<PAGE>

                                 UNITED STATES
                      SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C. 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 September 30, 2000

                        Commission File Number 1-10827

                        PHARMACEUTICAL RESOURCES, INC.
            (Exact name of registrant as specified in its charter)


     NEW JERSEY                                         22-3122182
     (State or other jurisdiction of                    (I.R.S. Employer
     incorporation or organization)                   Identification Number)


     One Ram Ridge Road, Spring Valley, New York                10977
       (Address of principal executive offices)              (Zip Code)


      Registrant's telephone number, including area code: (845) 425-7100



         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 twelve 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. Yes  X    No
                                             -----    -----
                                  29,644,870

     Number of shares of Common Stock outstanding as of November 10, 2000.

         This is page 1 of 19 pages. The exhibit index is on page 18.
<PAGE>

                         PART I. FINANCIAL INFORMATION
                         ITEM 1. FINANCIAL STATEMENTS

                        PHARMACEUTICAL RESOURCES, INC.
                          CONSOLIDATED BALANCE SHEETS
                       (In Thousands, Except Share Data)

<TABLE>
<CAPTION>
                                                                             September 30,           December 31,
                                                                                 2000                   1999
                           ASSETS                                             (Unaudited)             (Audited)
                           ------                                             -----------             ---------
<S>                                                                              <C>                   <C>
Current assets:
  Cash and cash equivalents                                                        $353                   $222
  Accounts receivable, net of allowances of
  $2,994 and $2,559                                                              20,982                 17,528
  Inventories                                                                    20,712                 19,903
  Prepaid expenses and other current assets                                       3,153                  4,140
                                                                                -------                -------
    Total current assets                                                         45,200                 41,793

Property, plant and equipment, at cost less
 accumulated depreciation and amortization                                       23,474                 22,681

Deferred charges and other assets                                                 4,251                  3,604

Non-current deferred tax benefit, net                                            14,608                 14,608
                                                                                -------                -------
   Total assets                                                                 $87,533                $82,686
                                                                                =======                =======


           LIABILITIES AND SHAREHOLDERS' EQUITY
           ------------------------------------
Current liabilities:

  Current portion of long-term debt                                                $199                   $238
  Short-term debt                                                                11,670                  4,398
  Accounts payable                                                               10,518                 12,718
  Accrued salaries and employee benefits                                          1,666                  1,507
  Accrued expenses and other current liabilities                                  2,578                  1,711
                                                                                -------                -------
     Total current liabilities                                                   26,631                 20,572

Long-term debt, less current portion                                                932                  1,075

Accrued pension liability                                                           700                    700

Shareholders' equity:
  Common Stock, par value $.01 per share; authorized 90,000,000 shares;
    issued and outstanding 29,641,475 and 29,562,025 shares                         296                    296
  Additional paid in capital                                                     89,439                 89,003
  Accumulated deficit                                                           (30,199)               (28,694)
  Additional minimum liability related to defined benefit pension plan             (266)                  (266)
                                                                                -------                -------
    Total shareholders' equity                                                   59,270                 60,339
                                                                                -------                -------
    Total liabilities and shareholders' equity                                  $87,533                $82,686
                                                                                =======                =======
</TABLE>

       The accompanying notes are an integral part of these statements.

                                       2
<PAGE>

                        PHARMACEUTICAL RESOURCES, INC.
         CONSOLIDATED STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT
                   (In Thousands, Except Per Share Amounts)
                                  (Unaudited)

<TABLE>
<CAPTION>

                                                         Nine Months Ended                 Three Months Ended
                                                    -------------------------           ------------------------
                                                    September 30,   October 2,         September 30,   October 2,
                                                        2000           1999                2000           1999
                                                      --------       --------            --------       --------
<S>                                                  <C>            <C>                 <C>            <C>
Net sales                                              $61,289        $60,692             $20,436        $19,317
Cost of goods sold                                      46,101         48,347              15,273         15,247
                                                      --------       --------            --------       --------
       Gross margin                                     15,188         12,345               5,163          4,070

Operating expenses:
   Research and development                              5,334          4,755                 879          2,038
   Selling, general and administrative                  11,205          9,328               3,845          2,862
                                                      --------       --------            --------       --------
       Total operating expenses                         16,539         14,083               4,724          4,900
                                                      --------       --------            --------       --------
       Operating (loss) income                          (1,351)        (1,738)                439           (830)

Other income, net                                          504            658                 112            497
Interest (expense) income                                 (658)            61                (277)             7
                                                      --------       --------            --------       --------
Net (loss) income                                       (1,505)        (1,019)                274           (326)
Accumulated deficit, beginning of period               (28,694)       (26,920)            (30,473)       (27,613)
                                                      --------       --------            --------       --------
Accumulated deficit, end of period                    $(30,199)      $(27,939)           $(30,199)      $(27,939)
                                                      ========       ========            ========       ========
Net (loss) income per share of common stock:

    Basic                                                $(.05)         $(.03)               $.01          $(.01)
                                                      ========       ========            ========       ========
    Diluted                                              $(.05)         $(.03)               $.01          $(.01)
                                                      ========       ========            ========       ========

Weighted average number of common and
   common equivalent shares outstanding:
   Basic                                                29,591         29,433              29,622         29,526
                                                      ========       ========            ========       ========
   Diluted                                              29,591         29,433              30,670         29,526
                                                      ========       ========            ========       ========
</TABLE>


       The accompanying notes are an integral part of these statements.

