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: March 28,
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 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 April 29, 2009: 34,782,965          TABLE OF CONTENTS PAR PHARMACEUTICAL
COMPANIES, INC. FORM 10-Q FOR THE FISCAL QUARTER
ENDED MARCH 28, 2009  PAGE  PART I FINANCIAL
INFORMATION   Item 1. Condensed
Consolidated Financial Statements (unaudited)  Condensed
Consolidated Balance Sheets as of March 28, 2009 and December
31, 2008 3  Condensed
Consolidated Statements of Operations for the three months ended
March 28, 2009 and March 29, 2008 4  Condensed
Consolidated Statements of Cash Flows for the three months ended
March 28, 2009 and March 29, 2008 5  Notes
to Condensed Consolidated Financial Statements 6  Item
2. Managements
Discussion and Analysis of Financial Condition and
Results of Operations 30  Item 3. Quantitative
and Qualitative Disclosures about Market Risk 43  Item 4. Controls
and Procedures 44   PART II OTHER
INFORMATION  Item 1. Legal
Proceedings 44  Item 1A. Risk
Factors 48  Item 2. Unregistered
Sales of Equity Securities and Use of Proceeds 48  Item 6. Exhibits 49  SIGNATURES 50              2   PART I - FINANCIAL
INFORMATION ITEM 1.  FINANCIAL STATEMENTS PAR
PHARMACEUTICAL COMPANIES, INC. CONDENSED CONSOLIDATED BALANCE
SHEETS (In Thousands, Except Share Data) (Unaudited)   March 28,

December 31,2009

2008ASSETSCurrent assets:Cash and cash
equivalents

$133,773

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

70,813

93,097Accounts receivable, net

131,658

83,408Inventories

48,720

42,504Prepaid expenses and other
current assets

19,064

20,040Deferred income tax
assets

35,941

53,060Income taxes
receivable

39,856

35,397Total current assets

479,825

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

79,319

79,439Available for sale debt and marketable equity
securities

375

1,949Intangible assets, net

28,956

35,208Goodwill

63,729

63,729Deferred financing costs and other assets

991

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

68,030

68,618Total assets

$721,225

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

$129,234

$130,141Accounts payable

29,037

22,879Payables due to
distribution agreement partners

43,297

91,451Accrued salaries and
employee benefits

14,173

11,850Accrued expenses and other
current liabilities

36,250

38,352Total current
liabilities

251,991

294,673Long-term debt, less current portion

-

-Other long-term liabilities

40,786

41,581Commitments and contingencies

-

-Stockholders' equityCommon Stock, par value
$0.01 per share, authorized 90,000,000
shares;          
issued 37,572,275 and 37,392,469 shares

375

374Additional paid-in
capital

322,047

319,976Retained earnings

175,549

159,470Accumulated other
comprehensive gain

92

122Treasury stock, at cost
2,815,369 and 2,716,010 shares

(69,615)

(67,959)Total stockholders'
equity

428,448

411,983Total liabilities and stockholders equity

$721,225

$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 EndedMarch 28,

March 29,2009

2008Revenues:Net product sales
$200,223

$151,237Other product related
revenues
3,812

3,691Total revenues
204,035

154,928Cost of goods sold
139,966

105,407Gross margin
64,069

49,521Operating expenses:Research and
development
7,172

17,158Selling, general and
administrative
32,960

31,346Settlements and loss
contingencies, net
(3,376)

-Restructuring costs
1,401

-Total operating expenses
38,157

48,504Gain on sale of product rights and other
(1,100)

(1,625)Operating income
27,012

2,642Gain on extinguishment of senior subordinated
convertible notes
245

-Equity in loss of joint venture
-

(20)Loss on marketable securities and other
investments, net
(55)

-Interest income
1,157

3,014Interest expense
(2,567)

(3,510)Income from continuing operations before provision
for income taxes
25,792

2,126Provision for income taxes
9,537

743Income from continuing operations
16,255

1,383Discontinued operations:Gain from discontinued operations
-

505Provision for income taxes
176

445(Loss) gain from discontinued operations
(176)

60Net income
$16,079

$1,443Basic earnings per share of common stock:Income from continuing operations
$0.48

$0.04(Loss) gain from discontinued operations
0.00

0.00Net income
$0.48

$0.04Diluted earnings per share of common stock:Income from continuing operations
$0.48

$0.04(Loss) gain from discontinued operations
0.00

0.00Net income
$0.48

$0.04Weighted average number of common shares
outstanding:Basic
33,603

33,220Diluted
33,772

33,587 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) Three Months EndedMarch 28,

March 29,2009

2008Cash flows from operating activities:Net income
$16,079

$1,443Deduct: (Loss) gain from discontinued operations,
net of tax
(176)

60Income from continuing operations
16,255

1,383Adjustments to reconcile net income to net cash
(used in) provided by operating activities:Deferred income taxes
17,725

(700)Non-cash interest
expense
1,593

1,843Depreciation and
amortization
8,742

6,274Allowances against
accounts receivable
(13,106)

(18,924)Share-based
compensation expense
3,535

3,463Loss on disposal of
fixed assets
242

21Gain on
extinguishment of senior subordinated convertible notes
(245)

-Other
(69)

(30)Changes in assets and
liabilities:Increase in accounts
receivable
(35,144)

(929)(Increase) decrease
in inventories
(6,216)

19,704Decrease in prepaid
expenses and other assets
2,760

1,006Increase (decrease)
in accounts payable, accrued expenses and other liabilities
6,711

(6,947)(Decrease) increase
in payables due to distribution agreement partners
(48,154)

8,774(Increase) decrease
in income taxes receivable/payable
(6,870)

3,541Net
cash (used in) provided by operating activities
(52,241)

18,479Cash flows from investing activities:Capital expenditures
(2,594)

(4,023)Purchases of available for sale
debt securities
-

(17,305)Proceeds from maturity and sale
of available for sale debt and marketable
            equity
securities
21,772

34,995Capital contributions to joint
venture
-

(591)Net cash provided by
investing activities
19,178

13,076Cash flows from financing activities:Proceeds from issuances of
common stock upon exercise of stock options
30

301Proceeds from the issuance of
common stock under the Employee Stock
            Purchase
Program
59

75Excess tax benefits on exercise
of nonqualified stock options
12

194Purchase of treasury
stock
(1,656)

(1,064)Principal payments under
long-term and other borrowings
(2,238)

-Net cash used in
financing activities
(3,793)

(494)Net (decrease) increase in cash and cash
equivalents
(36,856)

31,061Cash and cash equivalents at beginning of
period
170,629

200,132Cash and cash equivalents at end of
period
$133,773

$231,193Supplemental disclosure of cash flow
information:Cash (received) paid during the period for:Income taxes, net
($1,400)

($2,291)Interest
$2,037

$2,875Non-cash transactions:Capital expenditures incurred but not yet
paid
$1,663

$1,916 The accompanying notes are an integral part
of these condensed consolidated financial statements.   5   PAR
PHARMACEUTICAL COMPANIES, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS March 28, 2009 (Unaudited)  Par Pharmaceutical Companies, Inc.
operates primarily through its wholly owned subsidiary, Par Pharmaceutical, Inc.
(collectively referred to herein as Par, 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.  Marketed products are principally in the solid oral
dosage form (tablet, caplet and two-piece hard-shell capsule).  Par also
distributes several oral suspension products and certain products in the
semi-solid form of a cream.  Note 1- Basis of Presentation:  The accompanying condensed
consolidated financial statements at March 28, 2009 and for the three-month
periods ended March 28, 2009 and March 29, 2008 are unaudited; in the opinion of
Pars management, however, such statements include all adjustments necessary to
present fairly the information presented therein.  The condensed
consolidated balance sheet at December 31, 2008 was derived from Pars audited
consolidated financial statements included in Pars 2008 Annual Report on Form
10-K.  Pursuant to accounting requirements of
the Securities and Exchange Commission (the SEC) applicable to quarterly
reports on Form 10-Q, the accompanying condensed consolidated financial
statements and these Notes do not include all disclosures required by accounting
principles generally accepted in the United States (GAAP) for audited
financial statements.  Accordingly, these statements should be read in
conjunction with Pars 2008 Annual Report on Form 10-K.  Results of
operations for interim periods are not necessarily indicative of those that may
be achieved for full fiscal years.  Note 2  Change in Accounting Principle and Related
Adjustments to Previously Issued Financial Statements:  In May 2008, the Financial Accounting
Standards Board (FASB) issued FASB Staff Position No. APB 14-1, Accounting
for Convertible Debt Instruments That May Be Settled in Cash Upon Conversion
(Including Partial Cash Settlement)(FSP APB 14-1).  Under the new
rules for convertible debt instruments that may be settled entirely or partially
in cash upon conversion, an entity should separately account for the liability
and equity components of the instrument in a manner that reflects the issuers
economic interest cost.  Previous guidance provided for accounting of this
type of convertible debt instruments entirely as debt. Pars senior subordinated
convertible notes are subject to FSP APB 14-1.  Upon conversion, Par has
agreed to satisfy its conversion obligation in cash in an amount equal to the
principal amount of the notes converted.  The effect of the new rules for
this type of convertible debt instruments is that the equity component would be
included in the additional paid-in capital section of stockholders equity on
Pars condensed consolidated balance sheet and the value of the equity component
would be treated as original issue discount for purposes of accounting for the
debt component of the convertible debt instruments.  FSP APB 14-1 was
effective as of January 1, 2009, with retrospective application required.
 For instruments subject to the scope of FSP APB 14-1, higher interest
expense will result through the accretion of the discounted carrying value of
the debt instruments to their face amount over their term.  Prior period
interest expense will also be higher than previously reported due to
retrospective application.  Par estimates that its original
$200 million aggregate principal amount of 2.875% senior subordinated
convertible notes due 2010 had an approximate initial measurement of a
$169 million liability component and a $31 million equity component.
 Annual interest expense will be retroactively adjusted upward between $5.6
million to $7.0 million for the years 2008, 2007, 2006, and 2005.  The table below sets forth the effect
of the adjustments on the applicable line items within Pars condensed
consolidated balance sheet as of December 31, 2008 ($ amounts in thousands):  As previously reported

Adjustments

As adjustedAssets:Current assets:Deferred income tax assets
$55,230

($2,170)

$53,060Total current assets
$500,305

($2,170)

$498,135Non-current deferred income
tax assets, net
$70,954

($2,336)

$68,618Total assets
$752,743

($4,506)

$748,237   6    **As previouslyreported**

**Adjustments**

**As adjusted**Liabilities and stockholders equity:Current liabilities:Current portion of
long-term debt
$142,000

($11,859)

$130,141Total current
liabilities
$306,532

($11,859)

$294,673Stockholders' equity:Additional
paid-in-capital
$289,666

$30,310

$319,976Retained earnings
$182,427

($22,957)

$159,470Total stockholders equity
$404,630

$7,353

$411,983Total liabilities and stockholders' equity
$752,743

($4,506)

$748,237  The table below sets forth the effect
of the adjustments on the applicable line items within Pars condensed
consolidated statement of operations for the period ending March 29, 2008 ($
amounts in thousands):  As previously reported

Adjustments

As adjustedInterest expense
($1,667)

($1,843)

($3,510)Income from continuing operations before provision
for income taxes
$3,969

($1,843)

$2,126Provision for income taxes
$1,443

($700)

$743Income from continuing operations
$2,526

($1,143)

$1,383Net income
$2,586

($1,143)

$1,443Basic earnings (loss) per share
of common stock:Income (loss)
from continuing operations
$0.08

($0.04)

$0.04Net (loss)
income
$0.08

($0.04)

$0.04Diluted earnings (loss) per
share of common stock:Income (loss)
from continuing operations
$0.08

($0.04)

$0.04Net (loss)
income
$0.08

($0.04)

$0.04  The table below sets forth the effect
of the adjustments on the applicable line items within Pars condensed
consolidated statements of cash flows for the period ending March 29, 2008 ($
amounts in thousands):  As previously reported

Adjustments

As adjustedCash flows from operating activities:Net income
$2,586

($1,143)

$1,443Income from continuing operations
$2,526

($1,143)

$1,383Adjustments to reconcile net income to net cash
provided by operating activities:Deferred income
taxes
-

($700)

($700)Non-cash interest
expense
-

$1,843

$1,843Net cash provided by
operating activities
$18,479

-

$18,479   Note 3 - Share-Based
Compensation: Par adopted Statement of Financial
Accounting Standards No. 123 (Revised 2004), Share-Based Payment (SFAS
123R), effective January 1, 2006.  SFAS 123R requires companies to
recognize compensation expense in the amount equal to the fair value of all
share-based payments granted to employees.  Par elected the modified
prospective transition method and, therefore, adjustments to prior periods were
not required as a result of adopting SFAS 123R.  Under this method, the
provisions of SFAS 123R apply to all awards granted after the date of adoption
and to any unrecognized expense of non-vested awards at the date of adoption
based on the grant date fair value.   Under SFAS 123R, Par recognizes
share-based compensation ratably over the service period applicable to the
award.  SFAS 123R also amended SFAS No. 95, Statement of Cash Flows, to
require that excess tax benefits that have been   7   reflected as operating cash
flows be reflected as financing cash flows.  In accordance with SFAS 123R,
$0.01 million and $0.2 million of excess tax benefits for the three months ended
March 28, 2009 and March 29, 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 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 March 28, 2009, there were
approximately 4.4 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 have been granted at exercise prices that were equal to the market value
of Pars common stock on the date of grant.  At March 28, 2009,
approximately 0.7 million shares remain available 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 threemonths ended
months endedMarch 28,
March 28,2009
2008Risk-free interest rate
1.8%
3.0%Expected life (in years)
6.3
6.3Expected Volatility
43.7%
48.5%Dividend
0%
0%  The Black-Scholes option pricing model
was developed for use in estimating the fair value of traded options, which have
no vesting restrictions and are fully transferable.  Par compiled
historical data on an employee-by-employee basis from the grant date through the
settlement date.  The results of analyzing the historical data showed that
there were three distinct populations of optionees, the Executive Officers
Group, the Outside Directors Group, and the All Others Group.  The expected
life of options represents the period of time that the options are expected to
be outstanding and is based generally on historical trends.  However,
because none of Pars existing options have reached their full 10-year term, and
also because the majority of such options granted are out-of-the-money and the
expected life of out-of-the-money options is uncertain, we opted to use the
simplified method for plain vanilla options described in Staff Accounting
Bulletin 107.  The simplified method calculation is the average of the
vesting term plus the original contractual term divided by 2.  We will
revisit this assumption at least annually or sooner if circumstances warrant.
 The risk-free rate is based on the yield on the Federal Reserve treasury
rate with a maturity date corresponding to the expected term of the option
granted.  The expected volatility assumption is based on the historical
volatility of Pars common stock over a term equal to the expected term of the
option granted.  SFAS 123R also requires forfeitures to be estimated at the
time of grant and revised, if necessary, in subsequent periods if actual
forfeitures differ from those estimates.  It is assumed that no dividends
will be paid during the entire term of the options.  All option valuation
models require input of highly subjective assumptions.  Because Par's
employee stock options have characteristics significantly different from those
of traded options, and because changes in subjective input assumptions can
materially affect the fair value estimate, the actual value realized at the time
the options are exercised may differ from the estimated values computed above.
 The weighted average per share fair value of options granted in the three
month periods ended March 28, 2009 and March 29, 2008 were $5.85 and $9.92.  Set forth below is the impact on Pars
results of operations of recording share-based compensation from its stock
options for the three-month periods ended March 28, 2009 and March 29, 2008 ($
amounts in thousands):  For the three months
endedMarch 28,

March 29,2009

2008Cost of goods sold

$125

$62Research and development

-

156Selling, general and
administrative

1,126

560Total, pre-tax

$1,251

$778Tax effect of share-based
compensation

(475)

(296)Total, net of tax

$776

$482   8       The following is a
summary of Pars stock option activity (shares and aggregate intrinsic value in
thousands):  Shares

Weighted Average Exercise
Price

Weighted Average Remaining
Life

Aggregate Intrinsic
ValueBalance at December 31, 2008

4,065

$31.88Granted

1,108

13.04Exercised

(5)

6.63Forfeited

(545)

39.22Balance at March 28, 2009

4,623

$26.55

6.3

$283Exercisable at March 28, 2009

2,722

$35.00

4.1

$282Vested and expected to vest at
      March 28, 2009

4,575

$26.66

5.3

$283  The total fair
value of shares vested during the three-month period ended March 28, 2009 was
$2.0 million and $5.3 million for the three-month period ended March 29, 2008.
 As of March 28, 2009, the total compensation cost related to all
non-vested stock options granted to employees but not yet recognized was
approximately $11.0 million, net of estimated forfeitures.  This cost will
be amortized on a straight-line basis over the remaining weighted average
vesting period of 3.1 years.  Restricted Stock/Restricted Stock
Units  Outstanding restricted stock and
restricted stock units generally vest ratably over four years.  The related
share-based compensation expense is recorded over the requisite service period,
which is the vesting period.  The fair value of restricted stock is based
on the market value of Pars common stock on the date of grant.  The impact on Pars results of
operations of recording share-based compensation from restricted stock for the
three-month periods ended March 28, 2009 and March 29, 2008 was as follows ($
amounts in thousands):  For the three months
endedMarch 28,

March 29,2009

2008Cost of goods sold

$181

$164Research and development

-

410Selling, general and
administrative

1,629

1,475Total, pre-tax

$1,810

$2,049Tax effect of stock-based
compensation

(688)

(779)Total, net of tax

$1,122

$1,270  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

209

13.06Vested

(174)

27.75Forfeited

(31)

14.87Non-vested balance at March 28,
2009

868

$18.04

$8,545    9    The following is a summary of Pars
restricted stock unit activity (shares and aggregate intrinsic value in
thousands):  Shares

Weighted Average Grant
Price

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

106

$23.72Granted

50

13.09Vested and shares
issued

(41)

