
sell under agreements because 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.  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 the patent or exclusivity periods 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
those products 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. Net sales and
gross margins derived from brand pharmaceutical products follow a different
pattern.  Sellers of brand pharmaceutical products benefit from years of
being the exclusive supplier to the market due to patent protections for the
branded products.  The benefits include significantly higher gross margins
relative to sellers of generic pharmaceutical products.  However,
commercializing brand pharmaceutical products is more costly than generic
pharmaceutical products.   Sellers of brand  32   pharmaceutical
products often have increased infrastructure costs relative to sellers of
generic pharmaceutical products and make significant investments in the
development and/or licensing of these products without a guarantee that these
expenditures will result in the successful development or launch of brand
products that will prove to be commercially successful.  Just as we compete
against companies selling branded products when we sell generic products, we
confront the same competitive pressures when we sell our branded products.
 Specifically, after patent protections expire, generic products can be
sold in the market at a significantly lower cost than the branded version, and,
where available, may be required or encouraged in preference to the branded
version under third party reimbursement programs, or substituted by pharmacies
for branded versions by law.  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 nine-month periods ending October 3, 2009, our generic business
net revenues and gross margin were concentrated in a few products, including
three products that were launched subsequent to the first quarter of 2008.
 The top five generic products accounted for approximately 73% of total
consolidated revenues and approximately 50% of total consolidated gross margins
in the third quarter of 2009.  The top five generic products accounted for
approximately 78% of total consolidated revenues and approximately 53% 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 first two quarters 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 abbreviated new drug applications
(ANDA) for metoprolol, and accordingly, we are no longer the sole
distributor for those two SKUs (25mg and 50mg).  Our sales volume and unit
price for metoprolol were adversely impacted for these two SKUs during the third
quarter and we anticipate that our sales and related gross margins from the
other two SKUs (100mg and 200mg) will be negatively impacted after Watson
receives FDA approval for those two SKUs.  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, and/or other competitors could enter the market, any of which events
would also adversely impact our metoprolol revenues and gross
margins.  In addition to new competition, supply issues could also
adversely impact our future sales of metoprolol. In August 2009, we launched the
clonidine transdermal system (clonidine TDS), the generic version of

Boehringer Ingelheims Catapres TTS ®
..  The product
is manufactured by Aveva, and Par and Aveva share profits from the sales of the
product.  From launch to October 3, 2009, we were the sole generic
distributor of this product, and as of the date of this Form 10-Q, we believe we
remain the sole generic distributor of this product. 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.  From the beginning of 2009 to October 3, 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 believe we are one of two generic distributors of dronabinol.
 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 ANDA 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.  From
the beginning of 2009 to October 3, 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 us 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.  We or our strategic
partners currently have approximately 27 ANDAs pending with the FDA, which
includes 13 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.   33   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
utilizes the Megace® brand name that the company has licensed from Bristol-Myers
Squibb Company.  The remaining net book value of the trademark was $4.7
million at October 3, 2009 and will be amortized over approximately 3.5 years.
 We have promoted Megace® ES as our primary brand product from 2005 through
March 2009.  With the acquisition of Nascobal®, Strativa will focus on
marketing both Megace® ES and Nascobal®. 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.  A lawsuit was subsequently filed by the Federal Trade Commission
alleging violations of antitrust laws stemming from our court approved
settlement of the related patent litigation.  For more information
regarding the lawsuit, refer to Note 14 to the condensed consolidated financial
statements. 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 buccal tablets, which
is marketed in Europe under the brand name Loramyc®, 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.  On August 19, 2009,
we announced that the FDA accepted the NDA.  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.  We and our
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.  Due to these developments, this contract ceased to be material to
us, and on September 8, 2009, we entered into a termination and mutual release
agreement with Alfacell, which terminated our commercial rights and obligations
under the licensing agreement, in exchange for a 2% royalty on U.S. sales of any
ranpirnase product commercialized by or on behalf of Alfacell in the field of
cancer. 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 is 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  34   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 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 ($ amounts in thousands):  Three months ended

Nine months endedProduct

Oct. 3, 2009

Sept. 27, 2008

$ Change

Oct. 3, 2009

Sept. 27, 2008

$ ChangeGenericMetoprolol succinate ER (Toprol-XL®)

$161,104

$41,003

$120,101

$579,667

$123,311

$456,356Clonidine TDS (Catapres TTS®)

20,393

-

20,393

20,393

-

20,393Sumatriptan succinate injection (Imitrex®)

16,669

-

16,669

54,513

-

54,513Meclizine Hydrochloride (Antivert®)

10,687

14,869

(4,182)

29,412

21,295

8,117Dronabinol (Marinol®)

6,570

7,960

(1,390)

19,073

7,960

11,113Nateglinide (Starlix®)

3,184

-

3,184

3,184

-

3,184Cabergoline (Dostinex®)

3,056

5,054

(1,998)

9,931

17,648

(7,717)Methimazole (Tapazole®)

3,039

2,818

221

7,433

8,041

(608)Cholestyramine Powder (Questran®)

2,960

2,491

469

7,318

6,831

487Propranolol HCl ER (Inderal LA®)