                                       3
<PAGE>

                        PHARMACEUTICAL RESOURCES, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                (In Thousands)
                                  (Unaudited)


<TABLE>
<CAPTION>
                                                                                          Nine Months Ended
                                                                                       ----------------------
                                                                                     September 30,     October 2,
                                                                                        2000             1999
                                                                                      --------         --------
<S>                                                                                   <C>               <C>
Cash flows from operating activities:
   Net loss                                                                             $(1,505)       $(1,019)

   Adjustments to reconcile net loss to net
   cash used in operating activities:
     Depreciation and amortization                                                        1,661          1,822
     Allowances against accounts receivable                                                 435          1,853
     Write-off of inventories                                                             1,010            870
     Other                                                                                  171            190

 Changes in assets and liabilities:
     Increase in accounts receivable                                                     (3,889)        (4,646)
     Increase in inventories                                                             (1,819)        (3,725)
     Decrease (increase) in prepaid expenses and other assets                               340         (2,901)
     Decrease in accounts payable                                                        (2,200)          (129)
     Increase (decrease) in accrued expenses and other liabilities                        1,026           (969)
                                                                                          -----          -----
       Net cash used in operating activities                                             (4,770)        (8,654)

Cash flows from investing activities:
     Capital expenditures                                                                (2,468)        (1,796)
     Proceeds from sale of fixed assets                                                      36             57
                                                                                          -----          -----
       Net cash used in investing activities                                             (2,432)        (1,739)

Cash flows from financing activities:
     Proceeds from issuances of Common Stock                                                243            642
     Net proceeds from revolving credit line and issuances of other debt                  7,272          3,691
     Principal payments under long-term debt and other borrowings                          (182)          (213)
                                                                                          -----          -----
       Net cash provided by financing activities                                          7,333          4,120


Net increase (decrease) in cash and cash equivalents                                        131         (6,273)
Cash and cash equivalents at beginning of period                                            222          6,424
                                                                                          -----          -----
Cash and cash equivalents at end of period                                                 $353           $151
                                                                                          =====          =====
</TABLE>



       The accompanying notes are an integral part of these statements.

                                       4
<PAGE>

                        PHARMACEUTICAL RESOURCES, INC.
                         NOTES TO FINANCIAL STATEMENTS
                              September 30, 2000
                                  (Unaudited)

       Pharmaceutical Resources, Inc. (the "Company" or "PRI") operates,
primarily through its wholly-owned subsidiary, Par Pharmaceutical, Inc. ("Par"),
in one business segment, the manufacture and distribution of generic
pharmaceuticals in the United States. Marketed products are principally in solid
oral dosage form (tablet, caplet and two-piece hard-shell capsule). The Company
also distributes one product in the semi-solid form of a cream.

Basis of Preparation:

       The accompanying consolidated financial statements at September 30, 2000
and for the nine-month and three-month periods ended September 30, 2000 and the
comparative periods ended October 2, 1999 are unaudited; however, in the opinion
of the management of PRI, such statements include all adjustments (consisting of
normal recurring accruals) necessary to make a fair statement of the information
presented therein. The balance sheet at December 31, 1999 was derived from the
Company's audited financial statements at such date.

       Pursuant to accounting requirements of the Securities and Exchange
Commission applicable to quarterly reports on Form 10-Q, the accompanying
financial statements and these notes do not include all disclosures required by
generally accepted accounting principles for audited financial statements.
Accordingly, these statements should be read in conjunction with PRI's most
recent annual financial statements.

       Results of operations for interim periods are not necessarily indicative
of those that may be achieved for a full fiscal year.

Strategic Alliance:

       On June 30, 1998, the Company completed a strategic alliance with Merck
KGaA, a pharmaceutical and chemical company located in Darmstadt, Germany.
Pursuant to the Stock Purchase Agreement, dated March 25, 1998, Merck KGaA,
through its subsidiary Lipha Americas, Inc., purchased 10,400,000 newly issued
shares of the Company's Common Stock for $20,800,000. In addition, the Company
issued to Merck KGaA and Genpharm, Inc. ("Genpharm"), a Canadian subsidiary of
Merck KGaA, five-year options to purchase an aggregate of 1,171,040 additional
shares of the Company's Common Stock at an exercise price of $2.00 per share in
exchange for consulting services. The options expire in April 2003 and become
exercisable commencing in July 2001. As part of the alliance, the Company
obtained the exclusive United States distribution rights to a portfolio of
products covered by a distribution agreement with Genpharm (see "-Distribution
and Supply Agreements-Genpharm, Inc."). Merck KGaA also purchased 1,813,272
shares of the Company's Common Stock from Clal Pharmaceutical Industries Ltd.
("Clal"), PRI's largest shareholder prior to the transaction. Clal has the right
to cause Merck KGaA and/or the Company to purchase an additional 500,000 shares
of Common Stock from Clal at a price of $2.50 per share in July 2001.

Research and Development Agreement:

       The Company, Israel Pharmaceutical Resources L.P. ("IPR"), a subsidiary
of PRI, and Generics (UK) Ltd. ("Generics"), a subsidiary of Merck KGaA, entered
into an agreement (the "Development Agreement"), dated August 11, 1998, pursuant
to which Generics agreed to fund one-half the costs of the operating budget of
IPR, the Company's research and development operation in Israel, in exchange for
the exclusive distribution rights outside of the United States to products
developed by IPR after the date of the Development Agreement. In addition,
Generics agreed to pay IPR a perpetual royalty for all sales of the products by
Generics or its affiliates outside the United States. To date, no such products
have been brought to market by Generics and no royalty has been paid to IPR. The
Development Agreement has an initial term of five years and automatically renews
for additional periods of one year subject to earlier termination upon six
months' notice in certain circumstances. Pursuant to the Development Agreement,
Generics paid the Company an initial fee of $600,000 in August 1998, funded
approximately $200,000 for IPR for year 1998, $800,000 for year 1999 and
$600,000 for year 2000, fulfilling their requirements through September 30,
2000. Under the Development Agreement, Generics is not required to fund more
than $1,000,000 for any one calendar year.

                                       5
<PAGE>
                        PHARMACEUTICAL RESOURCES, INC.
                         NOTES TO FINANCIAL STATEMENTS
                              September 30, 2000
                                  (Unaudited)


Profit Sharing Agreement:

       In January 1999, the Company entered into a profit sharing agreement (the
"Genpharm Profit Sharing Agreement") with Genpharm pursuant to which the Company
will receive a portion of the profits resulting from a separate agreement
between Genpharm and an unaffiliated United States based pharmaceutical company
in exchange for a non-refundable fee of $2,500,000 paid by the Company. The fee,
included in deferred charges and other assets, will be amortized over a
projected revenue stream from the products when launched by the third party. The
agreement between Genpharm and the unaffiliated third party covers 15 products
that are not included in the Company's distribution agreement with Genpharm
resulting from its strategic alliance with Merck KGaA (see "-Distribution and
Supply Agreements-Genpharm, Inc.").