23.70Forfeited

-

-Unvested restricted stock unit
balance at       March 28, 2009

115

$18.87

$1,138Vested awards not issued

94

$26.05

$924Total restricted stock unit balance
at March 28, 2009

209

$22.09

$2,062  As of March 28, 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 $15.1
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 years.  Restricted Stock Grants With
Market Performance Vesting Conditions In 2008, Par issued restricted stock
grants with market performance vesting conditions.  The vesting of
restricted stock grants issued to certain employees of Par is contingent upon
multiple market conditions that are factored into the fair value of the
restricted stock at grant date with cliff vesting after three years if the
market conditions have been met.  Vesting will occur if the applicable
continued employment condition is satisfied and the Total Stockholder Return
(TSR) on Pars common stock exceeds a minimum TSR relative to Pars stock
price at the beginning of the three-year vesting period, the TSR meets or
exceeds the median of a defined peer group of approximately 15 companies, and/or
the TSR exceeds the Standard and Poors 400 Mid Cap Index (S&P 400)
over the three-year measurement period beginning on January 1 in the
year of grant and ending after three years on December 31.  A maximum
number of 466 thousand shares of common stock could be issued after the
three-year vesting period depending on the achievement of the TSR goals.
 No shares of common stock will be issued if Pars TSR is below 6%
annualized return over the three-year vesting period, except by operation of the
provisions of approximately 5 employment contracts for senior executives under
specific termination conditions.  Any shares earned will be distributed
after the end of the three-year period, except by operation of the provisions of
approximately 5 employment contracts under specific termination conditions.
 In all circumstances, restricted stock granted does not entitle the holder
the right, or obligate Par, to settle the restricted stock in cash.  The
effect of the market conditions on the restricted stock issued to certain
employees of Par is reflected in the fair value on the grant date.  The
restricted stock grants with market conditions were valued using a Monte Carlo
simulation.  The Monte Carlo simulation estimates the fair value based on
the expected term of the award, risk-free interest rate, expected dividends, and
the expected volatility for Par, its peer group, and the S&P 400.  The
expected term was estimated based on the vesting period of the awards (3 years),
the risk-free interest was based on the yield on the Federal Reserve treasury
rate with a maturity matching the vesting period (2.6%).  The expected
dividends were assumed to be zero.  Volatility was based on historical
volatility over the expected term (40%).  Restricted stock that included
multiple market conditions had a grant date fair value per restricted share of
$24.78.  The
following table summarizes the components of Pars stock-based compensation
related to its restricted stock grants with market conditions recognized in our
financial statements for the three-month periods ended March 28, 2009 and March
29, 2008 ($ amounts in thousands):  For the three months
endedMarch 28,

March 29,2009

2008Cost of goods sold

$47

$51Research and development

-

127Selling, general and
administrative

426

458Total, pre-tax

$473

$636Tax effect of stock-based
compensation

(180)

(242)Total, net of tax

$293

$394   10     As
of March 28, 2009, $3.5 million of total unrecognized compensation cost,
net of estimated forfeitures, related to restricted stock grants with market
conditions, is expected to be recognized over a weighted average period of
approximately 2 years.  The following is a summary of Pars
restricted stock grants with market conditions activity (shares and aggregate
intrinsic value in thousands):  Shares

Weighted Average Grant Date Fair
Value Per Share

Aggregate Intrinsic
ValueNon-vested balance at December 31, 2008

290

$24.78Granted

-

-Vested

-

-Forfeited

(41)

24.78Non-vested balance at March 28,
2009

249

$24.78

$2,449  Employee Stock Purchase Program:  Par maintains an Employee Stock
Purchase Program (the Program).  The Program is designed to qualify as an
employee stock purchase plan under Section 423 of the Internal Revenue Code of
1986, as amended.  It enables eligible employees to purchase shares of
Pars common stock at a 5% discount to the fair market value.  An aggregate
of 1 million shares of common stock has been reserved for sale to employees
under the Program.  Employees
purchased 6 thousand shares during the three-month period ended March 28, 2009
and 4 thousand shares during the three-month period March 29, 2008.   Note 4- Available for Sale Debt and Marketable
Equity Securities:  At March 28, 2009 and December 31,
2008, all of Pars investments in debt and marketable equity securities were
classified as available for sale and, as a result, were reported at their
estimated fair values on the condensed consolidated balance sheets.  Refer
to Note 5 - Fair Value Measurements.  The following is a summary of
amortized cost and estimated fair value of Pars debt and marketable equity
securities available for sale at March 28, 2009 ($ amounts in thousands):  EstimatedUnrealized

FairCost

Gain

(Loss)

ValueSecurities issued by government agencies

$21,299

$129

$ -

$21,428Debt securities issued by various state
and        local municipalities and
agencies

28,109

263

-

28,372Other debt securities

21,255

-

(242)

21,013Available for sale debt
securities

70,663

392

(242)

70,813Marketable equity securities available
for       sale Hana Biosciences,
Inc.

375

-

-

375Total

$71,038

$392

($242)

$71,188  Of the $0.2 million of unrealized loss
as of March 28, 2009, $0.02 million has been in an unrealized loss position for
greater than one year.  Par believes that these losses are not
other-than-temporary in accordance with FASB Staff Position Nos. FAS 115-1 /
124-1, The Meaning of Other-Than-Temporary Impairment and Its Application to
Certain Investments, due to its assessment that all amounts due according to
the contractual terms of the related debt securities will be collected and its
ability and intent to hold all marketable debt securities for a reasonable
period of time sufficient for a recovery of fair value up to (or beyond) the
cost of the investments.  All available for sale debt securities are
classified as current on Pars condensed consolidated balance sheet as of March
28, 2009. Par sold its
investment in a debt security issued by Ford Motor Credit Company for
approximately $1.6 million during the three-month period ended March 28, 2009.
 Par recorded a pre-tax gain of $0.3 million in the condensed consolidated
statement of operations.  This item was included in Loss on marketable
securities and other investments, net on the condensed consolidated statement of
operations.   11   Par
recorded a loss of $0.2 million in the condensed consolidated statement of
operations during the three-month period ended March 28, 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 has classified its investment in
Hana (at the revised cost of $0.4 million) as a non-current asset on its
condensed consolidated balance sheet as of March 28, 2009 due to its intent to
hold the investment for a period of time greater than 12 months.  The following is a summary of
amortized cost and estimated fair value of Pars investments in debt and
marketable equity securities available for sale at December 31, 2008 ($ 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 debt
securities

94,248

576

(378)

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

600

-

-

600Total

$94,848

$576

($378)

$95,046  The following is a summary of the contractual
maturities of Pars available for sale debt securities at March 28, 2009 ($ amounts in thousands):   March 28, 2009Estimated FairCost

ValueLess than one year

$49,733

$50,058Due between 1-2 years

12,791

12,672Due between 2-5 years

8,139

8,083Total

$70,663

$70,813   Note 5  Fair Value
Measurements: As described in Note 19 Recent
Accounting Pronouncements, Par adopted SFAS 157 with respect to financial
assets and liabilities as of January 1, 2008.  SFAS 157 defines fair value
as the price that would be received for an asset or paid to transfer a liability
(an exit price) in the principal or most advantageous market for the asset or
liability in an orderly transaction between market participants on the
measurement date.  SFAS 157 requires that assets and liabilities carried at
fair value be classified and disclosed in one of the following three categories:  Level 1: Quoted
market prices in active markets for identical assets and liabilities.
 Active market means a market in which transactions for assets or
liabilities occur with sufficient frequency and volume to provide pricing
information on an ongoing unadjusted basis.  Our Level 1 assets include
Pars investment in Hana Biosciences, Inc. that is traded in an active exchange
market. Level
2:  Observable inputs other than Level 1 prices, such as quoted prices for
similar assets or liabilities; or other inputs that are observable or can be
corroborated by observable market data for substantially the full term of the
assets or liabilities. Pars Level 2 assets primarily include debt securities
including governmental agency and municipal securities, and corporate bonds with
quoted prices that are traded less frequently than exchange-traded instruments.
 All of Pars Level 2 asset values are determined using a pricing model
with inputs that are observable in the market or can be derived principally from
or corroborated by observable market data.  The pricing model information
is provided by third party entities (e.g., banks or brokers).  In some
instances, these third party entities engage external pricing services to
estimate 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   12   services
to an independent source that provides quoted market prices from broker or
dealer quotations.  Large differences, if any, are investigated by Par.
 Based on historical differences, Par has not been required to adjust
quotes provided by the third party entities pricing services used in estimating
the fair value of these securities. Level 3:
Unobservable inputs that are not corroborated by market data. The fair value of Pars financial assets and liabilities
measured at fair value on a recurring basis were as follows ($ amounts in
thousands): Estimated Fair Value at
March 28, 2009

Level 1

Level 2

Level 3Securities issued by government   
agencies (Note 4)

$21,428

$ -

$21,428

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

28,372

-

28,372

-Other debt securities (Note 4)

21,013

-

21,013

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

375

375

-

-Total investments in debt and
marketable    equity securities

$71,188

$375

$70,813

$ -   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 collectibility is reasonably assured. This is generally at the
time that products are received by the customers.  Upon recognizing revenue
from a sale, Par records estimates for chargebacks, rebates and incentive
programs, product returns, cash discounts and other sales reserves that reduce
accounts receivable. The following
tables summarize the impact of accounts receivable reserves and allowance for
doubtful accounts on the gross trade accounts receivable balances at each
balance sheet date ($ amounts in thousands):  March 28,

December 31,2009

2008Gross trade accounts receivable

$229,805

$194,661Chargebacks

(21,174)

(32,738)Rebates and incentive programs

(26,022)

(27,110)Returns

(37,302)

(38,128)Cash discounts and other

(13,647)

(13,273)Allowance for doubtful accounts

(2)

(4)Accounts receivable, net

$131,658

$83,408   Allowance for doubtful accounts

For the three-month period
endedMarch 28,

March 29,2009

2008Balance at beginning of period

($4)

($20)Additions  charge to expense

-

-Adjustments and/or deductions

2

-Balance at end of period

($2)

($20)    13    The following tables summarize the
activity for the three months ended March 28, 2009 and the three months ended
March 29, 2008,  in the accounts affected by the estimated provisions
described below ($ amounts in thousands):  For the Period Ended March 28,
2009Accounts receivable   
reserves

Beginning balance

Provision recorded for current
period sales

(Provision) reversal recorded for
prior period sales

Credits processed

Ending balanceChargebacks

($32,738)

($42,386)

($435)
(1)
$54,385

($21,174)Rebates and incentive  
 programs

(27,110)

(21,862)

157

22,793

(26,022)Returns

(38,128)

(6,298)

(339)

7,463

(37,302)Cash discounts and  
 other

(13,273)

(11,329)

-

10,955

(13,647)Total

($111,249)

($81,875)

($617)

$95,596

($98,145)Accrued liabilities(2)

($21,912)

($6,042)

$ -

$2,955

($24,999)   For the Period Ended March 29,
2008Accounts receivable   
reserves

Beginning balance

Provision recorded for current
period sales

(Provision) reversal recorded for
prior period sales

Credits processed

Ending balanceChargebacks

($46,006)

($107,639)

($539)
(1)
$110,197

($43,987)Rebates and incentive  
 programs

(42,859)

(23,086)

(1,571)
(3)
34,557

(32,959)Returns

(47,102)

(4,904)

4,293
(4)
7,220

(40,493)Cash discounts and  
 other

(16,158)

(12,274)

349

12,321

(15,762)Total

($152,125)

($147,903)

$2,532

$164,295

($133,201)Accrued liabilities(2)

($17,684)

($8,482)

$805

$1,657

($23,704)  (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(s) 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 three-month period
ended March 29, 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 relating to the loss of a customer for certain products
and new returns information that became available during the three-month period
ended March 29, 2008, of $2.8 million.  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 50% of our net product sales were derived from the wholesale
distribution channel for the three months ended March 28, 2009 and 72%for the three months ended March 29, 2008.  The information that Par
considers when establishing its chargeback reserves includes contract and
non-contract sales trends, average   14   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
Medicaid rebate accrual primarily based on historical experience of claims
submitted by the various states and any new information regarding changes in the
Medicaid program that might impact Pars provision for Medicaid rebates.
 In determining the appropriate accrual amount Par considers historical
payment rates; processing lag for outstanding claims and payments; and levels of
inventory in the distribution channel.  Par reviews the accrual and
assumptions on a quarterly basis against actual claims data to help ensure that
the estimates made are reliable.  On January 28, 2008, the Fiscal Year 2008
National Defense Authorization Act was enacted, which expands TriCare to include
prescription drugs dispensed by TriCare retail network pharmacies.  TriCare
rebate accruals reflect this program expansion and are based on actual and
estimated rebates on Department of Defense eligible sales.  Par accepts returns of product
according to the following criteria: (i) the product returns must be approved by
authorized personnel with the lot number and expiration date accompanying any
request and (ii) Par generally will accept returns of products from any customer
and will provide the customer with a credit memo for such returns if such
products are returned within six months prior to, and until 12 months following,
such products expiration date. Par records a provision for product returns
based on historical experience, including actual rate of expired and damaged
in-transit returns, average remaining shelf-lives of products sold, which
generally range from 12 to 48 months, and estimated return dates.
 Additionally, Par considers other factors when estimating its current
period return provision, including levels of inventory in the distribution
channel, significant market changes that may impact future expected returns, and
actual product returns, and may record additional provisions for specific
returns that it believes are not covered by the historical rates.  Par offers cash discounts to its
customers, generally 2% of the sales price, as an incentive for paying within
invoice terms, which generally range from 30 to 90 days.  Par accounts for
cash discounts by reducing accounts receivable by the full amount of the
discounts that Par expects its customers to take.  In addition to the
significant gross-to-net sales adjustments described above, Par periodically
makes other sales adjustments.  Par generally accounts for these other
gross-to-net adjustments by establishing an accrual in the amount equal to its
estimate of the adjustments attributable to the sale.  Par may at its discretion provide
price adjustments due to various competitive factors, through shelf-stock
adjustments on customers existing inventory levels.  There are
circumstances under which Par may not provide price adjustments to certain
customers as a matter of business strategy, and consequently may lose future
sales volume to competitors and risk a greater level of sales returns on
products that remain in the customers existing inventory.  As detailed above, Par has the
experience and access to relevant information that it believes are necessary to
reasonably estimate the amounts of such deductions from gross revenues.
 Some of the assumptions used by Par for certain of its estimates are based
on information received from third parties, such as wholesale customer
inventories and market data, or other market factors beyond Pars control.
 The estimates that are most critical to the establishment of these
reserves, and therefore, would have the largest impact if these estimates were
not accurate, are estimates related to contract sales volumes, average contract
pricing, customer inventories and return volumes.  Par regularly reviews
the information related to these estimates and adjusts its reserves accordingly,
if and when actual experience differs from previous estimates.  With the
exception of the product returns allowance, the ending balances of accounts
receivable reserves and allowances generally are processed during a two-month to
four-month period.  Use of Estimates in Reserves Par believes that its reserves,
allowances and accruals for items that are deducted from gross revenues are
reasonable and appropriate based on current facts and circumstances. It is
possible, however, that other parties applying reasonable judgment to the   15   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  March 28,

December 31,2009

2008McKesson Corporation

24%

36%AmerisourceBergen Corporation

16%

17%CVS Caremark

15%

5%Cardinal Health Inc.