2,788

4,292

(1,504)

9,998

13,216

(3,218)Various amoxicillin products (Amoxil®)

1,275

2,521

(1,246)

1,648

11,310

(9,662)Fluticasone (Flonase®)

518

6,345

(5,827)

5,910

34,636

(28,726)Other product related revenues

1,341

1,560

(219)

4,005

4,614

(609)Other

35,858

40,470

(4,612)

87,205

103,306

(16,101)Total Generic Revenues

$269,442

$129,383

$140,059

$839,690

$352,168

$487,522StrativaMegace® ES

$19,085

$16,942

$2,143

$49,675

$56,737

($7,062)Nascobal® Nasal Spray

3,775

-

3,775

5,973

-

5,973Other product related revenues

2,500

2,642

(142)

7,500

7,927

(427)Total Strativa Revenues

$25,360

$19,584

$5,776

$63,148

$64,664

($1,516)   Three months endedPercentage of Total
Revenues($
in thousands)

October 3, 2009

September 27, 2008

$ Change

% Change

October 3, 2009

September 27,
2008Revenues:Generic

$269,442

$129,383

$140,059

108.3%

91.4%

86.9%Strativa

25,360

19,584

5,776

29.5%

8.6%

13.1%Total revenues

$294,802

$148,967

$145,835

97.9%

100.0%

100.0%  The increase
in generic segment revenues in the third quarter of 2009 was primarily due to
the exclusivity on two SKUs  (packaging sizes of 100mg and 200mg) of
metoprolol and reduced competition for sales of two other SKUs (25mg and 50mg)
of metoprolol relative to the prior year quarter.  The dollar amount
increase of metoprolol revenues for the third quarter of 2009 can be attributed
to volume of units sold (12% of total dollar increase) with the remainder of the
dollar amount increase due to price.  We launched clonidine on August 19,
2009 as the sole generic distributor.  Previously, we also launched various
sumatriptan SKUs in the fourth quarter of 2008.  Throughout the third
quarter of 2009, we remained the sole distributor of three sumatriptan SKUs with
one  35   competitor
for a single SKU.  These increases were offset by decreases in meclizine
HCl tablets due to price and by lower sales of fluticasone, as the supply
agreement with GlaxoSmithKline plc was not extended and we had sold all
available inventories as of October 3, 2009. Net sales of distributed products,
which consist of products manufactured under contract and licensed products,
were $224.0 million or 77% of our total product revenues for the three month
period ended October 3, 2009 and $78.4 million or 53% of our total product
revenues for the three month period ended September 27, 2008.  The increase
in the percentage is primarily driven by higher sales of metoprolol, clonidine
and sumatriptan.  We are substantially dependent upon distributed products
for our overall sales and any inability by our suppliers to meet demand could
adversely affect our future results of operations.  The increase in the Strativa segment
revenues in the third quarter of 2009 was primarily due to the acquisition of
Nascobal® Nasal Spray and the associated relaunch of the product in
the second quarter of 2009 by Strativa.  Megace® ES revenues benefitted
from the additional week in the third quarter of 2009 as compared to the 13
weeks in third quarter of 2008.  Nine months endedPercentage of Total
Revenues($
in thousands)

October 3, 2009

September 27, 2008

$ Change

% Change

October 3, 2009

September 27,
2008Revenues:Generic

$839,690

$352,168

$487,522

138.4%

93.0%

84.5%Strativa

63,148

64,664

(1,516)

(2.3%)

7.0%

15.5%Total revenues

$902,838

$416,832

$486,006

116.6%

100.0%

100.0%  The increase in generic segment
revenues for the nine months ended October 3, 2009 was primarily due to the
exclusivity on two SKUs  (packaging sizes of 100mg and 200mg) of metoprolol
and reduced competition for sales of two other SKUs (25mg and 50mg) of
metoprolol relative to the prior year quarter.  The dollar amount increase
of metoprolol revenues for the third quarter of 2009 can be attributed to volume
of units sold (22% of total dollar increase) with the remainder of the dollar
amount increase due to price.  We launched various sumatriptan SKUs in the
fourth quarter of 2008.  Throughout the nine month period of 2009, we
remained the sole distributor of three sumatriptan SKUs with one competitor for
a single SKU.  We also launched clonidine on August 19, 2009 as the sole
generic distributor.  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.
 These increases were offset by lower sales of fluticasone, as the supply
agreement with GlaxoSmithKline plc was not extended and we had sold all
available inventories as of October 3, 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.  Net sales of
distributed products, which consist of products manufactured under contract and
licensed products, were $715.0 million or 80% of our total product revenues for
the nine month period ended October 3, 2009 and $231.6 million or 56% of our
total product revenues for the nine month period ended September 27, 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.  We currently expect that the
Megace® ES product returns rate for 2010 will approximate the 2009
returns rate.  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-month
to four-month period, on average.   36   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. Our gross revenues for the nine month
periods ended October 3, 2009 and September 27, 2008 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:  Percentage of Gross
Revenues



Percentage of Gross
RevenuesOctober 3, 2009($
thousands)