Lease Agreement:

       In March 1999, Par entered into an agreement to lease (the "Lease
Agreement") its manufacturing facility and related machinery and equipment
located in Congers, New York (the "Congers Facility") to Halsey Drug Co., Inc.
("Halsey"), a manufacturer of generic pharmaceutical products. The Lease
Agreement has an initial term of three years, subject to an additional two-year
renewal period and contains a purchase option permitting Halsey to purchase the
Congers Facility and substantially all the equipment thereof at any time during
the lease terms for a specified amount. The Lease Agreement provides for annual
fixed rent during the initial term of $500,000 per year and $600,000 per year
during the renewal period. Pursuant to the Lease Agreement, Halsey paid the
purchase option of $100,000 in March 1999. Under the Halsey Supply Agreement (as
hereinafter defined), Halsey is required to perform certain manufacturing
operations for the Company at the Congers Facility. Pursuant to the Lease
Agreement, Par agreed that if its purchases under the Halsey Supply Agreement
were less than $1,150,000 worth of the products between April 1999 and September
2000, the amount of the deficiency would be credited against rent payments due
under the Lease Agreement (see "-Distribution and Supply Agreements-Halsey Drug
Co., Inc.").

Distribution and Supply Agreements:

  Halsey Drug Co., Inc.:
       In March 1999, Par entered into a Manufacturing and Supply Agreement with
Halsey (the "Halsey Supply Agreement"). The Halsey Supply Agreement requires
Halsey to manufacture exclusively for Par certain products previously
manufactured by Par at the Congers Facility. The Halsey Supply Agreement has an
initial term of three years subject to earlier termination upon the occurrence
of certain events as provided therein. Par agreed to purchase not less than
$1,150,000 worth of the products under the Halsey Supply Agreement between April
1999 and September 2000, subject to Par's agreement to credit any deficiency of
products purchased against rent payments due under the Lease Agreement. In
addition, the Halsey Supply Agreement prohibits Halsey from manufacturing,
supplying, developing or distributing products produced under such Agreement for
anyone other than Par for a period of three years from the date of the Halsey
Supply Agreement.

  Genpharm, Inc.:
       The Company has a distribution agreement with Genpharm (the "Genpharm
Distribution Agreement") pursuant to which Genpharm granted exclusive
distribution rights to the Company within the United States and certain other
United States territories with respect to approximately 40 generic
pharmaceutical products. To date, 13 of such products have obtained U.S. Food
and Drug Administration ("FDA") approval and 12 are currently being marketed by
Par. The remaining products are either currently being developed, have been
identified for development, or have been submitted to the FDA for approval.
Products may be added to or removed from the Genpharm Distribution Agreement by
mutual agreement of the parties. Genpharm is required to use commercially
reasonable efforts to develop the products, which are subject to the Genpharm
Distribution Agreement, and is responsible for the completion of product
development and for obtaining all applicable regulatory approvals. The Company
will pay Genpharm a percentage of the gross profits attributable to the sales of
such products by the Company.

                                       6
<PAGE>

                            PHARMACUTICAL RESOURCES
                         NOTES TO FINANCIAL STATEMENTS
                              September 30, 2000
                                  (Unaudited)


       In August 1999, Par entered into a separate agreement with Genpharm
pursuant to which Par purchased the United States distribution rights for
methimazole (Tapazole(R)) for a fee of $707,000. The fee will be amortized over
three years and the net amount included in deferred charges and other assets.
The Company began marketing the product and amortizing the fee in April 2000.
The agreement has an initial term of three years and is renewable by mutual
consent of the parties for successive one-year terms

  BASF Corporation:
       In April 1997, Par and BASF Corporation ("BASF"), a manufacturer of
pharmaceutical products, entered into a Manufacturing and Supply Agreement (the
"BASF Supply Agreement"). Under the BASF Supply Agreement, Par agreed to
purchase certain minimum quantities of certain products manufactured by BASF at
one of its facilities, and to phase out Par's manufacturing of those products.
BASF agreed to discontinue its direct sale of those products. The agreement had
an initial term of three years and would have renewed automatically for
successive two-year periods until December 31, 2005, if Par had met certain
purchase thresholds. In each of the first three years of the initial term of the
BASF Supply Agreement, Par agreed to purchase an aggregate of at least
$24,500,000 worth of three products. However, if Par did not purchase at least
$29,000,000 worth of one of those products in the third and final year of the
agreement, BASF had the right to terminate the agreement with a notice period of
one year. The Company met the minimum purchase requirements for fiscal year
1999, but did not meet the minimum purchase requirements for one such product in
the third and final year of the agreement. To ensure continuance of product
supply, BASF and the Company have agreed in principle to the terms of a new
agreement similar to the terms of the prior agreement, but with lower minimum
purchase requirements.

  Elan Corporation:
       In September 1998, the Company and Elan Transdermal Technologies, Inc.,
formerly known as Sano Corporation, and Elan Corporation, plc (collectively
"Elan") entered into a termination agreement (the "Termination Agreement") with
respect to their prior distribution agreement. Pursuant to the Termination
Agreement, the Company's exclusive right to distribute in the United States a
prescription transdermal nicotine patch manufactured by Elan ended on May 31,
1999. The Company began selling Elan's prescription transdermal nicotine patch
in January 1998 and paid Elan a percentage of the gross profits through the
termination date. In exchange for relinquishing long-term distribution rights to
the prescription transdermal nicotine patch and a nitroglycerin patch, the
Company received a cash payment of $2,000,000 in October 1998 and an additional
payment of $1,000,000 in the third quarter of 1999. In June 2000, the Company
agreed to sell its remaining distribution rights for a non-prescription
transdermal nicotine patch back to Elan and to terminate Par's right to royalty
payments under the Termination Agreement. Pursuant to this agreement, the
Company will receive a minimum payment of $500,000 on or before July 31, 2001
and could receive an additional $1,000,000 to $1,500,000 subject to certain
conditions as set forth in the agreement, including Elan's introduction of the
product in the United States and Israel on or before certain dates. In July
2000, Elan paid the Company $150,000 under the agreement.