8%

13%Other customers

37%

29%Total gross accounts receivable

100%

100%  During the three months ended March
28, 2009, Par shipped a greater percentage of metoprolol as compared to prior
periods directly to retail customers such as CVS to help alleviate supply issues
in the market.   Note 7- Inventories: ($ amounts in thousands) March 28,

December 31,2009

2008Raw materials and supplies

$15,220

$13,760Work-in-process

4,270

4,495Finished goods

29,230

24,249$48,720

$42,504  Inventory write-offs (inclusive of
pre-launch inventories detailed below) were $2.5 million for the quarter ended
March 28, 2009 and $3.1 million for the quarter ended March 29, 2008.  Par capitalizes inventory costs
associated with certain products prior to regulatory approval and product
launch, based on management's judgment of reasonably certain future commercial
use and net realizable value, when it is reasonably certain that the pre-launch
inventories will be saleable.  The determination to capitalize is made once
Par (or its third party development partners) has filed an Abbreviated New Drug
Application (ANDA) that has been acknowledged by the FDA for containing
sufficient information to allow the FDA to conduct their review in an efficient
and timely manner and management is reasonably certain that all regulatory and
legal hurdles will be cleared.  This determination is based on the
particular facts and circumstances relating to the expected FDA approval of the
generic drug product being considered, and accordingly, the time frame within
which the determination is made varies from product to product.  Par could
be required to write down previously capitalized costs related to pre-launch
inventories upon a change in such judgment, or due to a denial or delay of
approval by regulatory bodies, or a delay in commercialization, or other
potential factors.  As of March 28, 2009, Par had approximately $2.3
million in inventories related to products that were not yet available to be
sold.   16    The amounts in the table below are
also included in the total inventory balances presented above.  Pre-Launch Inventories ($ amounts in thousands) March 28,

December 31,2009

2008Raw materials and supplies

$1,866

$577Work-in-process

442

542Finished goods

-

474$2,308

$1,593  Pre-launch
inventories at December 31, 2008 were mainly comprised of in-house developed
products.  Since that time, Par increased the quantity of that inventory in
preparation of anticipated launches later in 2009.  Write offs of
pre-launch inventories, net of partner allocation, were $0.4 million for the
quarter ended March 28, 2009 and $0.9 million for the quarter ended March 29,
2008.   Note 8  Property, Plant and Equipment, net: ($ amounts in thousands) March 28,

December 31,2009

2008Land

$1,882

$1,882Buildings

25,581

25,571Machinery and equipment

47,373

44,027Office equipment, furniture and
fixtures

4,750

4,774Computer software and hardware

30,461

29,179Leasehold improvements

11,543

11,548Construction in progress

15,960

16,462137,550

133,443Less accumulated depreciation and
amortization

58,231

54,004$79,319

$79,439 Depreciation and amortization expense
related to property, plant and equipment was $2.5 million for the three months
ended March 28, 2009 and $3.9 million for the three months ended March 29, 2008.   Note 9- Intangible Assets, net: ($ amounts in thousands) March 28,

December 31,2009

2008Trademark licensed from
Bristol-Myers Squibb Company, net
of        
 accumulated amortization of $4,251 and $3,850

$5,750

$6,151Paddock Licensing Agreement, net
of accumulated amortization of
$2,500          and
$2,250

3,500

3,750Spectrum Development and
Marketing Agreement, net of
accumulated        
 amortization of $11,520 and $6,839

13,480

18,161Genpharm, Inc. Distribution
Agreement, net of accumulated amortization
of        
 $7,763 and $7,582

3,070

3,251SVC Pharma LP License and
Distribution Agreement, net of
accumulated        
 amortization of $1,430 and $1,106

2,254

2,578Bristol-Myers Squibb Company
Asset Purchase Agreement, net
of        
 accumulated amortization of $11,699 and $11,420

-

279FSC Laboratories Agreement, net
of accumulated amortization of $4,942
and        
 $4,816

880

1,006Other intangible assets, net of
accumulated amortization of $5,226
and        
 $5,216

22

32$28,956

$35,208    17    Par recorded amortization expense
related to intangible assets of $6.3 million for the three-month period ended
March 28, 2009 and $2.4 million for the three-month period ended March 29, 2008,
and this amortization expense is included in cost of goods sold. Amortization
expense related to the intangible assets currently being amortized is expected
to total approximately $9.5 million for the remainder of 2009, $8.3 million in
2010, $7.8 million in 2011, $2.8 million in 2012, and $0.6 million in 2013.  Par evaluates all intangible assets
for impairment quarterly or whenever events or other changes in circumstances
indicate that the carrying value of an asset may no longer be recoverable.
 As of March 28, 2009, Par believes its net intangible assets are
recoverable.   Note 10- Income Taxes:  Par reflects interest and penalties
attributable to income taxes, to the extent they arise, as a component of its
income tax provision or benefit. The IRS is
currently examining Pars 2003-2007 federal income tax returns.  Prior
periods have either been audited or are no longer subject to IRS audit.
 Par is currently under audit by two state jurisdictions for the years
2003-2005.  In most other state jurisdictions, Par is no longer subject to
examination by tax authorities for years prior to 2004.  Current deferred income tax assets at
March 28, 2009 consisted of temporary differences primarily related to accounts
receivable reserves.  Current deferred income tax assets at December 31,
2008 consisted of temporary differences primarily related to accounts receivable
reserves and accrued expenses.  Non-current deferred income tax assets at
March 28, 2009 and December 31, 2008 consisted of the tax benefit related to
purchased call options, acquired in-process research and development and timing
differences primarily related to intangible assets and stock options.  Pars effective tax rate for
continuing operations for the three months ended March 28, 2009 was 37% and 35%
for the three months ended March 29, 2008.   Note 11 -
Long-Term Debt: Long-Term Debt ($ amounts in thousands) March 28,

December 31,2009

2008Senior subordinated convertible notes
(a)

$129,234

$130,141Less current portion

(129,234)

(130,141)$-

$-  (a) On March 28, 2009, the senior
subordinated convertible notes had a face value of $139.5 million and a quoted
market value of approximately $130 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,
accelerated or repurchased.  Par may not redeem the notes prior to
their maturity date.  See Legal Proceedings in Note 14,
Commitments, Contingencies and Other Matters for discussion involving notices
of default and acceleration Par received from the Trustee of Pars 2.875% senior
subordinated convertible notes due 2010 and the related litigation.  Until
the matter is resolved, Par is recording the payment obligations as a current
liability as of March 28, 2009 because the Court in the matter could (i) rule
against Pars position and (ii) determine that the appropriate remedy would be
the accelerated payment of the Notes.  Accordingly,
Par cannot consider the possibility of accelerated payment to be remote.  In March 2009, Par repurchased senior
subordinated convertible notes in the aggregate principal (face) amount of $2.5
million, including accrued interest.  Par recorded a gain of approximately
$0.2 million in the first quarter of 2009 related to this debt extinguishment.  See Note 2, Change in Accounting
Principle and Related Adjustments to Previously Issued Financial Statements for
the impact of the adoption of FSP APB 14-1.   18     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 three-month period ended March
28, 2009 were as follows:  AccumulatedAdditional

OtherCommon Stock

Paid-In

ComprehensiveShares

Amount

Capital

Income/(Loss)Balance, December 31, 2008

37,392

$374

$319,976

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

-

-

-

(30)Exercise of stock options

5

-

30

-Tax benefit from exercise of stock options

-

-

12

-Tax deficiency related to vesting
of       restricted stock

-

-

(1,441)

-Issuance of common stock under
the       Employee Stock Purchase
Program

-

-

59

-Forfeitures of restricted stock

(73)

(1)

1

-Issuances of restricted stock

248

2

(2)

-Compensatory arrangements

-

-

3,535

-Other

-

-

(123)

-Balance, March 28, 2009

37,572

$375

$322,047

$92  Comprehensive Income

Three months endedMarch 28,

March 29,2009

2008Net income

$16,079

$1,443Other comprehensive income:Unrealized loss on marketable securities, net of
tax

(64)

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

34

-Comprehensive income

$16,049

$1,125  In April 2004, Pars Board of
Directors authorized the repurchase of up to $50.0 million of Pars common
stock.  The repurchases may be made, subject to compliance with applicable
securities laws, from time to time in the open market or in privately negotiated
transactions.  Shares of common stock acquired through the repurchase
program are and will be available for general corporate purposes.  Par had
repurchased 849 thousand shares of its common stock for approximately $32.2
million pursuant to the April 2004 authorization.  On September 28, 2007,
Par announced that its Board approved an expansion of its share repurchase
program allowing for the repurchase of up to $75.0 million of Pars common
stock, inclusive of the $17.8 million remaining from the April 2004
authorization.  Par repurchased 1,643 thousand shares of its common stock
for approximately $31.4 million pursuant to the expanded program in 2007.
 The authorized amount remaining for stock repurchases under the repurchase
program was $43.6 million, as of March 28, 2009.  The repurchase program
has no expiration date. See Note 2,
Change in Accounting Principle and Related Adjustments to Previously Issued
Financial Statements for the impact of the adoption of FSP APB 14-1.     19    Note 13- Earnings Per Share: The following is a reconciliation of
the amounts used to calculate basic and diluted earnings per share:  Three months endedMarch 28,

March 29,2009

2008Income from continuing operations

$16,255

$1,383Gain from discontinued operations

-

505Provision for income taxes

176

445(Loss) gain from discontinued operations

(176)

60Net income

$16,079

$1,443Basic:Weighted average number of common shares
outstanding

33,603

33,220Income from continuing operations

$0.48

$0.04(Loss) gain from discontinued operations

0.00

0.00Net income per share of common stock

$0.48

$0.04Assuming dilution:Weighted average number of common shares
outstanding

33,603

33,220Effect of dilutive securities

169

367Weighted average number of common and common
equivalent shares     outstanding