September 27, 2008($
thousands)Gross revenues

$1,227,622



$830,725Chargebacks

(126,973)

10.3%

(286,974)

34.5%Rebates and incentive programs

(91,747)

7.5%

(65,435)

7.9%Returns

(21,933)

1.8%

(9,181)

1.1%Cash discounts and other

(63,548)

5.2%

(34,746)

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

(20,583)

1.7%

(17,557)

2.1%Total deductions

(324,784)

26.5%

(413,893)

49.8%Total revenues

$902,838

73.5%

$416,832

50.2%  The total
gross-to-net sales adjustments as a percentage of gross sales decreased for the
nine months ended October 3, 2009, compared to the nine months ended September
27, 2008, primarily due to a significant reduction of chargebacks.  This
decrease was driven primarily by the increase in metoprolol sales during the
first nine months of 2009.  The metoprolol sales increase was driven by
limited 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 nine months ended
October 3, 2009 for two SKUs (100mg and 200mg) and with reduced competition for
two other SKUs (25mg and 50mg), 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.
 Refer to the September 27, 2008 accounts receivable reserves activity
table below for details of the prior period returns allowance. The following tables summarize the
activity for the nine months ended October 3, 2009 and September 27, 2008 in the
accounts affected by the estimated provisions described above ($ amounts in
thousands):  For the Nine Month Period Ended
October 3, 2009Accounts receivable reserves

Beginning balance

Provision recorded for current
period sales

(Provision) reversal recorded for
prior period sales

Credits processed

Ending balanceChargebacks

($32,738)

($126,538)

($435)
(1)
$146,466

($13,245)Rebates and incentive programs

(27,110)

(91,904)

157

75,513

(43,344)Returns

(38,128)

(22,010)

77

20,012

(40,049)Cash discounts and other

(13,273)

(63,548)

-

59,409

(17,412)Total

($111,249)

($304,000)

($201)

$301,400

($114,050)Accrued liabilities(2)

($21,912)

($22,780)

$2,197
(5)
$14,820

($27,675)  37      For the Nine Month Period Ended
September 27, 2008Accounts receivable reserves

Beginning balance

Provision recorded for current
period sales

(Provision) reversal recorded for
prior period sales

Credits processed

Ending balanceChargebacks

($46,006)

($286,435)

($539)
(1)
$302,642

($30,338)Rebates and incentive programs

(42,859)

(63,864)

(1,571)
(3)
82,014

(26,280)Returns

(47,102)

(13,049)

3,868
(4)
16,610

(39,673)Cash discounts and other

(16,158)

(35,095)

349

38,525

(12,379)Total

($152,125)

($398,443)

$2,107

$439,791

($108,670)Accrued liabilities(2)

($17,684)

($17,365)

($192)

$12,129

($23,112)  (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 nine month
period ended September 27, 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 nine month period ended September 27, 2008. (5) The change in
accrued liabilities recorded for prior period sales is principally comprised of
a $1.4 million credit from the Medicaid drug rebate program related to a
positive settlement based upon the finalization of a negotiation in the third
quarter of 2009 pertaining to prior years.  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 our 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.   38   Gross
Margin We consider
gross margin to be a key performance indicator of our profitability.  Three months endedPercentage of Total
RevenuesOctober 3,

September 27,



October 3,

September 27,($ in thousands)

2009

2008

$ Change

2009

2008Gross margin:Generic

$72,934

$35,932

$37,002

27.1%

27.8%Strativa

19,204

15,530

3,674

75.7%

79.3%Total gross margin

$92,138

$51,462

$40,676

31.3%

34.5%  Our increase
in gross margin dollars for the three months ended October 3, 2009 is primarily
due to higher sales of metoprolol coupled with the launches of sumatriptan and
clonidine.  These three products, along with meclizine, dronabinol,
propranolol, nateglinide and cabergoline, totaled approximately $53 million
gross margin dollars and a margin percentage of approximately 24% for the third
quarter of 2009.  Gross margin related to all other revenues (approximately
$20 million and a margin percentage of approximately 44%) 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, the third
quarter launch of risperidone that also 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
increased for the three months ended October 3, 2009, primarily due to the
acquisition of Nascobal® Nasal Spray and the associated relaunch of
the product in the second quarter of 2009.  Megace® ES gross margin dollars
benefitted from the additional week in the third quarter of 2009 as compared to
the 13 weeks in third quarter of 2008.   Strativas gross margin
percentage deteriorated due mainly to lower margin Nascobal® Nasal
Spray sales.  Nine months endedPercentage of Total
RevenuesOctober 3,

September 27,



October 3,

September 27,($ in thousands)

2009

2008

$ Change

2009

2008Gross margin:Generic

$195,666

$75,291

$120,375

23.3%

21.4%Strativa

46,949

50,800

(3,851)