Short-Term Debt:

       In December 1996, Par entered into a Loan and Security Agreement (the
"Loan Agreement") with General Electric Capital Corporation ("GECC"). The Loan
Agreement, as amended, provides Par with a five-year revolving line of credit.
Pursuant to the Loan Agreement, Par is permitted to borrow up to the lesser of
(i) the borrowing base established under the Loan Agreement or (ii) $20,000,000.
The borrowing base is limited to 85% of eligible accounts receivable plus 50% of
eligible inventory of Par, each as determined from time to time by GECC. The
interest rate charge on the line of credit is based upon a per annum rate of
2.25% above the 30-day commercial paper rate for high-grade unsecured notes
adjusted monthly. The line of credit with GECC is secured by the assets of Par
and PRI other than real property and is guaranteed by PRI. In connection with
such facility, Par, PRI and their affiliates have established a cash management
system pursuant to which all cash and cash equivalents received by any of such
entities are deposited into a lockbox account over which GECC has sole operating
control and which are applied on a daily basis to reduce amounts outstanding
under the line of credit. The revolving credit facility is subject to covenants
based on various financial benchmarks. As of September 30, 2000, the borrowing
base was approximately $15,400,000 and $11,670,000 was outstanding under the
line of credit.

                                       7
<PAGE>

                        PHARMACEUTICAL RESOURCES, INC.
                          NOTES FINANCIAL STATEMENTS
                              September 30, 2000
                                 (Unaudited)

Income Taxes:

       Based on the Company's recent performance and uncertainty of the generic
pharmaceutical business in which it operates, management believes that future
operating income might not be sufficient to recognize fully the net operating
loss carryforwards of the Company. Therefore, the Company did not recognize a
benefit for its operating losses in any of the nine-month and three-month
periods ended September 30, 2000 or the comparable periods ended October 2,
1999. If the Company is unable to generate sufficient taxable income in the
future, the Company expects that increases in the valuation allowance will be
required through a charge to expense.

Earnings Per Share:

       During fiscal year 1998, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 128, "Earnings Per Share" ("SFAS 128"), which
establishes the standards for the computation and presentation of basic and
diluted earnings per share data. Under SFAS 128, the dilutive effect of stock
options is excluded from the calculation of basic earnings per share but
included in diluted earnings per share. The following table is a reconciliation
of the numerators and denominators used to calculate basic and diluted earnings
per share:

<TABLE>
<CAPTION>

                                                          Nine Months Ended              Three Months Ended
                                                      ---------------------------      --------------------------
                                                      September 30,   October 2,       September 30,   October 2,
                                                          2000           1999              2000          1999
                                                      ------------   ------------      ------------   -----------
                                                                 (In Thousands, Except Per Share Amounts)
<S>                                                     <C>            <C>                 <C>          <C>
Net (loss) income (numerator)                            $(1,505)        $(1,019)            $274          $(326)

Basic:
Weighted average number of common
  shares outstanding (denominator)                        29,591          29,433           29,622         29,526

Net (loss) income per share of common stock                $(.05)          $(.03)            $.01         $(.01)
                                                          ======          ======           ======         ======

Assuming dilution:
Weighted average number of common
  shares outstanding                                      29,591          29,433           29,622         29,526
Effect of dilutive options                                   -               -              1,048            -
                                                          ------          ------           ------         ------
Weighted average number of common and common
   equivalent shares outstanding (denominator)            29,591          29,433           30,670         29,526


Net (loss) income per share of common stock                $(.05)          $(.03)            $.01          $(.01)
                                                          ======          ======           ======         ======
</TABLE>

       Outstanding options and warrants of 408,700 and 360,200 at the end of the
nine-month and three-month periods ended September 30, 2000, respectively, and
288,500 and 283,500 at the end of the corresponding periods of the prior year
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
in the respective periods. In addition, incremental shares from assumed
conversions of 1,011,186 at the end of the nine-month period ended September 30,
2000 and 1,132,414 and 1,150,943 at the end of the nine-month and three-month
periods ended October 2, 1999, respectively, were excluded from diluted earnings
per share because they were anti-dilutive.

New Accounting Standards:

       The Company adopted SFAS No. 130, "Reporting Comprehensive Income" ("SFAS
130"), during the period ended December 31, 1998, which establishes standards
for the reporting and display of comprehensive income and its components. As a
result of the adoption of SFAS 130, there was no impact on the financial
statements in the nine-month and three-month periods ended September 30, 2000 or
October 2, 1999.

                                       8
<PAGE>

                        PHARMACEUTICAL RESOURCES, INC.
                         NOTES TO FINANCIAL STATEMENTS
                              September 30, 2000
                                  (Unaudited)

       In June 1998, the Financial Accounting Standards Board ("FASB") issued
SFAS No.133, "Accounting for Derivative Instruments and Hedging Activities"
("SFAS 133"), which establishes accounting and reporting standards for
derivative instruments, including certain derivative instruments embedded in
other contracts, and for hedging activities. In June 1999, the FASB issued SFAS
No. 137, "Accounting for Derivative Instruments and Hedging Activities -Deferral
of the Effective Date of SFAS 133", which delayed the Company's required
adoption of SFAS 133 to January 1, 2001. In June 2000, the FASB issued SFAS No.
138, "Accounting for Certain Derivative Instruments and Certain Hedging
Activities, an amendment to SFAS 133" ("SFAS 138"), which is effective
concurrently with SFAS 133. The Company is currently evaluating the impact of
the adoption of SFAS 133 and SFAS 138 on its financial position and results of
operations.

Commitments, Contingencies and Other Matters:

  Retirement Plans:
       The Company has a defined contribution, social security integrated
Retirement Plan (the "Retirement Plan") providing retirement benefits to
eligible employees as defined in the Retirement Plan. The Company suspended
employer contributions to the Retirement Plan effective December 30, 1996.
Consequently, participants in the Retirement Plan will no longer be entitled to
any employer contributions under such plan for 1996 or subsequent years. The
Company also maintains a Retirement Savings Plan (the "Retirement Savings Plan")
whereby eligible employees are permitted to contribute from 1% to 15% of pay to
the Retirement Savings Plan. The Company contributes an amount equal to 50% of
the first 6% of the pay contributed by the employee. In fiscal year 1998, the
Company merged the Retirement Plan into the Retirement Savings Plan.