33,772

33,587Income from continuing operations

$0.48

$0.04(Loss) gain from discontinued operations

0.00

0.00Net income per share of common stock

$0.48

$0.04  Outstanding options of 4.1 million as
of March 28, 2009 and 4.0 million as of March 29, 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.  As
of March 28, 2009, restricted stock grants with market conditions were not
included in the calculation of diluted earnings per share because the Total
Stockholder Return (TSR) on Pars common stock did not exceed a minimum TSR
relative to Pars stock price at the beginning of the vesting period.  In
addition, outstanding warrants sold concurrently with the sale of the senior
subordinated convertible notes in September 2003 and issued in conjunction with
the acquisition of Kali in June 2004 were not included in the computation of
diluted earnings per share as of March 28, 2009 and March 29, 2008.  The
warrants related to the notes are exercisable for an aggregate of 1,572 thousand
shares of common stock at an exercise price of $105.20 per share and the
warrants related to the Kali acquisition are exercisable for an aggregate of 150
thousand shares of common stock at an exercise price of $47.00 per share.   Note 14- Commitments, Contingencies and
Other Matters: Legal
Proceedings Unless otherwise indicated in the
details provided below, Par cannot predict with certainty the outcome or the
effects on Par of the litigations described below.  The outcome of these
litigations could include substantial damages, the imposition of substantial
fines, penalties, and injunctive or administrative remedies, however unless
otherwise indicated, Par at this time is not able to estimate the possible loss
or range of loss, if any, associated with these legal proceedings.  Contractual Matters On May 3, 2004, Pentech
Pharmaceuticals, Inc. (Pentech) filed an action against Par in the United
States District Court for the Northern District of Illinois.  This action
alleged that Par breached its contract with Pentech relating to the supply and
marketing of paroxetine (Paxil®) and that Par breached fiduciary duties
allegedly owed to Pentech.  On February 9, 2009, following a bench trial,
the district court entered a judgment in favor of Pentech and against Par in the
amount of $70 million.  Subsequently, on March 5,   20   2009, in order to avoid any
further costs, burdens or distractions of litigation, Par entered into a
Settlement Agreement with Pentech pursuant to which Par paid Pentech an amount
of approximately $66 million.  Pursuant to the terms of the agreement, a
stipulation dismissing the appeal of judgment and Pentechs satisfaction of
judgment was filed with the District Court.  Corporate Litigation Par and certain of its former
executive officers have been named as defendants in consolidated class action
lawsuits filed on behalf of purchasers of common stock of Par between July 23,
2001 and July 5, 2006. The lawsuits followed Pars July 5, 2006 announcement
regarding the restatement of certain of its financial statements and allege that
Par and certain members of its then management engaged in violations of the
Securities Exchange Act of 1934, as amended (the Exchange Act), by issuing
false and misleading statements concerning Pars financial condition and results
of operations. The class actions are pending in the United States District
Court, District of New Jersey.  On June 24, 2008, the Court dismissed
co-lead plaintiffs Consolidated Amended Complaint without prejudice with leave
to re-file.  On July 24, 2008, co-lead plaintiffs filed a Second
Consolidated Amended Complaint. Par and the individual defendants have filed a
motion to dismiss.  The motion has been fully briefed but not yet scheduled
for argument.  Par and the individual defendants intend to vigorously
defend the class action.  On
September 1, 2006, Par received a notice of default from the American Stock
Transfer & Trust Company, as trustee (the Trustee)  of Pars 2.875%
Senior Subordinated Convertible Notes due 2010 (the Notes). The Trustee
claims, in essence, that Pars failure to include financial statements in its
Quarterly Report on Form 10-Q for the second quarter of 2006 constituted a
default under Section 6.2 of the Indenture, dated as of September 30,
2003 (the Indenture), between Par, as issuer, and the Trustee, relating to the
Notes.  Under the Indenture, Par is required only to provide the Trustee
with copies of its annual and other reports (or copies of such portions of such
reports as the SEC may by rules and regulations prescribe) that it is required
to file with the SEC pursuant to Section 13 or 15(d) of the Exchange Act within
15 calendar days after it files such annual and other reports with the SEC.
Moreover, Pars Indenture specifically contemplates providing the Trustee with
portions of reports. On August 24, 2006 (within 15 days of filing with the SEC),
Par provided to the Trustee a copy of its Quarterly Report on Form 10-Q for the
second quarter of 2006. Pars Form 10-Q did not include Pars financial
statements for the second quarter of 2006 and related Managements Discussion
and Analysis due to Pars work to restate certain of its past financial
statements, and, therefore, in accordance with SEC rules, Par filed a Form
12b-25 Notification of Late Filing disclosing the omissions. Pars Form 12b-25
also was provided to the Trustee on August 24, 2006. Accordingly, Par believes
that it complied with the Indenture provision in question. After Par communicated its position to
the Trustee, the Trustee filed a lawsuit, on October 19, 2006, on behalf of
the holders of the Notes in the Supreme Court of the State of New York, County
of New York, alleging a breach of the Indenture and of an alleged covenant of
good faith and fair dealing. The lawsuit demands, among other things, that Par
pay the holders of the Notes either the principal, any accrued and unpaid
interest and additional interest (as such term is defined in the Indenture), if
any, or the difference between the fair market value of the Notes on
October 2, 2006 and par, whichever the Trustee elects, or in the
alternative, damages to be determined at trial, alleged by the Trustee to exceed
$30.0 million. Par removed the lawsuit to the U.S. District Court for the
Southern District of New York and has filed its answer to the complaint in that
Court. On January 19, 2007, the Trustee filed a motion for summary
judgment. On February 16, 2007, Par filed its response to the Trustees motion
for summary judgment and cross-moved for summary judgment in its favor.
 The Court has not yet ruled on the motions.  Until the matter is
resolved, Par is recording the payment obligations as a current liability on the
condensed consolidated balance sheets because the Court in the matter could rule
against Pars position and determine that the appropriate remedy would be the
accelerated payment of the convertible notes.  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 action in a reexamination proceeding at
the United States Patent and Trademark Office (PTO) on February 24, 2006 and
on February 24, 2007.  The 392 patent is also the subject of a
reexamination proceeding.  As of July 10, 2008, the PTO has rejected with
finality all claims pending in both the 392 and 981 patents.  CIMA has
moved to stay this lawsuit pending the outcome of the reexamination proceedings
and to consolidate this lawsuit with another lawsuit in the same district
involving the same patents (CIMA Labs, Inc. et al. v. Actavis Group hf et al.).
Par intends to vigorously defend this lawsuit and pursue its counterclaims. Par entered
into a licensing agreement with developer Paddock Laboratories, Inc. (Paddock)
to market testosterone 1% gel, a generic version of Unimed Pharmaceuticals,
Inc.s (Unimed) product Androgel®.  Pursuant to this agreement, Par is
responsible for management of any litigation and payment of all legal fees
associated with this product.  The product, if successfully brought to
market, would be manufactured by Paddock and marketed by Par.  Paddock has
filed an ANDA (that is pending with the FDA) for the testosterone 1% gel
product.  As a result of the filing of the ANDA, Unimed and Laboratories
Besins Iscovesco (Besins), co-   21   assignees
of the patent-in-suit, filed a lawsuit against Paddock in the United States
District Court for the Northern District of Georgia, alleging patent
infringement on August 22, 2003.  Par has an economic interest in the
outcome of this litigation by virtue of its licensing agreement with Paddock.
 Unimed and Besins sought an injunction to prevent Paddock from
manufacturing the generic product.  On September 13, 2006, Par acquired
from Paddock all rights to the ANDA for testosterone 1% gel, a generic version
of Unimeds product Androgel® for $6 million.  The lawsuit was resolved by
a settlement and license agreement that terminates all on-going litigation and
permits Par to launch the generic version of the product no earlier than August
31, 2015 and no later than February 28, 2016, assuring Pars ability to market a
generic version of Androgel® well before the expiration of the patents at issue.
 On March 7, 2007, Par was issued a Civil Investigative Demand seeking
information and documents in connection with the court-approved settlement in
2006 of the patent infringement case, Unimed v. Paddock, in the U.S. District
Court for Northern District of Georgia.  The Bureau of Competition for the
Federal Trade Commission (FTC) is investigating whether the settlement of the
litigation constituted unfair methods of competition in a potential violation of
Section 5 of the FTC Act.  On January 30, 2009, the FTC filed a lawsuit
against the company in the U.S. District Court for the District of Central
California alleging violations of antitrust laws stemming from Pars
court-approved settlement in the patent litigation.  On February 2, 2009,
Meijer Distribution, Inc. filed a class action complaint in the same district
court alleging antitrust violations and seeking treble damages. On February 3,
2009, both Rochester Drug Co-Operative, Inc. and Louisiana Wholesale Drug Co.,
Inc. filed class action complaints in the same district court.  On April 9,
2009, the U.S. District Court for Central California granted Pars motion to
transfer the FTC lawsuit, as well as the three aforementioned class action
suits, to the U.S. District Court for Northern Georgia, the jurisdiction in
which Pars original consent judgment relating to the patent litigation
settlement entered.  On April 10, 2009, the cases were transferred.
 On April 17, 2009 the Fraternal Order of Police, Fort Lauderdale Lodge 31
Insurance Trust Fund filed a class action complaint naming Par in the U.S.
District Court for the District of New Jersey and on April 21, 2009 Raymond
Scurto on behalf of another class, filed a second class action complaint naming
Par in the same court both alleging antitrust violations.  Par believes it
has complied with all applicable laws in connection with the court-approved
settlement and intends to vigorously defend these actions. On October 4,
2006, Novartis Corporation, Novartis Pharmaceuticals Corporation, and Novartis
International AG (collectively Novartis) filed a lawsuit against Par in the
United States District Court for the District of New Jersey. Novartis alleged
that Par and Kali infringed U.S. Patent No. 6,162,802 (the 802 patent) by
submitting a Paragraph IV certification to the FDA for approval of amlodipine
and benazepril hydrochloride combination capsules. Par and its subsidiary denied
Novartis allegation, asserting that the 802 patent is not infringed and is
invalid.  Par submitted a claim construction brief on September 5, 2008 and
its rebuttal brief on October 8, 2008.  On December 11, 2008, the company
entered into a settlement agreement with Novartis.  On February 10, 2009, a
stipulation of dismissal was entered by the judge, finally terminating the case. On December 19, 2006, Reliant
Pharmaceuticals, Inc. (Reliant) filed a lawsuit against Par in the United
States District Court for the District of Delaware.  Reliant alleged, in
its Complaint, that Par infringed U.S. Patent No. 5,681,588 (the 588 patent)
by submitting a Paragraph IV certification to the FDA for approval to market
generic 325 mg Propafenone HCl SR capsules.  On January 26, 2007, Reliant
amended its complaint to add the additional allegation that Par infringed the
588 patent by submitting a Paragraph IV certification to the FDA for approval
to market generic 225 mg and 425 mgin addition to the 325 mgPropafenone HCl SR
capsules.  Par has answered and counterclaimed denying Reliants
infringement allegations, and asserting that the 588 patent is invalid and
unenforceable.  On April 17, 2009, a dismissal with prejudice was entered
in the case pursuant to a settlement agreement between the parties.  In
view of this agreement, Par will enter the market with generic Rythmol SR on
January 1, 2011 or earlier depending on certain circumstances.  On May 9, 2007, Purdue Pharma Products
L.P. (Purdue), Napp Pharmaceutical Group Ltd. (Napp), Biovail Laboratories
International SRL (Biovail), and Ortho-McNeil, Inc. (Ortho-McNeil) filed a
lawsuit against Par in the United States District Court for the District of
Delaware.  The complaint alleges infringement of U.S. Patent No. 6,254,887
(the 887 patent) because Par submitted a Paragraph IV certification to the
FDA for approval of 200 mg extended release tablets containing tramadol
hydrochloride.  On May 30, 2007, Par filed its answer and counterclaim to
the Complaint seeking a declaration of noninfringement and invalidity of the
'887 patent.  A subsequent Complaint was served on July 2, 2007 in the same
District Court.  The new Complaint alleges that Par's 100 mg and 200 mg
extended release tablets containing tramadol hydrochloride infringe the 887
patent.  Par filed its Answer and Counterclaim on July 23, 2007 and will
assert all available defenses in addition to seeking a declaration of
noninfringement and invalidity of the '887 patent.  On October 24, 2007,
plaintiffs filed an amended complaint in the Delaware District Court in view of
Par's amendment of its ANDA to include the 300 mg strength of extended release
tramadol. Trial is currently set for April 16, 2009.  Par intends to defend
this action vigorously and pursue its counterclaims against the plaintiffs.  On July 6, 2007, Sanofi-Aventis and
Debiopharm, S.A. filed a lawsuit against Par and its development partner, MN
Pharmaceuticals ("MN"), in the United States District Court for the District of
New Jersey.  The complaint alleges infringement of U.S. Patent Nos.
5,338,874 and 5,716,988 because Par and MN submitted a Paragraph IV
certification to the FDA for approval of 50 mg/10 ml, 100 mg/20 ml, and 200
mg/40 ml oxaliplatin by injection.  Par and MN filed their Answer and
Counterclaims on October 10, 2007 and an amendment to it on October 22, 2007.
 On January 14, 2008, following MN's amendment of its ANDA to include
oxaliplatin injectable 5 mg/ml, 40 ml vial, Sanofi-Aventis filed a complaint
asserting infringement of the '874 and the '998 patents.  Par and MN filed
their Answer and Counterclaim on February 20, 2008.  The court has set an
expert discovery deadline of June 9,   22   2009, with all motions due by
June 15, 2009.  Par and MN intend to defend these actions vigorously and
pursue their counterclaims against Sanofi and Debiopharm.  On September 21, 2007, Sanofi-Aventis
and Sanofi-Aventis U.S., LLC (Sanofi-Aventis) filed a lawsuit against Par and
its development partner, Actavis South Atlantic LLC ("Actavis"), in the United
States District Court for the District of Delaware.  The complaint alleges
infringement of U.S. Patent Nos. 4,661,491 and 6,149,940 because Par and Actavis
submitted a Paragraph IV certification to the FDA for approval of 10 mg
alfuzosin hydrochloride extended release tablets. Par has filed an Answer to the
Complaint and counterclaims that the patents asserted are not infringed and are
invalid.  On April 3, 2008, the judge ordered all actions in the case
stayed pending the plaintiffs motion for transfer and consolidation under the
rules governing multi-district litigation.  On June 9, 2008, the
Multi-District Litigation Panel granted plaintiffs motion for transfer and
consolidation and lifted the stay of litigation.  On December 24, 2008, Par
agreed to terminate its collaboration agreement with Actavis and, with it, all
obligations and all benefits related to Alfuzosin.  Par has instructed its
attorneys to move to withdraw the company from the litigation.  On October 1, 2007, Elan
Corporation, PLC (Elan) filed a lawsuit against Par and its development
partner, IntelliPharmaCeutics Corp., and IntelliPharmaCeutics Ltd. ("IPC") in
the United States District Court for the District of Delaware.  On October
5, 2007, Celgene Corporation (Celgene) and Novartis filed a lawsuit against
IPC in the United States District Court for the District of New Jersey.
 The Complaint in the Delaware case alleged infringement of U.S. Patent
Nos. 6,228,398 and 6,730,325 because Par submitted a Paragraph IV certification
to the FDA for approval of 5, 10, 15, and 20 mg dexmethylphenidate hydrochloride
extended release capsules.  The original Complaint in the New Jersey case
alleged infringement of U.S. Patent Nos. 6,228,398; 6,730,325; 5,908,850;
6,355,656; 6,528,530; 5,837,284; and 6,635,284 because Par and IPC submitted a
Paragraph IV certification to the FDA for approval of 5, 10, 15, and 20 mg
dexmethylphenidate extended release capsules.  Par and IPC filed an Answer
and Counterclaims in both the Delaware case and the New Jersey case.  Elan
filed a motion to consolidate the cases on January 2, 2008, and on February 20,
2008, the judge in the Delaware litigation consolidated all four related cases
pending in Delaware and entered a scheduling order providing for April 15, 2009
as the deadline for all discovery, June 29, 2009 as the date for a Markman
hearing, and August 17, 2009 as the date for a bench trial.  The Delaware
court has established a March 5, 2009 deadline for fact discovery and a June 15,
2009 deadline for expert discovery.  A Rule 16 conference was held for the
New Jersey litigation on March 4, 2008 setting a deadline of December 12, 2008
for all discovery with a Markman hearing scheduled for June 19, 2009.  The
New Jersey court has set a fact discovery deadline of March 1, 2009.  Par
intends to defend these actions vigorously and pursue its counterclaims against
Elan, Celgene and Novartis.  On September 13, 2007, Santarus, Inc.
(Santarus), and The Curators of the University of Missouri (Missouri) filed
a lawsuit against Par in the United States District Court for the District of
Delaware.  The Complaint alleges infringement of U.S. Patent Nos.
6,699,885; 6,489,346; and 6,645,988 because Par submitted a Paragraph IV
certification to the FDA for approval of 20 mg and 40 mg omeprazole/sodium
bicarbonate capsules.  Par filed its Answer and Counterclaims on October
17, 2007.  A scheduling conference was held February 11, 2008, setting
September 8, 2008 as the date for the claim construction hearing and July 13,
2009 as the first day of the bench trial. On December 20, 2007, Santarus, Inc.,
and Missouri filed a second lawsuit against Par in the United States District
Court for the District of Delaware alleging infringement of U.S. Patent Nos.
6,699,885; 6,489,346; 6,780,882; and 6,645,988 because Par submitted a Paragraph
IV certification to the FDA for approval of 20 mg and 40 mg omeprazole/sodium
bicarbonate powders for oral suspension.  Par filed an answer and
counterclaims in this action as well.  On March 4, 2008, the cases
pertaining to Pars ANDAs for omeprazole capsules and omeprazole oral suspension
(see below) were consolidated for all purposes.  Par filed its claim
construction brief on August 22, 2008, and its answering brief on September 22,
2008, as the Court rescheduled the Markman hearing.  The Court held a
Markman hearing on November 5, 2008 and issued its claim construction order on
the same day.   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
pretrial conference for January 11, 2010, and a bench trial for February 15,
2010. Par intends to defend these actions vigorously and pursue its
counterclaims against AstraZeneca Pharmaceuticals, LP, AstraZeneca UK Ltd., IPR
Pharmaceuticals, Inc. and Shionogi Seiyaku Kabushiki Kaisha.  On November 14, 2008, Pozen, Inc.
filed a lawsuit against Par in the United States District Court for the Eastern
District of Texas.  The Complaint alleges infringement of U.S. Patent Nos.
6,060,499; 6,586,458; and 7,332,183 because Par submitted a Paragraph IV
certification to the FDA for approval of 500 mg/85 mg naproxen
sodium/sumatriptan succinate oral tablets.  Par filed an Answer and
Counterclaims on December 8, 2008 and the court has scheduled a Markman hearing
for February 2010 and trial for October 2010.  On March 17, 2009, Par filed
an Amended Answer and Counterclaim in order to join GlaxoSmithKline as a
counterclaim defendant in this litigation.  Par intends to defend this
action vigorously and pursue its counterclaims against Pozen and
GlaxoSmithKline.    23   On April
15, 2009, Par filed a declaratory judgment Complaint against Novartis and
Ajinomoto Co., Inc. in the United States District Court for the Eastern District
of Pennsylvania.  The complaint seeks declaratory judgment of invalidity
and non-infringement of U.S. Patent Nos. 5,463,116; 5,488,150; 6,559,188;
6,641,841; 6,844,008; and 6,878,749 in view of Pars December 22, 2004
submission of a Paragraph IV certification to the FDA for approval of 60 mg and
120 mg nateglinide oral tablets.  Par intends to prosecute this action
vigorously against Novartis and Ajinomoto.  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 pretrial 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, the requested documents and
information to the respective Attorneys General and theUSOPM and will
continue to cooperate with the Attorneys General and the USOPM in these
investigations if it is called upon to do so. Other  On March 19, 2009, Par was served with
a subpoena by the Department of Justice requesting documents related to
Strativas marketing of Megace® ES.  The subpoena indicated that the
Department of Justice is currently investigating promotional practices in the
sales and marketing of Megace® ES.  We intend to fully cooperate with the
Department of Justice's inquiry.  Par is, from time to time, a party to
certain other litigations, including product liability litigations.  Par
believes that these litigations are part of the ordinary course of its business
and that their ultimate resolution will not have a material adverse effect on
its financial condition, results of operations or liquidity. Par intends to
defend or, in cases where Par is plaintiff, to prosecute these litigations
vigorously.  Contingency Par accrued for a loss contingency
related to a routine post award contract review of Pars Department of Veterans
Affairs contract (the VA Contingency) for the periods 2004 to 2007 that is
being conducted by the Office of Inspector General of the Department of Veterans
Affairs.  The regulations that govern the calculations used to generate the
pricing-related information are complex and require the exercise of judgment.
 Should there be ambiguity with regard to how to interpret the regulations
that govern the calculations, and report these calculations, and even in the
absence of any such ambiguity, a governmental authority may take a position
contrary to the position that Par has taken.  In accordance with Statement
of Financial Accounting Standards No. 5, Accounting for
Contingencies, Par accrues for contingencies by a charge to income when it
is both probable that a loss will be incurred and the amount of the loss can be
reasonably estimated.  In the event that Pars loss contingency is
ultimately determined to be higher than originally accrued, the recording of the
additional liability may result in a material impact on Pars results of
operations, liquidity or financial condition when such additional liability is
accrued.  Pars estimate of the probable loss is approximately $4.4
million, including interest, which has been accrued as of March 28, 2009.     24   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 March 29, 2008.  Note 16- Segment Information: Par operates in two reportable
business segments: generic pharmaceuticals and branded pharmaceuticals.
 Branded products are marketed under brand names through marketing programs
that are designed to generate physician and consumer loyalty.  Branded
products generally are patent protected, which provides a period of market
exclusivity during which they are sold with little or no competition.  Par
operates the brand pharmaceutical segment under the name Strativa
Pharmaceuticals.  Generic pharmaceutical products are the chemical and
therapeutic equivalents of reference brand drugs.  The Drug Price
Competition and Patent Term Restoration Act of 1984 provides that generic drugs
may enter the market upon the approval of an ANDA and the expiration,
invalidation or circumvention of any patents on corresponding brand drugs, or
the expiration of any other market exclusivity periods related to the brand
drugs.  The business
segments of Par were determined based on managements reporting and
decision-making requirements in accordance with SFAS No. 131, Disclosures
about Segments of an Enterprise and Related Information.  Par believes
that its generic products represent a single operating segment because the
demand for these products is mainly driven by consumers seeking a lower cost
alternative to brand name drugs.  Pars generic drugs are developed using
similar methodologies, for the same purpose (e.g., seeking bioequivalence
with a brand name drug nearing the end of its market exclusivity period for any
reason discussed above).  Pars generic products are produced using similar
processes and standards mandated by the FDA, and Pars generic products are sold
to similar customers.  Based on the economic characteristics, production
processes and customers of Pars generic products, Par has determined that its
generic pharmaceuticals are a single reportable business segment.  Pars
chief operating decision maker does not review the generic segment in any more
granularity, such as at the therapeutic or other classes or categories.
 Certain of Pars expenses, such as the direct sales force and other sales
and marketing expenses and specific research and development expenses, are
charged directly to either of the two segments.   Other expenses, such
as general and administrative expenses and non-specific research and development
expenses are allocated between the two segments based on assumptions determined
by Pars management.  The financial data for
the two business segments are as follows:  Three months endedMarch 28,

March 29,2009

2008Revenues:Generic

$188,081

$129,884Strativa

15,954

25,044Total revenues

$204,035

$154,928Gross margin:Generic

$52,031

$30,132Strativa

12,038

19,389Total gross margin

$64,069

$49,521Operating income (loss):Generic

$31,378

$1,679Strativa

(4,366)

963Total operating income

$27,012

$2,642Gain on extinguishment of senior
subordinated convertible notes

245

-Equity in loss of
joint venture

-

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

(55)

-Interest
income

1,157

3,014Interest
expense

(2,567)

(3,510)Provision for
income taxes

9,537

743Income from continuing
operations

$16,255

$1,383   25        Pars chief operating decision maker
does not review our assets, depreciation or amortization by business segment at
this time as they are not material to its branded operations.  Therefore,
such allocations by segment are not provided.  Total revenues of Pars top selling
products were as follows:  Three months endedMarch 28,

March 29,Product

2009

2008GenericMetoprolol succinate ER (Toprol-XL®)

$112,214

$43,298Sumatriptan succinate injection (Imitrex®)

16,020

-Meclizine Hydrochloride (Antivert®)

9,820

6,513Dronabinol (Marinol®)

7,001

-Fluticasone (Flonase®)

4,157

17,762Propranolol HCl ER (Inderal LA®)

4,001

5,455Cabergoline (Dostinex®)

3,775

7,982Ibuprofen Rx (Advil®, Nuprin®, Motrin®)

3,144

3,279Megestrol oral suspension (Megace®)

2,883

2,065Hydralazine Hydrochloride (Apresazide®)

2,622

2,586Methimazole (Tapazole®)

2,375

3,019Various amoxicillin products (Amoxil®)

123

5,588Other product related revenues (2)

1,312

1,048Other (1)

18,634

31,289Total Generic Revenues

$188,081

$129,884StrativaMegace® ES

$13,454

$22,401Other product related revenues (2)

2,500

2,643Total Strativa Revenues

$15,954

$25,044  (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 2% of total generic revenues for three-month periods ended
March 28, 2009 or March 29, 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.  Par believes it has complied
with all applicable laws in connection with the court-approved settlement
and intends to vigorously defend this action.  During the three-month period ended
March 28, 2009, Par recognized a gain on the sale of product rights of $1.1
million and $1.0 million during the three-month period ended March 29, 2008
related to the sale of multiple ANDAs.  In November 2007, Par entered into
an agreement to provide certain information and other deliverables related to
Megace®ESto enable the formal technology transfer to a
third party seeking to commercialize Megace®ESoutside of
the U.S.  Par recorded $0.6 million in the operating results of the first
quarter of 2008 when Pars obligations were fulfilled related to this
agreement.     Note 17- Research and Development
Agreements: In February
2009, Par executed an amendment to its development and supply agreement with
Cipla Limited (Cipla) for the development of additional generic product(s).
 The total milestone payments could be up to $1.3 million under the
agreement.  Par is responsible for the clinical costs, API costs, stability
testing and process validation.  Par incurred $0.5 million as of March 2009
which was charged to research and development expense.  The agreement is
set for a ten year term from commercial launch of the product.   26   In
July 2007, Par entered into an exclusive licensing agreement under which we
received commercialization rights in the U.S. to BioAlliance Pharma's
Loramyc® (miconazole Lauriad®), 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, Par paid BioAlliance an
initial payment of $15.0 million.  BioAlliance completed Phase III studies
and on February 6, 2009 submitted a NDA for Loramyc®.   On
April 9, 2009, we announced that the NDA was not accepted based on the lack of
an imprint code on the tablet.  BioAlliance had previously initiated the
development of a debossed tablet and is planning to use that work to fulfill the
FDA requirement and plans to resubmit the NDA.  Par will pay BioAlliance
$20.0 million upon FDA approval.  In addition to royalties on sales,
BioAlliance may receive milestone payments on future sales. In June 2008, Par entered into
an exclusive licensing agreement with MonoSol Rx (MonoSol) under which we
acquired the commercialization rights in the United States and its territories
to MonoSols thin film formulation of ondansetron.  Through March 2009, we
made payments of $3.5 million (charged to research and development expense) to
MonoSol, consisting of an initial payment of $1.3 million for the delivery of
product prototype, development milestones of $1.3 million for the delivery of
pilot stability reports and $1.0 million for the successful completion of the
final ondansetron thin film bioequivalence reports indicating successful
completion of all clinical studies necessary to file the NDA for the product
with the FDA, including meeting all applicable clinical end-points necessary for
the approval of the NDA for the Product.  On April 7, 2009, we submitted a
NDA for the product.  If the product receives FDA approval MonoSol will
earn a milestone payment of $2.5 million.  Upon FDA approval, MonoSol will
supply commercial quantities of the product to us and we will commercialize the
product in the United States and pay MonoSol royalties on net sales.   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 employees.
 Approximately 30% of the affected positions in manufacturing, research and
development, and general and administrative were eliminated as of December 31,
2008 and the remaining positions are expected to be eliminated by the end of the
first half of 2009.  In connection with these actions, Par incurred
expenses for severance and other employee-related costs.  In addition, as
part of its plans to resize its generic products division, Par made the
determination to abandon or sell certain assets that resulted in asset
impairments, and accelerated depreciation expense. During the
first quarter of 2009, Par incurred additional restructuring costs as it
continued to execute this plan.  The Company recognized pretax charges of
approximately $1.4 million, ($0.9 million, after-tax) of one-time termination
benefit costs. The pretax charges are reported in the Restructuring costs line
in the condensed consolidated statements of operations for the three months
ended March 28, 2009. The following
table summarizes the restructuring costs incurred by Par in the first quarter of
2009 and the remaining related restructuring liabilities balance (included in
accrued expenses and other current liabilities on the condensed consolidated
balance sheet) as of March 28, 2009 ($ amounts in thousands);  Restructuring Activities