74.3%

78.6%Total gross margin

$242,615

$126,091

$116,524

26.9%

30.2%  Our increase in gross margin dollars
for the nine months ended October 3, 2009 is primarily due to higher sales of
metoprolol coupled with the launches of sumatriptan, clonidine and dronabinol
and higher sales of meclizine.  These five products, along with propranolol
and cabergoline, totaled approximately $143 million gross margin dollars and a
margin percentage of approximately 20% for the first three quarters of 2009.
 Gross margin related to all other revenues (approximately $53 million and
a margin percentage of approximately 45%) benefited from the generic segments
resizing which began in the fourth quarter of 2008 and included the trimming of
the generic product portfolio to retain only those marketed products that
deliver acceptable gross margins, royalties, the first quarter launch of
alprazolam that has a high gross margin percentage and additional tramadol
business due to loss of a competitor that had to exit the market during the
second quarter of 2009. Strativa gross
margin dollars decreased for the nine months ended October 3, 2009, primarily
due to lower sales of Megace® ES.  The gross margin percentage of
Nascobal® Nasal Spray was negatively impacted by purchase price
adjustments associated with inventory acquired and sold in the second quarter of
2009.   39   Operating
Expenses  Research and Development  Three months endedPercentage of Total Revenues($ in thousands)

October 3, 2009

September 27, 2008

$ Change

% Change

October 3, 2009

September 27, 2008Research and
development:Generic

$6,034

$11,111

($5,077)

(45.7%)

2.2%

8.6%Strativa

424

2,673

(2,249)

(84.1%)

1.7%

13.6%Total research
and development

$6,458

$13,784

($7,326)

(53.1%)

2.2%

9.3%  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 began to significantly
reduce our internal Generic research and development effort in the first quarter
of 2009.  These actions led to reduced third quarter 2009 expenditures of
$5.1 million driven by a $1.8 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.  Strativa: The decrease in Strativa research and
development expenditures principally reflects the non-recurrence of: · a
$1.25 million development milestone to MonoSol Rx related to the orally
dissolving film strips (ODFS) formulation of ondansetron; and · approximately
$1.1 million of costs related to the development of ZensanaTM, an
oral spray formulation of ondansetron.  Nine months endedPercentage of Total Revenues($ in thousands)

October 3, 2009

September 27, 2008

$ Change

% Change

October 3, 2009

September 27, 2008Research and
development:Generic

$16,896

$36,143

($19,247)

(53.3%)

2.0%

10.3%Strativa

2,671

10,754

(8,083)

(75.2%)

4.2%

16.6%Total research
and development

$19,567

$46,897

($27,330)

(58.3%)

2.2%

11.3%  Generic: As cited above, we significantly
reduced our internal Generic research and development spending during 2009.
 Expenditures were reduced by $19.2 million driven by a $6.7 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: 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 U.S. commercialization rights to Onconase®.  On
September 8, 2009, we entered into a termination and mutual release agreement
with Alfacell, which terminated our commercial rights and obligations under the
licensing agreement, in exchange for a 2% royalty on U.S. sales of any Onconase®
product commercialized by or on behalf of Alfacell in the field of cancer; · the
non-recurrence of approximately $2.3 million of costs related to the development
of ZensanaTM, an oral spray formulation of ondansetron, which was
acquired in the latter half of 2007; and · lower net
milestone payments to MonoSol Rx relating to the orally dissolving film strips
(ODFS) formulation of ondansetron as a $1.0 million milestone payment triggered
by MonoSol Rx in January 2009 upon successful completion of bioequivalence
reports for ODFS was more than offset by the non-recurrence of $2.5 million of
development milestones that were paid during the first nine months of 2008.
 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 $3.5 million for the completion
of certain milestones; the next milestone payment is payable upon FDA approval
of the NDA.  40   These
reductions were slightly tempered by FDA filing fees associated with the New
Drug Application for ODFS formulation of ondansetron incurred in the second
quarter of 2009.  Although there can be no such
assurance, total research and development expenses for 2009, including payments
to be made to unaffiliated companies, and expected milestone payments under
currently executed brand licensing arrangements (refer to Notes to Condensed
Consolidated Financial Statements  Note 17  Research and Development
Agreements) are expected to decrease by approximately 50% to 60% from 2008.  Selling, General and Administrative
Expenses  Three months endedPercentage of Total Revenues($ in thousands)

October 3, 2009

September 27, 2008

$ Change

% Change

October 3, 2009

September 27, 2008Selling, general
and administrative:Generic

$20,643

$18,310

$2,333

12.7%

7.7%

14.2%Strativa

24,663

12,354

12,309

99.6%

97.3%

63.1%Total selling,
general and administrative

$45,306

$30,664

$14,642

47.7%

15.4%

20.6%   The net increase in SG&A
expenditures for the 3-month period principally reflects: · an increase of $9.3 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 pipeline products; · higher estimated
annual bonus costs of $2.9 million due to our year-to-date 2009 annual operating
results being significantly better than the year-to-date 2008 operating results
were at this time; · approximately $0.6
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 · $0.5 million of
higher legal expenditures.  Nine months endedPercentage of Total Revenues($ in thousands)