  Legal Proceedings:
       Par has filed with the FDA an abbreviated new drug application ("ANDA")
for megestrol acetate oral suspension, the generic version of Bristol Myers
Squibb's ("BMS") Megace(R) Oral Suspension. Par filed a paragraph IV
certification regarding the formulation patent as part of its ANDA submission.
The basic compound patent for Megace(R) has expired. Megace(R) Oral Suspension
received orphan drug exclusivity from the FDA that expired September 10, 2000
and BMS has a formulation patent for Megace(R) Oral Suspension expiring in 2011.
Par believes that its distinct and unique formulation does not infringe the BMS
formulation patent. In October 1999, BMS initiated a patent infringement action
against Par. On March 1, 2000, Par was granted a patent by the U.S. Patent and
Trademark Office regarding Par's unique formulation of megestrol acetate oral
suspension. Par believes that the issuance of this patent, which establishes the
uniqueness of Par's formulation compared to the BMS patent, should significantly
help Par's defense in the patent infringement case. Par intends to vigorously
pursue its pending litigation with BMS and to defend its patent rights and
ensure that other generic companies do not infringe the Par patent. At this
time, it is not possible for the Company to predict the probable outcome of this
litigation and the impact, if any, that it might have on the Company.

       In October 2000, Par received from the FDA tentative approval of its ANDA
for megestrol acetate oral suspension. A tentative approval is issued by the FDA
following the satisfactory conclusion of the regulatory review process. Although
there can be no assurance, final approval by the FDA is expected to be granted
following court resolution of the patent infringement litigation between Par and
BMS.

       The Company is involved in certain other litigation matters, including
certain product liability actions and actions by former employees, and believes
these actions are incidental to the conduct of its business and that the
ultimate resolution thereof will not have a material adverse effect on its
financial condition, results of operations or liquidity. The Company intends to
vigorously defend these actions.

                                       9
<PAGE>

                         PHARMACETICAL RESOURCES, INC.
                         NOTES TO FINANCIAL STATEMENTS
                              September 30, 2000
                                  (Unaudited)

  Asset Impairment/Restructuring:
       As part of previously announced measures to lower costs and increase
operating efficiencies, the Company discontinued the sale of certain
unprofitable products and reduced the workforce and certain related operating
expenses. These measures resulted in a charge of $1,906,000 in the three-month
transition period ended December 31, 1998, which included approximately
$1,200,000 for write-downs related to the impairment of assets affected by the
discontinuance of the products and a provision of $706,000 for severance
payments and other employee termination benefits. The amount of the actual
termination benefits paid approximated the amount of the provision.
Additionally, the Company established inventory reserves of $630,000 relating to
the discontinued products which was recorded as part of cost of goods sold
during the transition period. At September 30, 2000, the remaining provision for
discontinued product inventory amounted to approximately $78,000, which the
Company expects to be sufficient and fully utilized.

                                       10
<PAGE>

                ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                 FINANCIAL CONDITION AND RESULTS OF OPERATIONS

       Certain statements in this Form 10-Q may 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 and future events, particularly relating to sales
of current products as well as certain cost cutting and restructuring measures
and the introduction of new manufactured and distributed products. Such
statements involve known and unknown risks, uncertainties and contingencies,
many of which are beyond the control of the Company, which could cause actual
results and outcomes to differ materially from those expressed herein. Factors
that might affect such forward-looking statements set forth in this Form 10-Q
include, among others, (i) increased competition from new and existing
competitors and pricing practices from such competitors, (ii) pricing pressures
resulting from the continued consolidation by the Company's distribution
channels, (iii) the amount of funds available for internal research and
development and research and development joint ventures, (iv) research and
development project delays or delays and unanticipated costs in obtaining
regulatory approvals, (v) continuation of distribution rights under significant
agreements, (vi) the effectiveness of restructuring measures to reduce losses
and increase efficiencies, (vii) the continued ability of distributed product
suppliers to meet future demand, (viii) the outcome of any threatened or pending
litigation and (ix) general industry and economic conditions. Any forward-
looking statements included in this Form 10-Q are made as of the date hereof,
based on information available to the Company as of the date hereof, and the
Company assumes no obligation to update any forward-looking statements.

RESULTS OF OPERATIONS

General

       The Company's operating loss of $1,351,000 for the nine-month period
ended September 30, 2000 was reduced from $1,738,000 for the nine-month period
ended October 2, 1999. Higher gross margins more than offset additional legal
costs related to a patent infringement action and increased research and
development spending. Although net sales increases were moderate, gross margins
improved to 25% of net sales for the most recent nine-month period compared to
20% in the comparable period of last year, as higher margin new products
replaced certain lower margin discontinued products. The Company's net loss of
$1,505,000 for the nine months ended September 30, 2000 increased from last
years nine-month net loss of $1,019,000 primarily due to additional interest
expense from higher levels of short-term debt.

       Results for the three-month period ended September 30, 2000 improved from
the prior year as the Company reported operating income of $439,000 compared to
an operating loss of $830,000 for the corresponding period of 1999. Gross margin
gains combined with sales growth, primarily from newer products, led to the
improved results. Increased legal costs in the most recent quarter were more
than offset by lower product development spending. Net income of $274,000 for
the third quarter 2000 included increased interest expense while a net loss of
$326,000 in the comparable three-month period of last year included payments
from Genpharm to reimburse the Company for research costs incurred in prior
periods in return for a share of the gross margin of certain products awaiting
FDA approval.