Initial Charge

Liabilities at December 31,
2008

Cash Payments

Additional Charges

Reversals, Reclass or
Transfers

Liabilities at March 28,
2009Severance and   employee benefits to
be   paid in cash

$6,254

$6,254

$1,738

$1,401

$ -

$5,917Severance related to 
 share-based   compensation

3,291

-

-

-

-

-Asset impairments and   other

5,907

60

-

-

-

60Total

$15,452

$6,314

$1,738

$1,401

$ -

$5,977 Par
expects that approximately $6 million of the initial charge and $1.4 million of
the additional charges will result in cash expenditures during 2009.  The
carrying amount of assets held for sale related to these actions was $2.0
million at March 28, 2009 and included in other current assets on the condensed
consolidated balance sheet.   27   Par
expects to record an additional $0.2 million of one-time termination benefit
costs in the second quarter of 2009.  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 but were expected to be idled or sold
in late 2009.  In conjunction with its acquisition of Nascobal and the
MDRNA facility (see Note #20  Subsequent Events), Par has 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 has resumed depreciating
these assets in the first quarter of 2009 in accordance with their expected
useful life.  Par accounted for these actions as a change in estimate in
accordance with US GAAP.  Note 19  Recent Accounting
Pronouncements: In April 2009, the FASB issued FASB Staff
Position FAS 157-4,Determining Whether a Market Is Not Active
and a Transaction Is Not Distressed,or FSP FAS 157-4; FSP FAS 157-4
provides guidelines for making fair value measurements more consistent with the
principles presented in SFAS 157. FSP FAS 157-4 provides additional
authoritative guidance in determining whether a market is active or inactive,
and whether a transaction is distressed, is applicable to all assets and
liabilities (i.e. financial and nonfinancial) and will require enhanced
disclosures. This FASB Staff Position is effective for periods ending after
June 15, 2009.  We are evaluating the impact that this standard will
have on our financial position, results of operation, or cash flows. In April 2009, the FASB issued FASB Staff
Position FAS 115-2, and FAS 124-2,Recognition and Presentation of
Other-Than-Temporary Impairments, or FSP FAS 115-2, and FAS 124-2;
and FSP FAS 115-2, and FAS 124-2 provides additional guidance to
provide greater clarity about the credit and noncredit component of an
other-than-temporary impairment event and to more effectively communicate when
an other-than-temporary impairment event has occurred. This FSP applies to debt
securities. This FASB Staff Position is effective for periods ending after
June 15, 2009.  We are evaluating the impact that this standard will
have on our financial position, results of operation, or cash flows. In April 2009, the FASB issued FASB Staff
Position FAS 107-1 and APB 28-1,Interim Disclosures about Fair Value of
Financial Instruments, or FSP
FAS 107-1 and APB 28-1. FSP FAS 107-1 and APB 28-1, amends FASB
Statement No. 107,Disclosures about Fair Value of Financial
Instruments, to require
disclosures about fair value of financial instruments in interim as well as in
annual financial statements. This FSP also amends APB Opinion No. 28,Interim Financial
Reporting, to require those
disclosures in all interim financial statements. This FASB Staff Position is
effective for periods ending after June 15, 2009.  We are evaluating
the impact that this standard will have on our financial position, results of
operation, or cash flows. In April 2009, the FASB issued FASB Staff
Position FSP FAS 141(R)-1,Accounting for Assets Acquired and
Liabilities Assumed in a Business Combination That Arise from
Contingencies, or FSP
FAS 141(R)-1. FSP FAS 141(R)-1, amends FASB Statement No. 141
(R),BusinessCombinations, to state a contingency acquired in a
business combination should be measured at fair value if the acquisition-date
value of that asset or liability can be determined during the measurement
period.   This FASB Staff Position is effective as of January 1, 2009.
 Our acquisition 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 (formerly Nastech Pharmaceutical) as part of the
transaction in the second quarter of 2009 will be accounted for under SFAS 141R.
 Refer to Note 20  Subsequent Event.  In June 2008, the FASB issued EITF 07-5,Determining Whether an
Instrument (or Embedded Feature) Is Indexed to an Entitys Own
Stock.  EITF 07-5
provides that an entity should use a two step approach to evaluate whether an
equity-linked financial instrument (or embedded feature) is indexed to its own
stock, including evaluating the instrument's contingent exercise and settlement
provisions.  EITF 07-5 was effective as of the beginning of our 2009 fiscal
year.  The adoption of EITF 07-5 did not have a material impact on our
financial position, results of operation, or cash flows. In December 2007, the FASB ratified
Emerging Issue Task Force Issue No. 07-1 (EITF 07-1), Accounting for
Collaborative Arrangements.  A contractual arrangement falls within the
scope of EITF 07-1 if the arrangement requires the parties to be active
participants and the arrangement exposes the parties to significant risks and
rewards that are tied to the commercial success of the endeavor.  Costs
incurred and revenue generated on sales to third parties should be reported in
the statement of operations based on the guidance in EITF Issue No. 99-19,
Reporting Revenue Gross as a Principal versus Net as an Agent.  The
equity method of accounting should not be applied to a collaborative arrangement
within the scope of this issue without the creation of a separate legal entity
for the arrangement.  Payments between parties to the collaborative
arrangement should be presented in the statement of operations based on the
nature of the arrangement and each entity's business operations, the contractual
terms of the arrangement as well as if existing GAAP is applicable.  EITF
07-1 requires companies to disclose the nature and purpose of the arrangement,
its rights and obligations under the arrangement, the accounting policy applied
to the arrangement, and the amounts attributable to transactions between other
participants to the collaborative arrangement and where in the statement of
operations these amounts have been classified.  EITF 07-1 requires that
companies comply in its first fiscal year beginning after December 15, 2008 and
transition to the guidance in this issue by retrospectively applying the
guidance to all periods presented for all arrangements existing at the effective
date, unless it is impracticable to do so.  The impracticability assessment
should be made on an arrangement-by-arrangement basis and certain disclosures
would be required if a company utilizes the impracticability exception.
 The adoption of EITF 07-1 did not have a material impact on our financial
position, results of operation, or cash flows.    28   In
December 2007, the FASB issued FASB Statement No. 141 (Revised 2007) (SFAS
141R),Business Combinations.  SFAS 141R will significantly change
the accounting for business combinations.  Under SFAS 141R, an acquiring
entity will be required to recognize all the assets acquired and liabilities
assumed in a transaction at the acquisition date fair value with limited
exceptions.  SFAS 141R will change the accounting treatment for certain
specific items, including; acquisition costs will be generally expensed as
incurred, minority interests will be valued at fair value at the acquisition
date, acquired contingent liabilities will be recorded at fair value at the
acquisition date and subsequently measured at either the higher of such amount
or the amount determined under existing guidance for non-acquired contingencies,
in-process research and development will be recorded at fair value as an
indefinite-lived intangible asset at the acquisition date, restructuring costs
associated with a business combination will be generally expensed subsequent to
the acquisition date, and changes in deferred tax asset valuation allowances and
income tax uncertainties after the acquisition date generally will affect income
tax expense.  SFAS 141R also includes a substantial number of new
disclosure requirements.  SFAS 141R applies prospectively to business
combinations for which the acquisition date is on or after the beginning of the
first annual reporting period beginning on or after December 15, 2008.
 Earlier adoption was prohibited. Our acquisition 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 (formerly
Nastech Pharmaceutical) as part of the transaction in the second quarter of 2009
will be accounted for under SFAS 141R.  Refer to Note 20  Subsequent
Event. In December 2007, SFAS
No. 160, Noncontrolling Interests in Consolidated Financial Statements 
an amendment of ARB No. 51(SFAS 160), was issued. SFAS 160 requires
entities to report noncontrolling (minority) interests as a component of
stockholders equity on the balance sheet; include all earnings of a
consolidated subsidiary in consolidated results of operations; and treat all
transactions between an entity and noncontrolling interest as equity
transactions between the parties.  SFAS 160 was effective for Pars fiscal
year beginning 2009 and adoption is prospective only; however, presentation and
disclosure requirements described above must be applied retrospectively.
 The adoption of SFAS 160 did not have a material impact on our financial
position, results of operation, or cash flows.  In September 2006, the FASB issued SFAS No.
157Fair Value
Measurements(SFAS
157).  SFAS 157 establishes a common definition for fair value to be
applied to GAAP guidance requiring use of fair value, establishes a framework
for measuring fair value, and expands disclosure about such fair value
measurements.  SFAS 157 applies to fair value measurements that are already
required or permitted by other accounting standards, except for measurements of
share-based payments and measurements that are similar to, but not intended to
be, fair value.  The FASB has previously concluded in those accounting
pronouncements that fair value is the relevant measurement attribute.
 Accordingly, this Statement does not require any new fair value
measurements.  SFAS 157 is effective for fiscal years beginning after
November 15, 2007.  Pars adoption of SFAS 157 with respect to financial
assets and liabilities as of January 1, 2008 did not have a material impact on
its consolidated financial statements.  Refer to Note 5, Fair Value
Measurements.  The effective date of SFAS 157 with regard to non-financial
assets and liabilities was January 1, 2009 for Par.  These non-financial
assets and liabilities include goodwill.  The adoption of SFAS 157 for
our nonfinancial assets and liabilities that are remeasured at fair value on a
non-recurring basis did not impact our financial position or results of
operations; however, 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 20  Subsequent
Events:   On March 31,
2009, Par acquired the worldwide rights to Nascobal® (Cyanocobalamin, USP) Nasal Spray from
QOL Medical LLC.   Nascobal® Nasal Spray is an FDA approved
prescription vitamin B12 supplement indicated to treat vitamin B12
deficiency.  Under the terms of the all cash transaction, Par paid QOL
Medical $54.5 million for the worldwide rights to Nascobal® Nasal Spray. 
Nascobal® Nasal Spray will be manufactured by Par with assets acquired and
operating leases assumed on March 31, 2009 from MDRNA (formerly Nastech
Pharmaceutical).    29      ITEM 2.  MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS.  Forward-Looking Statements Certain statements in this Report
constitute forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995, including those concerning
managements expectations with respect to future financial performance, trends
and future events, particularly relating to sales of current products and the
development, approval and introduction of new products.  To the extent that
any statements made in this 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
Report.  Risk factors that might affect such forward-looking statements
include those set forth in Item 1A (Risk Factors) of our Annual Report on Form
10-K for the year ended December 31, 2008, in Item 1A of this and our subsequent
Quarterly Reports on Form 10-Q, and from time to time in our other filings with
the SEC, including Current Reports on Form 8-K, and on general industry and
economic conditions.  Any forward-looking statements included in this
Report are made as of the date of this 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 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 in
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
decreased levels of internal research and development activities in an effort to
focus on completing products currently in development.  Also, we will
continue seeking additional generic products for sale through new and existing
distribution agreements or acquisitions of complementary products and
businesses, additional first-to-file opportunities and unique dosage forms to
differentiate our products in the marketplace.  We pay a percentage of
the gross or net profits or sales to our strategic partners on sales of products
covered by our distribution agreements.  Generally, products that Par
had developed internally, and to which it is not required to split any profits
with strategic partners, contribute higher gross margins than products covered
by distribution agreements.  To continue the development of our Strativa
segment, on March 31, 2009, we acquired the worldwide rights to Nascobal® Nasal
Spray.  Nascobal® Nasal Spray is an FDA approved prescription vitamin B12
supplement indicated to treat vitamin B12 deficiency.  It is the first and
currently only once-weekly, self-administered alternative to B12 injections. Sales and
gross margins of our products depend principally on the: (i) introduction of
other generic drug manufacturers products in direct competition with our
significant products; (ii) ability of generic competitors to quickly enter the
market after patent or exclusivity period expirations, 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 and the successful development to commercialization
of our in-licensed branded product pipeline.  Net sales and gross margins derived
from generic pharmaceutical products often follow a pattern based on regulatory
and competitive factors that are believed by management to be unique to the
generic pharmaceutical industry.  As the patent(s) for a brand name product
and the related exclusivity period(s) expire, the first generic manufacturer to
receive regulatory approval from the FDA for a generic equivalent of the product
is often able to capture a substantial share of the market.  At that time,
however, the branded company may license an authorized generic product to a
competing generic company.  As additional generic manufacturers receive
regulatory approvals for competing products, the market share and the price of
that product have typically declined, often significantly, depending on several
factors, including the number of competitors, the price of the brand product and
the pricing strategy of the new competitors.    30   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 period ending March 28, 2009, our generic business net revenues and
gross margin were concentrated in a few products, including two products that
were launched subsequent to the first quarter of 2008.  The top 5 generic
products that we plan to market throughout 2009 accounted for approximately 70%
total revenues and approximately 60% of total gross margins in the first quarter
of 2009. Throughout the
first quarter of 2009, we did not have competition for sales of metoprolol (sold
pursuant to a supply and distribution agreement with AstraZeneca), which
resulted in increased volume of units sold coupled with a price increase
commensurate with being the sole distributor. In November
2008, we launched generic versions of Imitrex® (sumatriptan)
injection 4mg and 6mg starter kits and 4mg and 6mg prefilled syringe cartridges
pursuant to a supply and distribution agreement with GlaxoSmithKline plc. 
Throughout the first quarter of 2009, we remained the sole distributor of 3 SKUs
(packaging sizes) with one competitor for a single SKU. In thethird quarter of
2008, we launched dronabinol in 2.5mg, 5mg and 10mg strengths in soft gel
capsules.  We share net product margin, as contractually defined, on sales
of dronabinol with SVC Pharma LP, an affiliate of Rhodes Technologies. We marketed
meclizine prior to an explosion at the manufacturing facility of our API
supplier in February 2008.  Subsequently, we qualified a new API source and
received the appropriate approval of our abbreviated new drug application to
manufacture and market meclizine utilizing our new supplier.  We
reintroduced meclizine HCl tablets in 12.5mg and 25mg strengths in the third
quarter of 2008.  Throughout the first quarter of 2009, we believe we were
the exclusive supplier of this generic product.   In addition, our investments in
generic development is expected to yield approximately 14 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; expiry of
regulatory exclusivity.  However, such dates may change due to various
circumstances, including extended litigation, outstanding citizens petitions,
other regulatory requirements set forth by the FDA, and stays of litigation.
 These launches will be significant mileposts for Par as many of these
products are first-to-file/first-to-market opportunities with gross margins in
excess of our current portfolio. STRATIVA For Strativa,
we will continue to invest in the marketing and sales of our promoted products
and prepare for the commercialization of our licensed products.   In
addition, we will continue to seek new licenses and acquisitions that accelerate
the growth of our branded business. In July 2005, we received FDA approval
for our first New Drug Application (NDA), filed pursuant to Section 505(b)(2)
of the Federal Food, Drug and Cosmetic Act, and immediately began marketing
megestrol acetate oral suspension NanoCrystal® Dispersion (Megace® ES).
 Megace® ES is indicated for the treatment of anorexia, cachexia or any
unexplained significant weight loss in patients with a diagnosis of AIDS and is
utilizing the Megace® brand name that the company has licensed from
Bristol-Myers Squibb Company.  The net book value of the trademark was $5.8
million at March 28, 2009 and will be amortized over approximately 3.5 years.
 We have promoted Megace® ES as our primary brand product since 2005. 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®, as well
as future versions of the product or other products that are mutually agreed
upon, for a period of six years.  As compensation for our marketing and
sales efforts, we will receive up to $10 million annually, paid quarterly, for
the six-year period.  On January 30, 2009, the FTC filed a lawsuit against
us in the U.S. District Court for the District of Central California alleging
violations of antitrust laws stemming from our court-approved settlement in the
patent litigation with Solvay Pharmaceuticals.  On April 9, 2009, the U.S.
District Court of Central California granted our motion to transfer the lawsuit,
along with three class action lawsuits that had been filed in the same court, to
the United States District Court for the Northern District of Georgia, the
jurisdiction in which our consent judgment in connection with the original
patent litigation had been entered.  On April 17, 2009 and April 21, 2009,
two additional class action plaintiffs filed complaints in the United States
District Court for the District of New Jersey alleging antitrust law violations.
 We believe we have complied with all applicable laws in connection with
the court-approved settlement and intend to vigorously defend these
actions. In July 2007,
we entered into an exclusive licensing agreement under which we received
commercialization rights in the U.S. to BioAlliance Pharma's Loramyc®
(miconazole Lauriad®), 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 completed Phase III studies and on February 6, 2009 submitted
a NDA for Loramyc®.   On April 9, 2009, we announced that
the NDA was not accepted based on the lack of an imprint code on the tablet.
 BioAlliance had previously initiated the development of a debossed tablet
and is planning to use that work to fulfill the FDA requirement and plans to
resubmit the NDA later this year.   31   In
August 2007, we also acquired the North American commercial rights to
ZensanaTM (ondansetron HCl) Oral Spray from Hana Biosciences, Inc.
 Ondansetron is used to prevent nausea and vomiting after chemotherapy,
radiation and surgery.  Assuming successful development and approval,
ZensanaTM could be among the first in our class of 5-HT3
antagonist anti-emetic therapies to be available in an oral spray form.
 Par and its development partner in this program, NovaDel, 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 (MonoSol)
under which we acquired the commercialization rights in the United States and
its territories to MonoSols thin film formulation of ondansetron.  Through
March 2009, we made payments of $3.5 million (charged to research and
development expense) to MonoSol, consisting of an initial payment of $1.3
million for the delivery of product prototype, development milestones of $1.3
million for the delivery of pilot stability reports and $1.0 million for the
successful completion of the final ondansetron thin film bioequivalence
reports indicating successful completion of all clinical studies necessary to
file the NDA for the product with the FDA, including meeting all applicable
clinical end-points necessary for the approval of the NDA for the Product.
 On April 7, 2009, we submitted a NDA for the product.  If the product
receives FDA approval, MonoSol will earn a milestone payment of $2.5 million.
 Upon FDA approval, MonoSol will supply commercial quantities of the
product to us and we will commercialize the product in the United States and pay
MonoSol royalties on net sales. In January
2008, we announced that we entered into an exclusive licensing agreement with
Alfacell Corporation (Alfacell) to acquire the commercialization rights in the
United States for 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, which assessed
treatment with Onconase® plus doxorubicin compared to treatment with doxorubicin
alone, did not meet statistical significance for the primary endpoint of overall
survival in unresectable malignant mesothelioma.  However, based on the
preliminary data from the Phase III study, statistically significant results
were achieved in the subset of evaluable unresectable malignant mesothelioma
patients who failed a prior chemotherapy regimen before entering this clinical
trial.  This subset of patients achieved a statistically significant
increase in overall survival when treated with Onconase® plus doxorubicin
compared to treatment with doxorubicin alone.  On January 27, 2009,
Alfacell reported that it has conducted a pre-NDA meeting with the FDA to
discuss its planned submission of the final components of the Onconase® rolling
New Drug Application for the treatment of unresectable malignant mesothelioma
patients.  At the pre-NDA meeting, the FDA provided guidance to Alfacell
recommending that an additional clinical trial be conducted in unresectable
malignant mesothelioma patients that have failed one prior chemotherapy regimen,
prior to submitting an NDA.  Alfacells current financial situation does
not allow it to pursue an additional clinical trial, prior to submitting an NDA
until other sources of capital are secured.  Alfacell intends to continue
to explore strategic alternatives and additional capital.  Under our
agreement, the next milestone payment to Alfacell is payable upon approval of
Onconase® by the FDA for unresectable malignant mesothelioma.  We do not
have an obligation to provide Alfacell with any additional funding to conduct
the FDA required additional clinical trial. 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 supplement indicated to treat vitamin B12
deficiency.  Under the terms of the all cash transaction, we paid QOL
Medical $54.5 million for the worldwide rights to Nascobal® Nasal Spray. 
Nascobal® Nasal Spray will be manufactured by Par with assets acquired and
operating leases assumed on March 31, 2009 from MDRNA (formerly Nastech
Pharmaceutical).  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 are increasingly suing companies that produce
generic forms of their patented brand name products for alleged patent
infringement or other violations of intellectual property rights, which could
delay or prevent the entry of such generic products into the market. Generally,
a generic drug may not be marketed until the applicable patent(s) on the brand
name drug expires. When an ANDA is filed with the FDA for approval of a generic
drug, the filing person may certify either that the patent listed by the FDA as
covering the branded product is about to expire, in which case the ANDA will not
become effective until the expiration of such patent, or that the patent listed
as covering the branded drug is invalid or will not be infringed by the
manufacture, sale or use of the new drug 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.    32   RESULTS OF OPERATIONS Revenues Total revenues of our top selling products were as
follows:  Three months endedMarch 28,