October 3, 2009

September 27, 2008

$ Change

% Change

October 3, 2009

September 27, 2008Selling, general
and administrative:Generic

$59,471

$58,578

$893

1.5%

7.1%

16.6%Strativa

62,912

40,123

22,789

56.8%

99.6%

62.0%Total selling,
general and administrative

$122,383

$98,701

$23,682

24.0%

13.6%

23.7%  The net increase in SG&A
expenditures for the 9-month period principally reflects: · an increase of $16.8 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; · higher estimated
bonus costs of $4.4 million due to our year-to-date 2009 annual operating
results being significantly better than the year-to-date 2008 operating results
were at this time; and · approximately $2.0
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).  Settlements and Loss Contingencies, net  Three months ended

Nine months endedOctober 3,

September 27,

October 3,

September 27,($ in thousands)

2009

2008

2009

2008Settlements and loss contingencies, net

$62

$4,592

($3,253)

$4,592  Settlements
and loss contingencies, net of $3.3 million during the nine months ended October
3, 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  41   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, we entered into a settlement agreement
and release with Pentech 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. During the
three months ended September 27, 2008, the Company recorded a loss contingency
of approximately $4.6 million in connection with Companys Department of
Veterans Affairs contract (refer to Notes to Condensed Consolidated Financial
Statements   Note 14 - Commitments, Contingencies and Other Matters),
which represented its estimate of the loss related to an expected settlement of
this matter, including interest. Restructuring
Costs Three months ended

Nine months endedOctober 3,

September 27,

October 3,

September 27,($ in thousands)

2009

2008

2009

2008Restructuring costs

($230)

$ -

$1,252

$ -  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 nine months 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.  These charges
were somewhat tempered during the three months ended October 3, 2009, by a
revision in estimate of certain termination benefit costs. The following
table summarizes the restructuring costs in the first nine months 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 October 3, 2009 ($ amounts in thousands):  Restructuring Activities

Initial Charge

Liabilities at December 31,
2008

Cash Payments

Additional Charges

Reversals, Reclass or
Transfers

Liabilities at October 3,
2009Severance and employee
    benefits to be paid in cash

$6,254

$6,254

$5,080

$1,309

($300)

$2,183Severance related to
share-   based compensation

3,291

-

-

-

-

-Asset impairments and other

5,907

60

243

243

-

60Total

$15,452

$6,314

$5,323

$1,552

($300)

$2,243  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
certain assets from 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.   42   Gain on Sale of Product
Rights and other  Three months ended

Nine months endedOctober 3,

September 27,

October 3,

September 27,($ in thousands)

2009

2008

2009

2008Gain on sale of product rights and other

$1,835

$2,200

$3,200

$4,325  During the three-month periods ended
October 3, 2009 and September 27, 2008, we recognized a gain on the sale of
product rights of $1.8 million and $2.2 million, related to the sale of multiple ANDAs.  During the nine
month periods ended October 3, 2009 and September 27, 2008, we recognized a gain
on the sale of product rights of $3.2 million and $3.7 million, respectively,
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 March 29, 2008,
when our obligations were fulfilled related to this agreement.  Operating Income (Loss)  Three months ended

Nine months ended($ in thousands)

October 3, 2009

September 27, 2008

$ Change

October 3, 2009

September 27, 2008

$ ChangeOperating income (loss):Generic

$48,260

$4,117

$44,143

$124,500

($20,323)

$144,823Strativa

(5,883)

505

(6,388)

(18,634)

549

(19,183)Total operating income (loss)

$42,377

$4,622

$37,755

$105,866

($19,774)

$125,640  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

Nine months endedOctober 3,

September 27,

October 3,

September 27,($ in thousands)

2009

2008

2009

2008Gain on bargain purchase

$ -

$ -

$3,021

$ -  During the
nine-month period ended October 3, 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 FASB ASC 805.  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

Nine months endedOctober 3,

September 27,

October 3,

September 27,($ in thousands)

2009

2008

2009

2008Gain on extinguishment of senior
    subordinated convertible notes

$1,615

$ -

$2,364

$ -  During the third quarter of 2009, we
repurchased senior subordinated convertible notes that were to mature on
September 30, 2010 in the aggregate principal amount of $49.6 million for
approximately $47.6 million, including accrued interest.  The repurchase
also resulted in the write-off of approximately $0.3 million of deferred
financing costs in the third quarter of 2009.  Par recorded a gain of
approximately $1.6 million in the third quarter of 2009 related to this debt
extinguishment.  The notes bore interest at an annual rate of 2.875%.
 As of October 3, 2009, the outstanding notes had an aggregate principal
amount of $78.6 million.  In June 2009, we repurchased senior
subordinated convertible notes in the aggregate principal amount of $11.3
million for approximately $10.8 million, including accrued interest.  The
repurchase also resulted in the write-off of approximately $0.07 million  43   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

Nine months endedOctober 3,

September 27,

October 3,

September 27,($ in thousands)

2009

2008

2009

2008Interest income

$504

$2,285

$2,328

$7,428  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, the
purchase price related to our acquisition of Nascobal® and certain assets from MDRNA,
and the repurchase of senior subordinated convertible notes.  Interest Expense  Three months ended

Nine months endedOctober 3,

September 27,

October 3,

September 27,($ in thousands)

2009

2008

2009

2008Interest expense

($1,773)