       In 1998, the Company and Merck KGaA formed a strategic alliance as a
means to improve the Company's prospects and strengthen its financial condition
through the introduction of new products at profitable pricing. As part of the
alliance, the Company sold Common Stock to a subsidiary of Merck KGaA and
received exclusive United States distribution rights for up to approximately 40
generic pharmaceutical products covered by the Genpharm Distribution Agreement.
To date, 13 such products have received FDA approval and 12 are currently being
marketed by Par. The remaining products are either being developed, have been
identified for development, or have been submitted to the FDA for approval.
There are currently ANDAs for 10 additional products covered by the Genpharm
Distribution Agreement pending with and awaiting approval from, the FDA.
Genpharm pays the research and development costs associated with the products
and the Company is obligated to pay Genpharm a certain percentage of the gross
margin on sales of the products. The alliance provides the Company with a
significant number of potential products for its development pipeline without
the substantial resource commitment, including financial, it would normally take
to develop such a pipeline, improved financial condition and access to Merck
KGaA's expertise and experience in the industry (see "Notes to Financial
Statements-Strategic Alliance" and "-Distribution and Supply Agreements-
Genpharm, Inc.").

       Critical to any significant improvement in the Company's financial
condition is the introduction of new manufactured and distributed products at
selling prices that generate significant gross margin. In addition to product
introductions expected as part of the strategic alliance with Merck KGaA, the
Company plans to continue to invest in

                                       11
<PAGE>

research and development efforts, subject to liquidity concerns, and pursue
additional products for sale through new and existing distribution agreements.
The Company is engaged in efforts, subject to FDA approval and other factors, to
introduce new products as a result of its research and development efforts and
distribution and development agreements. No assurance can be given that the
Company will obtain any additional products for sale or that sales of additional
products will reduce losses or return the Company to profitability. Continuing
operating losses will have a materially adverse affect on the Company's
liquidity and, accordingly, limit its ability to fund research and development
or ventures relating to the sale of new products and market existing products
(see "-Financial Condition-Liquidity and Capital Resources").

       The generic drug industry in the United States continues to be highly
competitive. The factors contributing to the intense competition and affecting
both the introduction of new products and the pricing and profit margins of the
Company, include, among other things: (i) introduction of other generic drug
manufacturer's products in direct competition with the Company's products, (ii)
consolidation among distribution outlets through mergers, acquisitions and the
formation of buying groups, (iii) ability of generic competitors to quickly
enter the market after patent expiration, diminishing the amount and duration of
significant profits, (iv) willingness of generic drug customers, including
wholesale and retail customers, to switch among pharmaceutical manufacturers and
(v) pricing and product deletions by competitors.

Net Sales

       Net sales for the nine-month period ended September 30, 2000 were
$61,289,000 compared to net sales of $60,692,000 for the nine-month period ended
October 2, 1999. Additional sales from new products, primarily products sold
under distribution agreements with Genpharm, offset the termination of the
prescription transdermal nicotine patch distribution rights, effective May 31,
1999, and decreased sales of antibiotics due to a supplier's inability to meet
the Company's production requirements. The Company has discontinued its
antibiotic product line due to continued production issues with suppliers. Total
sales of antibiotics were approximately $4,088,000, or 5% of the Company's total
net sales in 1999. Net sales of distributed products in the most recent nine
months, which consist of products manufactured under contract and licensed
products, were approximately 63% of the Company's net sales compared to
approximately 66% of net sales in 1999. The Company is substantially dependent
upon distributed products for its sales, and as the Company introduces new
distributed products under its distribution agreements, it is expected that this
trend will continue. Any inability by suppliers to meet expected demand could
adversely affect future sales. The Company discontinued certain unprofitable
products during 1999 following an evaluation of its product line. Although there
can be no assurance, it is anticipated that new product introductions will
continue to offset decreased sales from the termination of the prescription
transdermal nicotine patch distribution rights, loss of the antibiotics
business, and to a lesser extent, the discontinued manufactured products.

       Third quarter 2000 net sales of $20,436,000 increased $1,119,000, or 6%,
from $19,317,000 in the third quarter of 1999. Increased sales of new products
more than offset lower sales of certain existing or discontinued products. Net
sales of distributed products were approximately 66% of the Company's total net
sales in the most recent quarter versus approximately 65% of the total for the
same quarter of last year.

       Sales of the Company's products are principally dependent upon, among
other things, (i) pricing levels and competition, (ii) market penetration for
the existing product line, (iii) the continuation of existing distribution
agreements, (iv) introduction of new distributed products, (v) approval of ANDAs
and introduction of new manufactured products, and (vi) the level of customer
service.

Gross Margin

       The gross margin for the nine-month period ended September 30, 2000
increased $2,843,000 to $15,188,000 (25% of net sales) from $12,345,000 (20% of
net sales) in the corresponding period of the prior year. Gross margin
improvements were attained principally through the sale of new products and
lower manufacturing costs, primarily due to the leasing of the Congers Facility
in March 1999. The loss of gross margin from the termination of the prescription
transdermal nicotine patch distribution rights was partially offset by the sale
of distribution rights for a non-prescription transdermal nicotine patch (see
"Notes to Financial Statements-Distribution and Supply Agreements-Elan
Corporation Inc.").

                                       12
<PAGE>

       The third quarter 2000 gross margin of $5,163,000 (25% of net sales)
increased $1,093,000 from $4,070,000 (21% of net sales) in the corresponding
quarter of the prior year primarily due to additional gross margin contributions
from new products.

       Inventory write-offs were $1,010,000 and $180,000 for the nine-month and
three-month periods ended September 30, 2000, respectively, compared to $870,000
and $342,000 in the corresponding periods of the prior year. The higher
inventory write-offs in the most recent nine-month period were primarily
attributable to the discontinuance of a low margin product. Inventory write-offs
taken in the normal course of business are related primarily to the disposal of
finished products due to short shelf lives. Inventory write-offs also include
work in process inventory not meeting the Company's quality control standards.