March 29,Product

2009

2008

$ ChangeGenericMetoprolol succinate ER (Toprol-XL®)

$112,214

$43,298

$68,916Sumatriptan succinate injection (Imitrex®)

16,020

-

16,020Meclizine Hydrochloride (Antivert®)

9,820

6,513

3,307Dronabinol (Marinol®)

7,001

-

7,001Fluticasone (Flonase®)

4,157

17,762

(13,605)Propranolol HCl ER (Inderal LA®)

4,001

5,455

(1,454)Cabergoline (Dostinex®)

3,775

7,982

(4,207)Ibuprofen Rx (Advil®, Nuprin®, Motrin®)

3,144

3,279

(135)Megestrol oral suspension (Megace®)

2,883

2,065

818Hydralazine Hydrochloride (Apresazide®)

2,622

2,586

36Other product related revenues

1,312

1,048

264Other

19,123

37,888

(18,765)Total Generic Revenues

$188,081

$129,884

$58,197StrativaMegace® ES

$13,454

$22,401

($8,947)Other product related revenues

2,500

2,643

(143)Total Strativa Revenues

$15,954

$25,044

($9,090)   Three months endedPercentage of Total
RevenuesMarch 28,

March 29,





March 28,

March 29,($
in thousands)

2009

2008

$ Change

% Change

2009

2008Revenues:Generic

$188,081

$129,884

$58,197

44.8%

92.2%

83.8%Strativa

15,954

25,044

(9,090)

(36.3%)

7.8%

16.2%Total revenues

$204,035

$154,928

$49,107

31.7%

100.0%

100.0%  The increase
in generic segment revenues in the first quarter of 2009 was primarily due to
the lack of competition for sales of metoprolol that resulted in increased
volume of units sold coupled with a price increase commensurate with being the
sole distributor of the generic product.   We also launched various
sumatriptan SKUs in the fourth quarter of 2008.  Throughout the first
quarter of 2009, we remained the sole distributor of 3 sumatriptan SKUs with one
competitor for a single SKU.  In thethird quarter of 2008, Par
launched multiple strengths of dronabinol.  We also commenced shipment
of meclizine HCl tablets in 12.5mg and 25mg strengths in the third quarter of
2008.  We believe we were the exclusive supplier of this generic product,
throughout the first quarter of 2009. These gains were tempered by lower sales
of fluticasone as the supply agreement with GlaxoSmithKline plc was not extended
and we have substantially sold through all available inventories as of March 28,
2009.  In addition, cabergoline sales were negatively impacted by the loss
of key customers and pricing pressure due to additional competition.
 Products aggregated in Other also declined principally due to the
generic segments resizing that included the trimming of the generic product
portfolio to only retain those marketed products that deliver acceptable gross
margins coupled with pricing pressures on the remaining products. Net sales of distributed products,
which consist of products manufactured under contract and licensed products,
were $145.0 million or 72% of the Companys total product revenues for the three
month period ended March 28, 2009 and $87.0 million or 56% of our total product
revenues for the three month period ended March 29, 2008.  The increase in
the percentage is primarily driven by higher sales of metoprolol, dronabinol,
and sumatriptan.  We are substantially dependent upon distributed products
for our overall sales and any inability by our suppliers to meet demand could
adversely affect our future sales.   33    The net sales decline of
Megace® ES in the first quarter 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 first quarter of 2008.  In December 2008, the trade
accelerated its Megace® ES purchases before the holidays to the
detriment of the first quarter of 2009.  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, sales returns, rebates and incentive programs, and the sales
allowances, for all our customers at the time of sale, as reductions to gross
revenues, with corresponding adjustments to our accounts receivable reserves and
allowances.  As detailed above, we have the
experience and the access to relevant information that we believe necessary to
reasonably estimate the amounts of such deductions from gross revenues.
 Some of the assumptions we use for certain of our estimates are based on
information received from third parties, such as wholesale customer inventory
data and market data, or other market factors beyond our control.  The
estimates that are most critical to the establishment of these reserves, and
therefore would have the largest impact if these estimates were not accurate,
are estimates related to expected contract sales volumes, average contract
pricing, customer inventories and return levels.  We regularly review the
information related to these estimates and adjust our reserves accordingly if
and when actual experience differs from previous estimates.  With the
exception of the product returns allowance, the ending balances of account
receivable reserves and allowances generally are eliminated during a two- to
four-month period, on average.  We recognize revenue for product sales
when title and risk of loss have transferred to our customers and when
collectibility 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 incentives, returns,
cash discounts and other sales reserves that reduce accounts receivable. Our gross revenues before deductions
for chargebacks, rebates and incentive programs (including rebates paid under
federal and state government Medicaid drug reimbursement programs), sales
returns and other sales allowances were as follows:  March 28, 2009

Percentage of Gross
Revenues

March 29, 2008

Percentage of Gross
Revenues($ thousands)


($ thousands)Gross revenues

$292,569



$307,976Chargebacks

(42,821)

14.6%

(108,178)

35.1%Rebates and incentive programs

(21,705)

7.4%

(24,657)

8.0%Returns

(6,637)

2.3%

(611)

0.2%Cash discounts and other

(11,329)

3.9%

(11,925)

3.9%Medicaid rebates and rebates    due
under other US   Government pricing programs

(6,042)

2.1%

(7,677)

2.5%Total deductions

(88,534)

30.3%

(153,048)

49.7%Total revenues

$204,035

69.7%

$154,928

50.3%  The total
gross-to-net sales adjustments as a percentage of gross sales decreased for the
three months ended March 28, 2009, compared to the three months ended March 29,
2008, primarily due to the significant reduction of chargebacks driven by lower
overall volume of sales of products that carry higher than average chargeback
rates, including lower fluticasone sales coupled with the discontinuation of
other lower margin products.  In addition, the chargeback rate benefited
from new product launches of dronabinol and sumatriptan and the lack of
competition for sales of metoprolol.  Refer to the March 29, 2008 accounts
receivable reserves activity table below for details of the prior period returns
deduction amount.   34   The
following tables summarize the activity for the three months ended March 28,
2009 and March 29, 2008 in the accounts affected by the estimated provisions
described above:  For the Period Ended March 28,
2009Accounts receivable reserves

Beginning balance

Provision recorded for current
period sales

(Provision) reversal recorded for
prior period sales

Credits processed

Ending balanceChargebacks

($32,738)

($42,386)

($435)
(1)
$54,385

($21,174)Rebates and incentive   programs

(27,110)

(21,862)

157

22,793

(26,022)Returns

(38,128)

(6,298)

(339)

7,463

(37,302)Cash discounts and   other

(13,273)

(11,329)

-

10,955

(13,647)Total

($111,249)

($81,875)

($617)

$95,596

($98,145)Accrued liabilities(2)

($21,912)

($6,042)

$ -

$2,955

($24,999)  For the Period Ended March 29,
2008Accounts receivable reserves

Beginning balance

Provision recorded for current
period sales

(Provision) reversal recorded for
prior period sales

Credits processed

Ending balanceChargebacks

($46,006)

($107,639)

($539)
(1)
$110,197

($43,987)Rebates and incentive 
 programs

(42,859)

(23,086)

(1,571)
(3)
34,557

(32,959)Returns

(47,102)

(4,904)

4,293
(4)
7,220

(40,493)Cash discounts and   other

(16,158)

(12,274)

349

12,321

(15,762)Total

($152,125)

($147,903)

$2,532

$164,295

($133,201)Accrued liabilities(2)

($17,684)

($8,482)

$805

$1,657

($23,704)  (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(s) 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 three-month period
ended March 29, 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 relating to the loss of a customer for certain products
and new returns information that became available during the three-month period
ended March 29, 2008, of $2.8 million. Use of Estimates in
Reserves  We believe that our reserves,
allowances and accruals for items that are deducted from gross revenues are
reasonable and appropriate based on current facts and circumstances. It is
possible, however, that other parties applying reasonable judgment to the same
facts and circumstances could develop different allowance and accrual amounts
for items that are deducted from gross revenues. Additionally, changes in actual
experience or changes in other qualitative factors could cause Pars allowances
and accruals to fluctuate, particularly with newly launched or acquired
products.  We review the rates and amounts in our allowance and accrual
estimates on a quarterly basis. If future estimated rates and amounts are
significantly greater than those reflected in our recorded reserves, the
resulting adjustments to those reserves would decrease our reported net
revenues; conversely, if actual product returns, rebates and chargebacks are
significantly less than those reflected in its recorded reserves,  the
resulting adjustments to those reserves would increase our reported net
revenues. If we were to change its assumptions and estimates, our reserves would
change, which   35   would impact the net revenues
that we report.  We regularly review the information related to these
estimates and adjust our reserves accordingly, if and when actual experience
differs from previous estimates.  Gross Margin We consider
gross margin to be a key performance indicator of our profitability.  Three months endedPercentage of Total
RevenuesMarch 28,

March 29,



March 28,

March 29,($ in thousands)

2009

2008

$ Change

2009

2008Gross margin:Generic

$52,031

$30,132

$21,899

27.7%

23.2%Strativa

12,038

19,389

(7,351)

75.5%

77.4%Total gross margin

$64,069

$49,521

$14,548

31.4%

32.0%  Our increase
in gross margin dollars is primarily due to the launches of sumatriptan and
dronabinol coupled with higher sales of metoprolol and meclizine.  These 4
products with propranolol and cabergoline totaled approximately $35 million
gross margin dollars and a margin percentage of approximately 23% for the first
quarter of 2009.  Gross margin related to all other revenues (approximately
$17 million and a margin percentage of approximately 48%) benefited from the
generic segments resizing begun 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, and the first quarter launch
of alprazolam that has a high gross margin percentage. Strativa gross margin dollars
decreased for the three months ended March 28, 2009, primarily due to lower
sales of Megace® ES.  Strativas gross margin percentage deteriorated due
mainly to increased rebates.  Operating Expenses  Research and Development  Three months endedPercentage of Total RevenuesMarch 28,

March 29,





March 28,

March 29,($ in thousands)

2009

2008

$ Change

% Change

2009

2008Research
and     development:Generic

$5,890

$11,700

($5,810)

(49.7%)

3.1%

9.0%Strativa

1,282

5,458

(4,176)

(76.5%)

8.0%

21.8%Total research
and     development

$7,172

$17,158

($9,986)

(58.2%)

3.5%

11.1%  Strativa: In June 2008, Strativa acquired the
commercialization rights in the United States and its territories to the orally
dissolving thin film strips (ODFS) formulation of ondansetron from MonoSol Rx.
 In January 2009, MonoSol Rx triggered a $1.0 million dollar milestone
payment upon successful completion of bioequivalence reports for ODFS which
indicated successful completion of all clinical studies and all applicable
clinical end-points necessary to file a NDA for the product with the FDA.
 Based upon these studies, on April 7, 2009, Strativa submitted a NDA for
ODFS to the FDA seeking approval in 8 mg and 4 mg strengths for the prevention
of chemotherapy and radiation-induced nausea and vomiting, and prevention of
post-operative nausea and vomiting.  Contract 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.  This expense was offset by the
non-recurrence of a $5 million initial cash payment made to Alfacell Corporation
in the first quarter of 2008 under an exclusive licensing agreement with
Alfacell to acquire the commercialization rights to Onconase® in the United
States.   In January 2009, Alfacell reported that it conducted a
pre-NDA meeting with the FDA to discuss its planned submission of the final
components of the Onconase® rolling New Drug Application for the treatment of
unresectable malignant mesothelioma. At the pre-NDA meeting, the FDA provided
guidance to Alfacell recommending that an additional clinical trial be conducted
in unresectable malignant mesothelioma patients that have failed one prior
chemotherapy regimen, prior to submitting an NDA.  Alfacells current
financial situation does not allow it to pursue an additional clinical trial
prior to submitting a NDA until other sources of capital are secured.
 Alfacell intends to continue to explore strategic alternatives and
additional capital.  Under our agreement, the next milestone payment to
Alfacell is payable upon approval of Onconase® by the FDA for the treatment of
unresectable malignant mesothelioma.  We do not have an obligation to
provide Alfacell with any additional funding to conduct the FDA required
additional clinical trial.    36   Generic: In October 2008, we announced plans to
resize our generic unit as part of an ongoing strategic assessment of our
businesses.  In conjunction with this action, we significantly reduced our
internal Generic research and development effort during the first quarter of
2009.  Expenditures were reduced by $5.8 million driven by a $2.3 million
reduction in employment related costs on headcount reductions of approximately
65 employees.  The remainder of savings was achieved through lower
development and biostudy costs as we concentrate our efforts on completing a
more focused portfolio of generic products.  As a result of our product development
program, we or our strategic partners currently have approximately 37 ANDAs
pending with the FDA.  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.  Although there can be no such
assurance, 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 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 RevenuesMarch 28,

March 29,





March 28,

March 29,($ in thousands)

2009

2008

$ Change

% Change

2009

2008Selling, general
and    administrative

$32,960

$31,346

$1,614

5.1%

16.2%

20.2%  The net increase in SG&A
expenditures principally reflects: · an increase in employment costs of
$0.7 million, driven by higher estimated bonus costs tempered by headcount
reductions, · $0.7 million of increased allocations
of stock based compensation costs driven by the significant downsizing of the
R&D organization (total stock based compensation costs for Par are
essentially flat versus prior year), and · higher legal fees of $0.5 million. These increases were tempered by lower
consulting fees of $0.4 million.  Costs related to Pars on-going
investment behind Strativa sales and marketing were essentially flat as
increased pre-launch costs behind products currently being developed were offset
by the elimination of a contract sales force and lower product liability
insurance premiums.  Settlements and Loss Contingencies, net  Three months endedMarch 28,

March 29,($ in thousands)

2009

2008Settlements and loss contingencies, net

($3,376)

$ -  Settlements
and loss contingencies, net, of $3.4 million during the three months ended March
28, 2009, is principally comprised of a net $3.4 million gain related to the
final resolution of our litigation with Pentech Pharmaceuticals, Inc.  On
February 9, 2009, following a bench trial, the United States District Court for
the Northern District of Illinois entered a judgment in favor of Pentech and
against Par in the amount of $70.0 million.  This action had alleged that
we breached our contract with Pentech relating to the supply and marketing of
paroxetine (Paxil®) and that we breached fiduciary duties allegedly owed to
Pentech.  As a result of the courts decision, we recorded (as a subsequent
event) $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 and Pentech entered into a settlement
agreement and release under which the parties fully resolved all disputes,
claims, and issues in connection with this litigation for $66.1 million.
 We paid $66.1 million in cash and recorded a $3.9 million gain related to
this settlement, net of $0.5 million of interest accrued from January 1, 2009.    37   Restructuring Costs  Three months endedMarch 28,