($3,579)

($6,935)

($10,633)   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 $121.4 million during October 2008, March 2009, June 2009, and the third
quarter of 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 Accounting Standards
Codification (ASC) 470-20 Debt - Debt with Conversion and Other Options and
restated third quarter 2008 interest expense to $3.6 million.  Income Taxes  Three months ended

Nine months endedOctober 3,

September 27,

October 3,

September 27,($ in thousands)

2009

2008

2009

2008Provision for income taxes

$16,209

$196

$39,833

($7,298)Effective tax rate

38%

24%

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).  Discontinued Operations  Three months ended

Nine months endedOctober 3,

September 27,

October 3,

September 27,($ in thousands)

2009

2008

2009

2008Gain from discontinued operations

$ -

$ -

$ -

$505Provision for income taxes

176

150

528

863(Loss) gain from discontinued operations

($176)

($150)

($528)

($358)  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  44   proceeds of the sale
transaction.  This $0.5 million has been classified as discontinued
operations on the condensed consolidated statement of operations for the nine
month period ended September 27, 2008.   FINANCIAL CONDITION  Liquidity and Capital Resources  Nine months endedOctober 3,($ in thousands)

2009Cash and cash equivalents at beginning of
period

$170,629Net cash provided by operating activities

69,598Net cash used in investing activities

(7,794)Net cash used in financing activities

(61,747)Net increase in cash and cash equivalents

$57Cash and cash equivalents at end of period

$170,686  Cash provided by operations for the
nine months ended October 3, 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 nine month period ended October 3, 2009 mainly represented the
repurchase of approximately $60 million (face value) of our outstanding senior
subordinated convertible notes due September 2010.  Our working capital, current assets
minus current liabilities, of $243 million at October 3, 2009 increased
approximately $39 million from $203 million at December 31, 2008, which
primarily reflects the repurchases of our senior subordinated convertible notes
during 2009.  The working capital ratio, which is calculated by dividing
current assets by current liabilities, was 2.12x at October 3, 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. Sources of Liquidity Our primary
source of liquidity is cash received from customers.  In the third quarter
of 2009, we collected approximately $460 million with respect to net product
sales as compared to approximately $125 million in the third quarter of 2008.
 For the first 3 quarters of 2009, we collected approximately $897 million
with respect to net product sales as compared to approximately $415 million in
the comparable period in 2008.  The increase can be attributed to our
improved sales performance in the third quarter and the first 3 quarters 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 fewer 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
13 first-to-file and/or first-to-market opportunities (a total of 27 ANDAs
pending with the FDA) and our Strativa pipeline had 2 brand drugs in active
development as of October 3, 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.  45   · Cash paid for inventory purchases was
approximately $68 million for the third quarter of 2009 as compared to
approximately $36 million for prior year quarter.  Cash paid for inventory
purchases was approximately $162 million for the first 3 quarters of 2009 as
compared to approximately $107 million for the first 3 quarters of 2008.
 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 $327 million for the third quarter of 2009 as
compared to approximately $80 million for the prior year quarter.  Cash
paid to all other suppliers and third parties was approximately $590 million for
the first 3 quarters of 2009 as compared to approximately $240 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 $17 million for the third quarter of 2009 as compared to
approximately $17 million for the prior year quarter.  Cash compensation
paid to employees was approximately $47 million for the first 3 quarters of 2009
as compared to approximately $57 million for the prior year period.  The
decrease for this 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 January 2009
related to 2008 operating performance as compared to bonus payments in January
2008 related to 2007 operating performance. · The payment of our outstanding senior
subordinated convertible notes ($78.6 million principal amount outstanding at
October 3, 2009) by September 2010 or sooner.  Subsequent to October 3,
2009, we commenced a Modified Dutch Auction tender offer for up to $65 million
of our outstanding 2.875% senior subordinated convertible notes.  Refer to
Subsequent Events below for further details. · 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 $5.0 million, including interest, as
of October 3, 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 October 3,
2009, the total potential future payments that ultimately could be due under
existing agreements related to products in various stages of development were
approximately $31 million. This amount is exclusive of contingencies tied to the
achievement of sales milestones, which will be funded through future revenue
streams. · Normal course payables due to
distribution agreement partners of approximately $54 million as of October 3,
2009 related primarily to amounts due under profit sharing agreements.  We
expect to pay substantially all of the $54 million during the first two months
of the fourth 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 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 October 3, 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 $40 million of available for sale debt
securities classified as current assets on the condensed consolidated balance
sheet as of October 3, 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,  46   enter into product license
arrangements, potentially acquire other complementary businesses and products,
and for general corporate purposes. Contractual Obligations as of
October 3, 2009 The dollar
values of our material contractual obligations and commercial commitments as of
October 3, 2009 were as follows, $ amounts in thousands:  Amounts Due by PeriodObligation

Total Monetary

2009

2010 to

2012 to

2014 andObligations


2011

2013

thereafter

OtherOperating leases

$9,589

$1,217

$6,682

$1,337

$353

$ -Convertible notes (1)

78,551

-

78,551

-

-

-Interest payments (2)