Operating Expenses

  Research and Development
       For the nine-month period ended September 30, 2000, research and
development expenses of $5,334,000 increased $579,000, or 12%, from $4,755,000
for the nine-month period ended October 2, 1999. The higher expenditures,
primarily attributable to increased bio-study activity, personnel and material
costs, were partially offset by lower payments to purchase rights to
pharmaceutical processes and for formulation development work performed for PRI
by unaffiliated companies. The Company conducts part of its research and
development in Israel through IPR. Following the acquisition of the remaining
interests of IPR in 1997, the Company's domestic research and development
program was integrated with that of IPR. Research and development expenses at
IPR in the most recent nine-month period were $935,000, net of Generics funding,
compared to expenses of $831,000 in the same period of the prior year. The
Company, IPR and Generics have an agreement pursuant to which Generics shares
one-half of the costs of IPR's operating budget up to $1,000,000 in exchange for
the exclusive distribution rights outside of the United States to the products
developed by IPR after the date of the agreement (see "Notes to Financial
Statements-Development Agreement").

       In the three-month period ended September 30, 2000, research and
development expenses were $879,000 compared to $2,038,000 in the same period of
last year. Lower payments to unaffiliated development companies, reimbursement
of certain expenses by Genpharm and the timing of bio-studies resulted in lower
spending in the most recent three-month period. Third quarter 2000 research and
development expenses of $313,000 for IPR, net of funding from Generics, were
comparable to the $302,000 spent in the corresponding quarter of the prior year.

       The Company has ANDAs for six potential products, two of which have been
tentatively approved, pending with and awaiting approval from, the FDA as a
result of its product development program. The Company has in process or expects
to commence biostudies for at least two additional products in 2000. None of
these products are included as part of the Genpharm Distribution Agreement.

       As part of the Genpharm Distribution Agreement, Genpharm pays the
research and development costs associated with the products covered by the
Genpharm Distribution Agreement. Currently, there are ANDAs for 10 potential
products that are covered by the Genpharm Distribution Agreement pending with
and awaiting approval from, the FDA. To date, the Company is marketing 12
products under the Genpharm Distribution Agreement and anticipates introducing
at least one more product in 2000 (see "Notes to Financial
Statements-Distribution and Supply Agreements-Genpharm, Inc.").

  Selling, General and Administrative
       Selling, general and administrative costs of $11,205,000 (18% of net
sales) for the nine-month period ended September 30, 2000 increased $1,877,000,
or 20%, from $9,328,000 (15% of net sales) in the corresponding period ended
October 2, 1999. The increase was primarily attributable to higher legal costs
for a patent infringement action by BMS following the Company's ANDA filing for
megestrol acetate oral suspension (see "Notes to Financial
Statements-Commitments, Contingencies and Other Matters-Legal Proceedings").

       Selling, general and administrative costs of $3,845,000 (19% of net
sales) in the third quarter 2000 increased $983,000, or 34%, from $2,862,000
(15% of net sales) for the corresponding three-month period of last year
primarily due to higher legal expenses.

                                       13
<PAGE>

Other Income

       Other income of $504,000 and $112,000 for the nine-month and three-month
periods ended September 30, 2000, respectively, decreased from $658,000 and
$497,000 in the corresponding periods of 1999, primarily due to lower payments
from strategic partners to reimburse the Company for research costs incurred in
prior periods in return for a share of the gross margin of certain products
awaiting FDA approval.

Income Taxes

       Management has determined, based on the Company's recent performance and
uncertainty of the generic pharmaceutical business in which the Company
operates, that future operating income might not be sufficient to recognize
fully the net operating loss carryforwards of the Company. Therefore, the
Company did not recognize a benefit for its operating losses in any of the nine-
month and three-month periods ended September 30, 2000 or the comparable periods
ended October 2, 1999 (see "Notes to Financial Statements-Income Taxes").

FINANCIAL CONDITION

Liquidity and Capital Resources

       The Company's cash and cash equivalents increased to $353,000 at
September 30, 2000 from $222,000 at December 31, 1999. Additional borrowings
from the Company's credit line with GECC of $7,272,000 for the nine months ended
September 30, 2000 were used primarily to fund increased research and
development, legal costs, higher inventory levels and capital projects. Capital
projects include expenditures for product development and production equipment
and system improvements. Working capital at September 30, 2000 of $18,569,000,
which includes cash and cash equivalents, decreased $2,652,000 from $21,221,000
at December 31, 1999. The working capital ratio was 1.70x at September 30, 2000
compared to 2.03x at December 31, 1999.

       The Company, from time to time, enters into agreements with third parties
with respect to the development of new products and technologies. To date, the
Company has entered into agreements and advanced funds to several companies for
products in various stages of development. The payments are expensed as incurred
and included in research and development costs. At this time, research and
development expenses are expected to total approximately $7,500,000 for the year
2000.

       In June 2000, the Company agreed to sell its remaining distribution
rights back to Elan for a non-prescription transdermal nicotine patch and to
terminate Par's right to royalty payments under the Termination Agreement.
Pursuant to this agreement, the Company will receive a minimum payment of
$500,000 on or before July 31, 2001 and could receive an additional $1,000,000
to $1,500,000, subject to certain conditions as set forth in the agreement,
including Elan's introduction of the product in the United States and Israel on
or before certain dates. In July 2000, Elan paid the Company $150,000 under the
agreement. In September 1998, the Company and Elan entered into the Termination
Agreement pursuant to which the Company's exclusive distribution rights in the
United States for a prescription transdermal nicotine patch ended on May 31,
1999. Pursuant to the Termination Agreement, the Company received a cash payment
of $2,000,000 in October 1998 and an additional $1,000,000 in the third quarter
of 1999 (see "Notes to Financial Statements-Distribution and Supply Agreements-
Elan Corporation").

       In August 1999, Par entered into an agreement with Genpharm pursuant to
which Par purchased the United States distribution rights for an additional
product, not included in the Genpharm Distribution Agreement, for a fee of
$707,000 paid by the Company in May 2000. The Company began marketing the
product in April 2000 (see "Notes to Financial Statements-Distribution and
Supply Agreements-Genpharm, Inc.").

       In March 1999, the Company entered into an agreement to lease, with an
option to purchase, its Congers Facility to Halsey. Halsey paid the Company a
purchase option of $100,000 in March 1999 and is obligated to pay rent of
$500,000 annually during the initial three-year term of the lease. The rent is
expected to continue to cover the Company's fixed costs of the facility in
subsequent periods. Under the purchase option, Halsey may purchase the facility
and substantially all the machinery and equipment at any time during the lease
for a specified amount (see "Notes to Financial Statements-Leasing Agreement").