March 29,($ in thousands)

2009

2008Restructuring costs

$1,401

$ -  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 employees.  Approximately 30%
of the affected positions in manufacturing, research and development, and
general and administrative were eliminated as of December 31, 2008 and the
remaining positions are expected to be eliminated by the end of the first half
of 2009.  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 quarter of 2009, we incurred additional restructuring costs as it
continued to execute this plan.  We recognized charges for one-time
termination benefit costs. The following
table summarizes the restructuring costs 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 March 28, 2009 ($ amounts in thousands): Restructuring Activities

Initial Charge

Liabilities at December 31,
2008

Cash Payments

Additional Charges

Reversals, Reclass or
Transfers

Liabilities at March 28,
2009Severance and   
employee benefits   to be paid in cash

$6,254

$6,254

$1,738

$1,401

$ -

$5,917Severance related to 
 share-based   compensation

3,291

-

-

-

-

-Asset impairments   
and other

5,907

60

-

-

-

60Total

$15,452

$6,314

$1,738

$1,401

$ -

$5,977 We expect that
approximately $6 million of the initial charge and $1.4 million of the
additional charges will result in cash expenditures during 2009.  We expect
to record an additional $0.2 million of one-time termination benefit costs in
the second quarter of 2009.  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 but were expected to be idled or sold in
late 2009.  In conjunction with our acquisition of Nascobal and the MDRNA
facility (see Subsequent Events below), we have reevaluated our plan for these
assets.  Under its revised plans, these assets will be held and used for
the life of the asset, and therefore we have resumed depreciating these assets
in the first quarter of 2009 in accordance with their expected useful life.
 We accounted for these actions as a change in estimate in accordance with
U.S. GAAP.  Gain on Sales of Product
Rights and other Three months endedMarch 28,

March 29,($ in thousands)

2009

2008Gain on sale of product rights and other

($1,100)

($1,625)  During the three-month periods ended
March 28, 2009 and March 29, 2008, we recognized a gain on the sale of product
rights of $1.1 million and $1.0 million, related to the sale of multiple ANDAs.    38   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 that is 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 Three months endedMarch 28,

March 29,($ in thousands)

2009

2008

$ ChangeOperating income:Generic

$31,378

$1,679

$29,699Strativa

(4,366)

963

(5,329)Total operating income

$27,012

$2,642

$24,370  Our increased operating income in the
first quarter of 2009 was mainly due to the increase in gross margins for the
generic segment as discussed above, coupled with the decrease in R&D
expenditures.   Gain on
Extinguishment of Senior Subordinated Convertible Notes Three months endedMarch 28,

March 29,($ in thousands)

2009

2008Gain on extinguishment of senior subordinated
convertible notes

$245

$ -  In March 2009, we repurchased senior
subordinated convertible notes that were to mature on September 30, 2010 in the
aggregate principal amount of $2.5 million for approximately $2.3 million,
including accrued interest.  The notes bore interest at an annual rate of
2.875%.  The repurchase also resulted in the write-off of approximately
$0.02 million of deferred financing costs in the fourth quarter of 2008.
 We recorded a gain of approximately $0.25 million, in the first quarter of
2009 related to this debt extinguishment.   Interest Income  Three months endedMarch 28,

March 29,($ in thousands)

2009

2008Interest income

$1,157

$3,014  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.  Interest Expense  Three months endedMarch 28,

March 29,($ in thousands)

2009

2008Interest expense

($2,567)

($3,510)  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 $60.5 million during October 2008 and March 2009.   As further
detailed in Note 2  Change in Accounting Principle and Related Adjustments to
Previously Issued Financial Statements of the accompanying condensed
consolidated financial statements, on January 1, 2009, Par adopted the
provisions of FASB Staff Position No. APB 14-1, Accounting for Convertible
Debt Instruments That May Be Settled in Cash Upon Conversion (Including Partial
Cash Settlement)(FSP APB 14-1) and restated first quarter 2008 interest
expense to $3.5 million.   39    Income Taxes Three months endedMarch 28,

March 29,($ in thousands)

2009

2008Provision for income taxes

$9,537

$743Effective tax rate

37%

35%  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 endedMarch 28,

March 29,($ in thousands)

2009

2008Gain from discontinued operations

$ -

$505Provision for income taxes

176

445(Loss) gain from discontinued operations

($176)

$60  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 period ended March 29, 2008 which represents our share of the
net proceeds of the sale transaction.  This $0.5 million has been
classified as discontinued operations on the condensed consolidated statement of
operations for the quarter ended March 29, 2008.  In the three month period
ended March 28, 2009, we recorded $0.2 million and $0.5 million in the three
month period ended March 29, 2008 to discontinued operations related to tax
contingencies.   FINANCIAL CONDITION  Liquidity and Capital Resources  Three months endedMarch 28,($ in thousands)

2009Cash and cash equivalents at beginning of
period

$170,629Net cash used in operating activities

(52,241)Net cash provided by investing activities

19,178Net cash used in financing activities

(3,793)Net decrease in cash and cash equivalents

($36,856)Cash and cash equivalents at end of period

$133,773  Cash and cash equivalents at March 28,
2009 decreased from December 31, 2008.  Cash used in operations for the
three months ended March 28, 2009, reflects the cash paid to Pentech in
connection with the unfavorable court decision of approximately $66 million
partially offset by cash generated by operations.  Cash flows provided by
investing activities were driven by the liquidation of net investments in
available for sale debt securities to fund the payment of the unfavorable court
decision related to Pentech.  Cash used in financing activities in the
three-month period ended March 28, 2009 mainly represented the repurchase of
$2.5 million (face value) of senior subordinated convertible notes.  Our working capital, current assets
minus current liabilities, of $228 million at March 28, 2009 increased
approximately $25 million from $203 million at December 31, 2008.  The
working capital ratio, which is calculated by dividing current assets by current
liabilities, was 1.90x at March 28, 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 first quarter
of 2009, we collected approximately $161 million with respect to net product
sales as compared to approximately $140 million in the first quarter of 2008.
 The increase can be   40   attributed
to our improved sales performance in the first quarter of 2009 as compared to
the prior year quarter.  Our ability to continue to generate cash from
operations is predicated on our ability to monetize our current product
portfolio, product pipeline, and future products acquired.  Our generic
product pipeline included 13 first-to-file ANDAs and our Strativa pipeline had 3
brand drugs in active development as of March 28, 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 its
business. Uses of Liquidity Our uses of
liquidity and future and potential uses of liquidity include the following: · Cash paid to Pentech in connection
with the unfavorable court decision of approximately $66 million in the first
quarter of 2009. · Cash paid for inventory purchases was
approximately $37 million for the first quarter of 2009 as compared to
approximately $31 million for prior year quarter.  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 $103 million for the first quarter of 2009 as
compared to approximately $57 million for the prior year quarter.  The
increase is mainly due to our 2009 sales performance improvement that resulted
in higher amounts paid to partners. · Cash compensation paid to employees
was approximately $20 million for the first quarter of 2009 as compared to
approximately $28 million for the prior year quarter.  The decrease is
mainly due to the resizing of our generic products division begun in October
2008, which resulted in a workforce reduction of approximately 190 employees
coupled with lower bonus payments in the first quarter of 2009. · The payment of the senior
subordinated convertible notes with a face amount of $139.5 million by September
2010 or sooner. · Potential liabilities related to the
outcomes of audits by regulatory agencies like the IRS or the Office of
Inspector General of the Department of Veterans Affairs.  We accrued for a
loss contingency estimated at approximately $4.4 million, including interest, as
of March 28, 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 $7 million. · Expenditures related to current
business development and product acquisition activities.  As of March 28,
2009, the total potential future payments that ultimately could be due under
existing agreements related to products in various stages of development were
approximately $52 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 $43.3 million as of March 28, 2009 related
primarily to amounts due under profit sharing agreements.  We expect to pay
substantially all of the $43.3 million during the first two months of the second
quarter of 2009. We believe
that we will be able to monetize our current product portfolio, our product
pipeline, and future product acquisitions and generate sufficient operating cash
flows and that along with existing cash, cash equivalents and available for sale
securities will allow us to meet our financial obligations over the foreseeable
future.  We expect to continue to fund our operations, including our
research and development activities, capital projects, in-licensing product
activity and obligations under our existing distribution and development
arrangements discussed herein, out of our working capital.  Our future
product acquisitions may require additional debt and/or equity financing; there
can be no assurance that we will be able to obtain any such additional financing
when needed on terms acceptable or favorable to it.  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 April 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   41   amount remaining for stock
repurchases under the repurchase program was approximately $43.6 million, as of
March 28, 2009.  We do not currently anticipate utilizing additional
available authorization under the repurchase program.  In addition to our cash and cash
equivalents, we had $70.8 million of available for sale debt securities
classified as current assets on the condensed consolidated balance sheet as of
March 28, 2009.  These available for sale debt securities were all
available for immediate sale.  We intend to continue to use our current
liquidity to support the expansion of our Strativa business, enter into product
license arrangements, potentially acquire other complementary businesses and
products, and for general corporate purposes.  Contractual Obligations as of
March 28, 2009 The dollar
values of our material contractual obligations and commercial commitments as of
March 28, 2009 were as follows, in $ thousands:  Amounts Due by PeriodObligation

Total Monetary

2009

2010 to

2012 to

2014 andObligations


2011

2013

thereafter

OtherOperating leases

$12,023

$3,653

$6,681

$1,336

$353

$ -Convertible notes (1)

139,500

139,500

-

-

-

-Interest payments (2)

6,065

3,060

3,005

-

-

-Purchase obligations (3)

69,086

69,086

-

-

-

-Long-term tax liability (4)

40,786

-

-

-

-

40,786Severance payments

4,153

4,153

-

-

-

-Other

1,663

1,663

-

-

-

-Total obligations

$273,276

$221,115

$9,686

$1,336

$353

$40,786  (1) The Notes mature on September 30,
2010, unless earlier converted, accelerated or repurchased.  See Legal
Proceedings in Note 14 to condensed consolidated financial statements,
Commitments, Contingencies and Other Matters for discussion involving notices
of default and acceleration we received from the Trustee of our 2.875% Senior
Subordinated Convertible Notes due 2010 and related litigation.  Until the
matter is resolved, we are recording the payment obligations as a current
liability as of March 28, 2009 because the Court in the matter could rule
against our position and determine that the appropriate remedy would be the
accelerated payment of the Notes. (2) Interest payments represent the
total interest due under the Notes until their contractual maturity on September
30, 2010.  A portion of these amounts would not be payable if the Notes are
earlier converted, accelerated or repurchased. (3) Purchase obligations consist of
both cancelable and non-cancelable inventory and non-inventory items. (4) The difference between a tax position
taken or expected to be taken in a tax return and the benefit recognized and
measured pursuant to FIN 48 represents an unrecognized tax
benefit.  An unrecognized tax benefit is a liability that represents a
potential future obligation to the taxing authorities.  As of March 28,
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.  For presentation on
the table above, we included the related long-term liability in the Other
column.   Financing  At March 28,
2009, our total outstanding short and long-term debt, including the current
portion, had a face value of $139.5 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, accelerated or repurchased.  We may not redeem the Notes
prior to the maturity date.  The Trustee under the Indenture governing the
Notes has alleged that we have defaulted in the performance of our
obligations under the Indenture and has instituted a lawsuit in connection
therewith.  Accordingly, until the matter is resolved, we are recording the
payment obligations under the Notes as a current liability on our condensed
consolidated balance sheet as of March 28, 2009.  Refer to Notes to
condensed consolidated financial statements  Note 14  Commitments,
Contingencies and Other Matters. In conjunction with the adoption of
FSP APB 14-1, we allocated a portion of the Senior Subordinated Convertible
Notes between liability and equity components of the instrument in a manner that
reflects the issuers economic interest cost.  Previous   42   guidance provided for
accounting of our type of convertible debt instruments entirely as debt.
 The effect of FSP APB 14-1 for our type of convertible debt instrument is
that the equity component is included in the additional paid-in capital section
of stockholders equity on Pars condensed consolidated balance sheet and the
value of the equity component is treated as original issue discount for purposes
of accounting for the debt component of the convertible debt instruments.
 FSP APB 14-1 was effective as of January 1, 2009, with retrospective
application required.  Higher interest expense will result through the
accretion of the discounted carrying value of the debt instruments to their face
amount over their term.  Prior period interest expense will also be higher
than previously reported due to retrospective application.  As of March 28,
2009, our condensed consolidated balance sheet reflects the debt amount of
$129.2 million, a related deferred tax liability amount of $3.9 million and an
equity component of $6.4 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.  There has been no change, update or revision to our critical
accounting policies subsequent to the filing of Pars Annual Report on Form 10-K
for the fiscal year ended December 31, 2008.   Subsequent Events 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 supplement indicated to treat vitamin B12 deficiency.  Under the terms
of the all cash transaction, we paid QOL Medical $54.5 million for the worldwide
rights to Nascobal® Nasal Spray.  Nascobal® Nasal Spray will be
manufactured by Par with assets acquired and operating leases assumed on March
31, 2009 from MDRNA (formerly Nastech Pharmaceutical).    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. 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 March 28, 2009 would have caused the fair value of our investments in
available for sale debt securities to decline by approximately $0.2 million as
of that date.  Additional investments are made in overnight deposits and
money market funds. These instruments are classified as cash and cash
equivalents for financial reporting purposes, generally also have lower interest
rate risk relative to its 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
$0.3 million on an annual basis. The following
table summarizes the carrying value of available for sale securities that
subject Par to market risk at March 28, 2009 and December 31, 2008 ($ amounts in
thousands):  March 28,

December 31,2009

2008Securities issued by government agencies
$21,428

$41,541Debt securities issued by various state and local
municipalities and    agencies
28,372