2,258

566

1,692

-

-

-Purchase obligations (3)

70,238

70,238

-

-

-

-Long-term tax liability (4)

42,866

-

-

-

-

42,866Severance payments

2,704

867

1,837

-

-

-Product development obligation (5)

5,000

-

5,000

-

-

-Other

461

461

-

-

-

-Total obligations

$211,667

$73,349

$93,762

$1,337

$353

$42,866  (1) Our senior subordinated convertible
notes mature on September 30, 2010, unless earlier converted or repurchased.
 Subsequent to October 3, 2009, we commenced a Modified Dutch Auction
tender offer for up to $65 million of our outstanding 2.875% senior subordinated
convertible notes due September 30, 2010.  Refer to Subsequent Events
below for further details. (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 or repurchased. (3) Purchase
obligations consist of both cancelable and non-cancelable inventory and
non-inventory items.  Approximately $32 million of the total purchase
obligations at October 3, 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 FASB ASC 740-10 Income Taxes
represents an unrecognized tax benefit.  An unrecognized tax benefit
is a liability that represents a potential future obligation to the taxing
authorities.  As of October 3, 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 thereafter such tax payments
may occur.  We believe that it is reasonably possible that approximately
$14 million of our existing unrecognized tax positions may be recognized within
the next twelve months as a result of settlements or a lapse of the statute of
limitations.For presentation on the
table above, we included the related long-term liability in the Other column. (5) In accordance with an existing supply
agreement, we committed to funding a portion of the third partys plant
expansion to enable the third party to increase manufacturing capacity to
accommodate the production of a collaboration product, currently in development,
upon FDA approval.  We will have limited rights to the manufacturing
capacity at the third partys plant in proportion to our investment whether or
not the collaboration product ever receives FDA approval.  The total cost
of the commitment will not exceed $5 million.  The funds are expected to be
paid in 2010.  Financing  At October 3,
2009, our total outstanding short and long-term debt, including the current
portion, had a face value of $78.6 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.  Subsequent to October 3, 2009, we commenced a Modified
Dutch Auction tender offer for up to $65 million of our outstanding 2.875%
senior subordinated convertible notes due September 30, 2010.  Refer to
Subsequent Events below for further details In conjunction with the adoption of
FASB ASC 470-20, 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 FASB ASC 470-20 for  47   our type of convertible debt
instrument is that the equity component is included in the additional paid-in
capital section of stockholders equity on our 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.  FASB ASC 470-20 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 October 3, 2009, our condensed consolidated balance
sheet reflects the debt amount of $74.4 million, a related deferred tax
liability amount of $1.6 million and an equity component of $2.6 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
FASB ASC 470-20.  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 On October 14, 2009, we commenced a
Modified Dutch Auction tender offer for a portion of our outstanding 2.875%
Senior Subordinated Convertible Notes due September 30, 2010.  Under the
Modified Dutch Auction procedure, we are offering to purchase, for cash, up to
$65.0 millionaggregate principal amount of the outstanding convertible
notes.  As of October 14, 2009, there was approximately $78.6 million
aggregate principal amount of notes outstanding.  We expect to fund the
purchase of convertible notes tendered in the tender offer with available cash
on hand. On November 6,
2009, Par entered into a product licensingagreement with a third party pharmaceutical company and made an initial
payment of $4 million.  A subsequent milestone of $2 million is payable
uponthe third party pharmaceutical
companys demonstration of certain manufacturing capabilities. The third party pharmaceutical company
will be responsible for manufacturing the product, and Par will be responsible
for marketing and distribution.  The parties will share profits on any
future sales.    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 October 3, 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, which 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 $0.2 million on an annual basis. The following
table summarizes the carrying value of available for sale securities that
subject Par to market risk at October 3, 2009 and December 31, 2008 ($ amounts
in thousands):  October 3,

December 31,2009

2008Securities issued by government agencies
$16,405

$41,541Debt securities issued by various state and local
municipalities and agencies
9,771