       In January 1999, the Company entered into the Genpharm Profit Sharing
Agreement pursuant to which the Company will receive a portion of the profits
resulting from a separate agreement between Genpharm and an unaffiliated United
States based pharmaceutical company in exchange for a non-refundable fee of
$2,500,000 paid by the Company (see "Notes to Financial Statements-Profit
Sharing Agreement").

                                       14
<PAGE>

       The Company, IPR and Generics entered into the Development Agreement,
dated August 11, 1998, pursuant to which Generics agreed to fund one-half of the
costs of IPR's operating budget in exchange for the exclusive distribution
rights outside of the United States to the products developed by IPR after the
date of the agreement. In addition, Generics agreed to pay IPR a perpetual
royalty for all sales of the products by Generics or its affiliates outside the
United States. To date, no such products have been brought to market by Generics
and no royalty has been paid to IPR. Pursuant to the Development Agreement,
Generics paid the Company an initial fee of $600,000 in August 1998, funded
approximately $200,000 for IPR for year 1998, $800,000 for year 1999 and
$600,000 for year 2000, fulfilling their requirements through September 30,
2000. Generics is not required to fund more than $1,000,000 for any one calendar
year (see "Notes to Financial Statements-Research and Development Agreement").

       The Company expects to fund its operations, including research and
development activities and its obligations under the existing distribution and
development arrangements discussed herein, out of its working capital and, if
necessary, with available borrowings against its line of credit, if and to the
extent then available. If, however, the Company continues to experience
operating losses, its liquidity and, accordingly, its ability to fund research
and development or ventures relating to the distribution of new products would
be materially and adversely affected (see "-Financing").

Financing

       The Company's total outstanding long-term debt, including the current
portion, at September 30, 2000 amounted to $1,131,000. The amount consists
primarily of an outstanding mortgage loan with a bank and capital leases for
computer equipment.

       Par entered into the Loan Agreement with GECC in December 1996, which as
amended, provides Par with a five-year revolving line of credit. Pursuant to the
Loan Agreement, Par is permitted to borrow up to the lesser of (i) the borrowing
base established under the Loan Agreement or (ii) $20,000,000. The borrowing
base is limited to 85% of eligible accounts receivable plus 50% of eligible
inventory of Par, each as determined from time to time by GECC. The interest
rate charge on the line of credit is based upon a per annum rate of 2.25% above
the 30-day commercial paper rate for high-grade unsecured notes adjusted
monthly. The line of credit with GECC is secured by the assets of Par and PRI
other than real property and is guaranteed by PRI. In connection with such
facility, Par, PRI and their affiliates have established a cash management
system pursuant to which all cash and cash equivalents received by any of such
entities are deposited into a lockbox account over which GECC has sole operating
control and which are applied on a daily basis to reduce amounts outstanding
under the line of credit. The revolving credit facility is subject to covenants
based on various financial benchmarks. As of September 30, 2000, the borrowing
base was approximately $15,400,000 and $11,670,000 was outstanding under the
line of credit.

Year 2000

       The Company completed implementation of its Year 2000 ("Y2K") compliance
plan on a timely basis and has not experienced any disruption in business or
significant issues resulting from Y2K. The costs of addressing Y2K have
consisted primarily of internal personnel costs and have been expensed as
incurred and have not, and the Company believes will not, be material.

      ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

    Not applicable.

                                       15
<PAGE>

                          PART II. OTHER INFORMATION

Item 1. Legal Proceedings.
------  -----------------

       Par has filed with the FDA an ANDA for megestrol acetate oral suspension,
the generic version of BMS's Megace(R) Oral Suspension. Par filed a paragraph IV
certification regarding the formulation patent as part of its ANDA submission.
The basic compound patent for Megace(R) has expired. Megace(R) Oral Suspension
received orphan drug exclusivity from the FDA that expired September 10, 2000
and BMS has a formulation patent for Megace(R) Oral Suspension expiring in 2011.
Par believes that its distinct and unique formulation does not infringe the BMS
formulation patent. In October 1999, BMS initiated a patent infringement action
against Par. On March 1, 2000, Par was granted a patent by the U.S. Patent and
Trademark Office regarding Par's unique formulation of megestrol acetate oral
suspension. Par believes that the issuance of this patent, which establishes the
uniqueness of Par's formulation compared to the BMS patent, should significantly
help Par's defense in the patent infringement case. Par intends to vigorously
pursue its pending litigation with BMS and to defend its patent rights and
ensure that other generic companies do not infringe the Par patent. At this
time, it is not possible for the Company to predict the probable outcome of this
litigation and the impact, if any, that it might have on the Company.

       In October 2000, Par received from the FDA tentative approval of its ANDA
for megestrol acetate oral suspension. A tentative approval is issued by the FDA
following the satisfactory conclusion of the regulatory review process. Although
there can be no assurance, final approval by the FDA is expected to be granted
following court resolution of the patent infringement litigation between Par and
BMS.

Item 6.  Exhibits and Reports on Form 8-K.
------   --------------------------------

    (a)  Exhibits:

          27 -    Financial Data Schedule.

    (b)  Reports on Form 8-K:

          None.

                                       16
<PAGE>

                                   SIGNATURE

      Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.


                          PHARMACEUTICAL RESOURCES, INC.
                          -------------------------------
                           (Registrant)




November 14, 2000         /s/   Kenneth  I. Sawyer
                          --------------------------------------------------
                          Kenneth I. Sawyer
                          President, Chief Executive Officer and Chairman of
                            the Board of Directors
                          (Principal Executive Officer)




November 14, 2000         /s/ Dennis J. O'Connor
                          ------------------------------------------------------
                          Dennis J. O'Connor
                          Vice President - Chief Financial Officer and Secretary
                          (Principal Accounting and Financial Officer)

                                       17
<PAGE>

                                 EXHIBIT INDEX
                                 -------------

  Exhibit Number                  Description                  Page Number
  --------------                  -----------                  ----------

       27                       Financial Data Schedule            19








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