28,585Other debt securities
13,591

24,320Marketable equity securities available for
sale
1,600

600Total
$41,367

$95,046  Senior Subordinated
Convertible Notes The outstanding face value of our
Senior Subordinated Convertible Notes on October 3, 2009 was $78.6 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
October 3, 2009, the Senior Subordinated Convertible Notes had a quoted market
value of approximately $77.0 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. 48      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 October 3, 2009.
 Based on that evaluation, our management, including our CEO and the CFO,
concluded that our disclosure controls and procedures were effective as of
October 3, 2009.   Changes in Internal Control
over Financial Reporting  There have
been no changes identified during the quarter ended October 3, 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  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
Exchange Act , by issuing false and misleading statements concerning Pars
financial condition and results of operations.  The class actions are
pending in the U.S. District Court for the 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.  On September 30,
2009, the Court granted the motion to dismiss all claims as against Kenneth
Sawyer but denied the motion as to the Company, Dennis OConnor, and Scott
Tarriff.  The time for the Company and Messrs. OConnor and Tarriff (the
Individual Defendants) to file answers expires on October 30, 2009.  Par
and the Individual Defendants intend to vigorously defend the consolidated class
action.  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.  On July 10, 2008, the PTO rejected with finality
all claims pending in both the 392 and 981 patents.  On September 28,
2009, the USPTO Board of Appeals affirmed the Examiners rejection of all claims
in the 981 patent.  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 (the Paddock
litigation).  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 the testosterone  49     1% gel, and
the Paddock litigation 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. The Bureau
of Competition for the Federal Trade Commission (FTC) is investigating whether
the settlement of the Paddock 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 Central District of California alleging violations of
antitrust laws stemming from Pars court-approved settlement in the Paddock
litigation.  In February 2009, Meijer Distribution, Inc., Rochester Drug
Co-Operative, Inc. and Louisiana Wholesale Drug Co., Inc. each filed class
action complaints in the same district court.  On April 9, 2009, the U.S.
District Court for the Central District of California granted Pars motion to
transfer the FTC lawsuit, in the three aforementioned class action suits to the
U.S. District Court for the Northern District of Georgia.  In April 2009
the Fraternal Order of Police, Fort Lauderdale Lodge 31 Insurance Trust Fund and
Raymond Scurto filed a class action complaint naming Par in the U.S. District
Court for the District of New Jersey alleging antitrust violations.  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.  On July 20, 2009, Par filed a motion to dismiss the FTCs case
and on September 1, 2009, filed a motion to dismiss the private plaintiffs
cases in the U.S. District Court for the Northern District of Georgia.  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, Propafenone HCl SR capsules.  Par has
answered and counterclaimed denying Reliants infringement allegations, and
asserted 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 and October 24, 2007, the Complaint was
amended to include claims of infringement of the 887 patent by Pars 100 mg and
300 mg extended release tablets containing tramadol hydrochloride, respectively.
On April 22, 2009, Pars bench trial in the U.S. District Court of Delaware
concluded and Par filed post-trial briefs on May 23, 2009 and replies on June
15, 2009.   On August 14, 2009, the District Court ruled in favor of
Par on the issue of invalidity, while ruling in favor of plaintiffs on the
issues of infringement and inequitable conduct.  On September 3, 2009,
plaintiffs filed their notice of appeal to the Court of Appeals for the Federal
Circuit while Par filed its notice of cross appeal on September 14, 2009.
 Par intends to vigorously prosecute its appeal.  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 (the 874 patent) and 5,716,988 (the 988 patent) 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.  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 September
10, 2009, the Court of Appeals for the Federal Circuit reversed the New Jersey
District Court and remanded the case for further proceedings.  On September
24, 2009, Sanofi-Aventis filed a motion for preliminary injunction against
defendants who entered the market following the New Jersey District Courts
summary judgment ruling.  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 counterclaim 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.  50     On October 1, 2007, Elan
Corporation, PLC (Elan) filed a lawsuit against Par and its development
partners, 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 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.  On February 20, 2008,
the judge in the Delaware litigation consolidated four related cases pending in
Delaware. 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.  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 the Patent 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 were consolidated for all purposes.  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.  Par filed its proposed findings of fact
and conclusions of law with the Delaware court on 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.  On September 11, 2009, plaintiffs filed a motion for summary
judgment in the Delaware District Court.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.
(Pozen) 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 (GSK) 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.  On
August 20, 2009, defendants entered into covenants-not-to-sue on the patents
covering nateglinide oral tablets and Par filed a notice of dismissal in the
district court on August 21, 2009.  On April 29, 2009, Pronova BioPharma
ASA (Pronova) 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 filed an Answer May 19, 2009 and the court has scheduled a
Markman hearing for October 22, 2010 and a two-week bench trial for March 28,
2011.  Par intends to defend this action vigorously and pursue its defenses
and counterclaims against Pronova.  On July 1, 2009, Alcon Research Ltd.
(Alcon) 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;
and 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 filed an Answer on August 21, 2009.
 Par intends to defend this action vigorously and pursue its defenses and
counterclaims against Alcon.  51     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, 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 called upon to do so. Department
of Justice Matter  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. Other  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 contract with the
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 FASB ASC 450-20 Contingencies  Loss 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.
Pars estimate of the probable loss is approximately $5.0 million, including
interest, which has been accrued as of October 3, 2009.  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.    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.  52      ITEM 2.  UNREGISTERED SALES OF EQUITY SECURITIES
AND USE OF PROCEEDS Issuer Purchases of Equity
Securities(1) Quarter Ending October
3, 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)June
28, 2009 through August 1, 2009

-

N/A

-

-August
2, 2009 through August 29, 2009

7,113

N/A

-

-August
30, 2009 through October 3, 2009

2,190

N/A

-

2,044,069Total

9,303

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 October 3, 2009.  The
repurchase program has no expiration date. (2) The total number of shares purchased
represents 9,303 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 $21.31 at October 2, 2009.    ITEM
6.  EXHIBITS  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).   53     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:
 November 6, 2009 /s/ Lawrence A.
Kenyon Lawrence A. Kenyon Executive Vice
President and Chief Financial Officer    54   EXHIBIT
INDEX   Exhibit
Number Description  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).    55