28,585Other debt securities
21,013

24,320Marketable equity securities available for
sale
375

600Total
$71,188

$95,046  Senior Subordinated
Convertible Notes The outstanding face value of our
Senior Subordinated Convertible Notes was $139.5 million and they bear fixed
interest at an annual rate of 2.875% as of March 28, 2009.  The Notes
mature on September 30, 2010, unless earlier converted, accelerated or
repurchased.  On March 28, 2009, the Senior Subordinated Convertible
Notes had a quoted market value of approximately $130 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.    43     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 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 March 28, 2009.  Based on that evaluation, our
management, including our CEO and the CFO, concluded that our disclosure
controls and procedures were effective as of March 28, 2009.   Changes in Internal Control
over Financial Reporting  There have been no
significant changes in our internal control over financial reporting identified
during the quarter ended March 28, 2009.    PART II. OTHER INFORMATION   ITEM 1. LEGAL PROCEEDINGS Contractual Matters On May 3, 2004, Pentech
Pharmaceuticals, Inc. (Pentech) filed an action against Par in the United
States District Court for the Northern District of Illinois.  This action
alleged that Par breached its contract with Pentech relating to the supply and
marketing of paroxetine (Paxil®) and that Par breached fiduciary duties
allegedly owed to Pentech.  On February 9, 2009, following a bench trial,
the district court entered a judgment in favor of Pentech and against Par in the
amount of $70 million.  Subsequently, on March 5, 2009, in order to avoid
any further costs, burdens or distractions of litigation, Par entered into a
Settlement Agreement with Pentech pursuant to which Par paid Pentech an amount
of approximately $66 million.  Pursuant to the terms of the agreement, a
stipulation dismissing the appeal of judgment and Pentechs satisfaction of
judgment was filed with the District Court.  Corporate Litigation Par and certain of its former
executive officers have been named as defendants in consolidated class action
lawsuits filed on behalf of purchasers of common stock of Par between July 23,
2001 and July 5, 2006. The lawsuits followed Pars July 5, 2006 announcement
regarding the restatement of certain of its financial statements and allege that
Par and certain members of its then management engaged in violations of the
Securities Exchange Act of 1934, as amended (the Exchange Act), by issuing
false and misleading statements concerning Pars financial condition and results
of operations. The class actions are pending in the United States District
Court, District of New Jersey.  On June 24, 2008, the Court dismissed
co-lead plaintiffs Consolidated Amended Complaint without prejudice with leave
to re-file.  On July 24, 2008, co-lead plaintiffs filed a Second
Consolidated Amended Complaint. Par and the individual defendants have filed a
motion to dismiss.  The motion has been fully briefed but not yet scheduled
for argument.  Par and the individual defendants intend to vigorously
defend the class action.  On September 1, 2006, Par
received a notice of default from the American Stock Transfer & Trust
Company, as trustee (the Trustee)  of Pars 2.875% Senior Subordinated
Convertible Notes due 2010 (the Notes). The Trustee claims, in essence, that
Pars failure to include financial statements in its Quarterly Report on Form
10-Q for the second quarter of 2006 constituted a default under Section 6.2
of the Indenture, dated as of September 30, 2003 (the Indenture), between
Par, as issuer, and the Trustee, relating to the Notes.  Under the
Indenture, Par is required only to provide the Trustee with copies of its annual
and other reports (or copies of such portions of such reports as the SEC may by
rules and regulations prescribe) that it is required to file with the SEC
pursuant to Section 13 or 15(d) of the Exchange Act within 15 calendar days
after it files such annual and other reports with the SEC. Moreover, Pars
Indenture specifically contemplates providing the Trustee with portions of
reports. On August 24, 2006 (within 15 days of filing with the SEC), Par
provided to the Trustee a copy of its Quarterly Report on Form 10-Q for the
second quarter of 2006. Pars Form 10-Q did not include Pars financial
statements for the second quarter of 2006 and related Managements Discussion
and Analysis due to Pars work to restate certain of its past financial
statements, and, therefore, in accordance with SEC rules, Par filed a Form
12b-25 Notification of Late Filing disclosing the omissions. Pars Form 12b-25
also was provided to the Trustee on August 24, 2006. Accordingly, Par believes
that it complied with the Indenture provision in question.   44   After Par
communicated its position to the Trustee, the Trustee filed a lawsuit, on
October 19, 2006, on behalf of the holders of the Notes in the Supreme
Court of the State of New York, County of New York, alleging a breach of the
Indenture and of an alleged covenant of good faith and fair dealing. The lawsuit
demands, among other things, that Par pay the holders of the Notes either the
principal, any accrued and unpaid interest and additional interest (as such term
is defined in the Indenture), if any, or the difference between the fair market
value of the Notes on October 2, 2006 and par, whichever the Trustee
elects, or in the alternative, damages to be determined at trial, alleged by the
Trustee to exceed $30.0 million. Par removed the lawsuit to the U.S.
District Court for the Southern District of New York and has filed its answer to
the complaint in that Court. On January 19, 2007, the Trustee filed a
motion for summary judgment. On February 16, 2007, Par filed its response to the
Trustees motion for summary judgment and cross-moved for summary judgment in
its favor.  The Court has not yet ruled on the motions.  Until the
matter is resolved, Par is recording the payment obligations as a current
liability on the condensed consolidated balance sheets because the Court in the
matter could rule against Pars position and determine that the appropriate
remedy would be the accelerated payment of the convertible notes.  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 action in a reexamination proceeding at
the United States Patent and Trademark Office (PTO) on February 24, 2006 and
on February 24, 2007.  The 392 patent is also the subject of a
reexamination proceeding.  As of July 10, 2008, the PTO has rejected with
finality all claims pending in both the 392 and 981 patents.  CIMA has
moved to stay this lawsuit pending the outcome of the reexamination proceedings
and to consolidate this lawsuit with another lawsuit in the same district
involving the same patents (CIMA Labs, Inc. et al. v. Actavis Group hf et al.).
Par intends to vigorously defend this lawsuit and pursue its counterclaims. Par entered
into a licensing agreement with developer Paddock Laboratories, Inc. (Paddock)
to market testosterone 1% gel, a generic version of Unimed Pharmaceuticals,
Inc.s (Unimed) product Androgel®.  Pursuant to this agreement, Par is
responsible for management of any litigation and payment of all legal fees
associated with this product.  The product, if successfully brought to
market, would be manufactured by Paddock and marketed by Par.  Paddock has
filed an ANDA (that is pending with the FDA) for the testosterone 1% gel
product.  As a result of the filing of the ANDA, Unimed and Laboratories
Besins Iscovesco (Besins), co-assignees of the patent-in-suit, filed a lawsuit
against Paddock in the United States District Court for the Northern District of
Georgia, alleging patent infringement on August 22, 2003.  Par has an
economic interest in the outcome of this litigation by virtue of its licensing
agreement with Paddock.  Unimed and Besins sought an injunction to prevent
Paddock from manufacturing the generic product.  On September 13, 2006, Par
acquired from Paddock all rights to the ANDA for testosterone 1% gel, a generic
version of Unimeds product Androgel® for $6 million.  The lawsuit was
resolved by a settlement and license agreement that terminates all on-going
litigation and permits Par to launch the generic version of the product no
earlier than August 31, 2015 and no later than February 28, 2016, assuring Pars
ability to market a generic version of Androgel® well before the expiration of
the patents at issue.  On March 7, 2007, Par was issued a Civil
Investigative Demand seeking information and documents in connection with the
court-approved settlement in 2006 of the patent infringement case, Unimed v.
Paddock, in the U.S. District Court for Northern District of Georgia.  The
Bureau of Competition for the Federal Trade Commission (FTC) is investigating
whether the settlement of the litigation constituted unfair methods of
competition in a potential violation of Section 5 of the FTC Act.  On
January 30, 2009, the FTC filed a lawsuit against the company in the U.S.
District Court for the District of Central California alleging violations of
antitrust laws stemming from Pars court-approved settlement in the patent
litigation.  On February 2, 2009, Meijer Distribution, Inc. filed a class
action complaint in the same district court alleging antitrust violations and
seeking treble damages. On February 3, 2009, both Rochester Drug Co-Operative,
Inc. and Louisiana Wholesale Drug Co., Inc. filed class action complaints in the
same district court.  On April 9, 2009, the U.S. District Court for Central
California granted Pars motion to transfer the FTC lawsuit, as well as the
three aforementioned class action suits, to the U.S. District Court for Northern
Georgia, the jurisdiction in which Pars original consent judgment relating to
the patent litigation settlement entered.  On April 10, 2009, the cases
were transferred.  On April 17, 2009 the Fraternal Order of Police, Fort
Lauderdale Lodge 31 Insurance Trust Fund filed a class action complaint naming
Par in the U.S. District Court for the District of New Jersey and on April 21,
2009 Raymond Scurto on behalf of another class, filed a second class action
complaint naming Par in the same court both alleging antitrust violations.
 Par believes it has complied with all applicable laws in connection with
the court-approved settlement and intends to vigorously defend these
actions. On October 4,
2006, Novartis Corporation, Novartis Pharmaceuticals Corporation, and Novartis
International AG (collectively Novartis) filed a lawsuit against Par in the
United States District Court for the District of New Jersey. Novartis alleged
that Par and Kali infringed U.S. Patent No. 6,162,802 (the 802 patent) by
submitting a Paragraph IV certification to the FDA for approval of amlodipine
and benazepril hydrochloride combination capsules. Par and its subsidiary enied
Novartis allegation, asserting that the 802 patent is not infringed and is
invalid.  Par submitted a claim construction brief on September 5, 2008 and
its rebuttal brief on October 8, 2008.  On December 11, 2008, the company
entered into a settlement agreement with Novartis.  On February 10, 2009, a   45   stipulation
of dismissal was entered by the judge, finally terminating the case. On December 19, 2006, Reliant
Pharmaceuticals, Inc. (Reliant) filed a lawsuit against Par in the United
States District Court for the District of Delaware.  Reliant alleged, in
its Complaint, that Par infringed U.S. Patent No. 5,681,588 (the 588 patent)
by submitting a Paragraph IV certification to the FDA for approval to market
generic 325 mg Propafenone HCl SR capsules.  On January 26, 2007, Reliant
amended its complaint to add the additional allegation that Par infringed the
588 patent by submitting a Paragraph IV certification to the FDA for approval
to market generic 225 mg and 425 mgin addition to the 325 mgPropafenone HCl SR
capsules.  Par has answered and counterclaimed denying Reliants
infringement allegations, and asserting that the 588 patent is invalid and
unenforceable.  On April 17, 2009, a dismissal with prejudice was entered
in the case pursuant to a settlement agreement between the parties.  In
view of this agreement, Par will enter the market with generic Rythmol SR on
January 1, 2011 or earlier depending on certain circumstances.  On May 9, 2007, Purdue Pharma Products
L.P. (Purdue), Napp Pharmaceutical Group Ltd. (Napp), Biovail Laboratories
International SRL (Biovail), and Ortho-McNeil, Inc. (Ortho-McNeil) filed a
lawsuit against Par in the United States District Court for the District of
Delaware.  The complaint alleges infringement of U.S. Patent No. 6,254,887
(the 887 patent) because Par submitted a Paragraph IV certification to the
FDA for approval of 200 mg extended release tablets containing tramadol
hydrochloride.  On May 30, 2007, Par filed its answer and counterclaim to
the Complaint seeking a declaration of noninfringement and invalidity of the
'887 patent.  A subsequent Complaint was served on July 2, 2007 in the same
District Court.  The new Complaint alleges that Par's 100 mg and 200 mg
extended release tablets containing tramadol hydrochloride infringe the 887
patent.  Par filed its Answer and Counterclaim on July 23, 2007 and will
assert all available defenses in addition to seeking a declaration of
noninfringement and invalidity of the '887 patent.  On October 24, 2007,
plaintiffs filed an amended complaint in the Delaware District Court in view of
Par's amendment of its ANDA to include the 300 mg strength of extended release
tramadol. Trial is currently set for April 16, 2009.  Par intends to defend
this action vigorously and pursue its counterclaims against the plaintiffs.  On July 6, 2007, Sanofi-Aventis and
Debiopharm, S.A. filed a lawsuit against Par and its development partner, MN
Pharmaceuticals ("MN"), in the United States District Court for the District of
New Jersey.  The complaint alleges infringement of U.S. Patent Nos.
5,338,874 and 5,716,988 because Par and MN submitted a Paragraph IV
certification to the FDA for approval of 50 mg/10 ml, 100 mg/20 ml, and 200
mg/40 ml oxaliplatin by injection.  Par and MN filed their Answer and
Counterclaims on October 10, 2007 and an amendment to it on October 22, 2007.
 On January 14, 2008, following MN's amendment of its ANDA to include
oxaliplatin injectable 5 mg/ml, 40 ml vial, Sanofi-Aventis filed a complaint
asserting infringement of the '874 and the '998 patents.  Par and MN filed
their Answer and Counterclaim on February 20, 2008.  The court has set an
expert discovery deadline of June 9, 2009, with all motions due by June 15,
2009.  Par and MN intend to defend these actions vigorously and pursue
their counterclaims against Sanofi and Debiopharm.  On September 21, 2007, Sanofi-Aventis
and Sanofi-Aventis U.S., LLC (Sanofi-Aventis) filed a lawsuit against Par and
its development partner, Actavis South Atlantic LLC ("Actavis"), in the United
States District Court for the District of Delaware.  The complaint alleges
infringement of U.S. Patent Nos. 4,661,491 and 6,149,940 because Par and Actavis
submitted a Paragraph IV certification to the FDA for approval of 10 mg
alfuzosin hydrochloride extended release tablets. Par has filed an Answer to the
Complaint and counterclaims that the patents asserted are not infringed and are
invalid.  On April 3, 2008, the judge ordered all actions in the case
stayed pending the plaintiffs motion for transfer and consolidation under the
rules governing multi-district litigation.  On June 9, 2008, the
Multi-District Litigation Panel granted plaintiffs motion for transfer and
consolidation and lifted the stay of litigation.  On December 24, 2008, Par
agreed to terminate its collaboration agreement with Actavis and, with it, all
obligations and all benefits related to Alfuzosin.  Par has instructed its
attorneys to move to withdraw the company from the litigation.  On October 1, 2007, Elan
Corporation, PLC (Elan) filed a lawsuit against Par and its development
partner, IntelliPharmaCeutics Corp., and IntelliPharmaCeutics Ltd. ("IPC") in
the United States District Court for the District of Delaware.  On October
5, 2007, Celgene Corporation (Celgene) and Novartis filed a lawsuit against
IPC in the United States District Court for the District of New Jersey.
 The Complaint in the Delaware case alleged infringement of U.S. Patent
Nos. 6,228,398 and 6,730,325 because Par submitted a Paragraph IV certification
to the FDA for approval of 5, 10, 15, and 20 mg dexmethylphenidate hydrochloride
extended release capsules.  The original Complaint in the New Jersey case
alleged infringement of U.S. Patent Nos. 6,228,398; 6,730,325; 5,908,850;
6,355,656; 6,528,530; 5,837,284; and 6,635,284 because Par and IPC submitted a
Paragraph IV certification to the FDA for approval of 5, 10, 15, and 20 mg
dexmethylphenidate extended release capsules.  Par and IPC filed an Answer
and Counterclaims in both the Delaware case and the New Jersey case.  Elan
filed a motion to consolidate the cases on January 2, 2008, and on February 20,
2008, the judge in the Delaware litigation consolidated all four related cases
pending in Delaware and entered a scheduling order providing for April 15, 2009
as the deadline for all discovery, June 29, 2009 as the date for a Markman
hearing, and August 17, 2009 as the date for a bench trial.  The Delaware
court has established a March 5, 2009 deadline for fact discovery and a June 15,
2009 deadline for expert discovery.  A Rule 16 conference was held for the
New Jersey litigation on March 4, 2008 setting a deadline of December 12, 2008
for all discovery with a Markman hearing scheduled for June 19, 2009.  The
New Jersey court has set a fact discovery deadline of March 1, 2009.  Par
intends to defend these actions vigorously and pursue its counterclaims against
Elan, Celgene and Novartis.    46   On
September 13, 2007, Santarus, Inc. (Santarus), and The Curators of the
University of Missouri (Missouri) filed a lawsuit against Par in the United
States District Court for the District of Delaware.  The Complaint alleges
infringement of U.S. Patent Nos. 6,699,885; 6,489,346; and 6,645,988 because Par
submitted a Paragraph IV certification to the FDA for approval of 20 mg and 40
mg omeprazole/sodium bicarbonate capsules.  Par filed its Answer and
Counterclaims on October 17, 2007.  A scheduling conference was held
February 11, 2008, setting September 8, 2008 as the date for the claim
construction hearing and July 13, 2009 as the first day of the bench trial. On
December 20, 2007, Santarus, Inc., and Missouri filed a second lawsuit against
Par in the United States District Court for the District of Delaware alleging
infringement of U.S. Patent Nos. 6,699,885; 6,489,346; 6,780,882; and 6,645,988
because Par submitted a Paragraph IV certification to the FDA for approval of 20
mg and 40 mg omeprazole/sodium bicarbonate powders for oral suspension.
 Par filed an answer and counterclaims in this action as well.  On
March 4, 2008, the cases pertaining to Pars ANDAs for omeprazole capsules and
omeprazole oral suspension (see below) were consolidated for all purposes.
 Par filed its claim construction brief on August 22, 2008, and its
answering brief on September 22, 2008, as the Court rescheduled the Markman
hearing.  The Court held a Markman hearing on November 5, 2008 and issued
its claim construction order on the same day.   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
pretrial conference for January 11, 2010, and a bench trial for February 15,
2010. Par intends to defend these actions vigorously and pursue its
counterclaims against AstraZeneca Pharmaceuticals, LP, AstraZeneca UK Ltd., IPR
Pharmaceuticals, Inc. and Shionogi Seiyaku Kabushiki Kaisha.  On November 14, 2008, Pozen, Inc.
filed a lawsuit against Par in the United States District Court for the Eastern
District of Texas.  The Complaint alleges infringement of U.S. Patent Nos.
6,060,499; 6,586,458; and 7,332,183 because Par submitted a Paragraph IV
certification to the FDA for approval of 500 mg/85 mg naproxen
sodium/sumatriptan succinate oral tablets.  Par filed an Answer and
Counterclaims on December 8, 2008 and the court has scheduled a Markman hearing
for February 2010 and trial for October 2010.  On March 17, 2009, Par filed
an Amended Answer and Counterclaim in order to join GlaxoSmithKline as a
counterclaim defendant in this litigation.  Par intends to defend this
action vigorously and pursue its counterclaims against Pozen and
GlaxoSmithKline.  On April 15, 2009, Par filed a
declaratory judgment Complaint against Novartis and Ajinomoto Co., Inc. in the
United States District Court for the Eastern District of Pennsylvania.  The
complaint seeks declaratory judgment of invalidity and non-infringement of U.S.
Patent Nos. 5,463,116; 5,488,150; 6,559,188; 6,641,841; 6,844,008; and 6,878,749
in view of Pars December 22, 2004 submission of a Paragraph IV certification to
the FDA for approval of 60 mg and 120 mg nateglinide oral tablets.  Par
intends to prosecute this action vigorously against Novartis and Ajinomoto.  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 pretrial 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, the requested documents and
information to the respective Attorneys   47   General
and theUSOPM and will continue to cooperate with the Attorneys General
and the USOPM in these investigations if it is called upon to do so. Other  On March 19, 2009, Par was served with
a subpoena by the Department of Justice requesting documents related to
Strativas marketing of Megace® ES.  The subpoena indicated that the
Department of Justice is currently investigating promotional practices in the
sales and marketing of Megace® ES.  We intend to fully cooperate with the
Department of Justice's inquiry.  Par is, from time to time, a party to
certain other litigations, including product liability litigations.  Par
believes that these litigations are part of the ordinary course of its business
and that their ultimate resolution will not have a material adverse effect on
its financial condition, results of operations or liquidity. Par intends to
defend or, in cases where Par is plaintiff, to prosecute these litigations
vigorously.  Contingency Par accrued for a loss contingency
related to a routine post award contract review of Pars Department of Veterans
Affairs contract (the VA Contingency) for the periods 2004 to 2007 that is
being conducted by the Office of Inspector General of the Department of Veterans
Affairs.  The regulations that govern the calculations used to generate the
pricing-related information are complex and require the exercise of judgment.
 Should there be ambiguity with regard to how to interpret the regulations
that govern the calculations, and report these calculations, and even in the
absence of any such ambiguity, a governmental authority may take a position
contrary to the position that Par has taken.  In accordance with Statement
of Financial Accounting Standards No. 5, Accounting for
Contingencies, Par accrues for contingencies by a charge to income when it
is both probable that a loss will be incurred and the amount of the loss can be
reasonably estimated.  In the event that Pars loss contingency is
ultimately determined to be higher than originally accrued, the recording of the
additional liability may result in a material impact on Pars results of
operations, liquidity or financial condition when such additional liability is
accrued.  Pars estimate of the probable loss is approximately $4.4
million, including interest, which has been accrued as of March 28, 2009.     ITEM 1A.  RISK FACTORS In addition to the other information
set forth in this Report, you should carefully consider the factors discussed in
the Risk Factors section of our Annual Report on Form 10-K for the year ended
December 31, 2008, which could materially affect our business, results of
operations, financial condition or liquidity.  The risks described in our
Annual Report on Form 10-K for the year ended December 31, 2008 have not
materially changed.  The risks described in our Annual Report are not the
only risks facing us.  Additional risks and uncertainties not currently
known to us, or that we currently believe are immaterial, also may materially
adversely affect our business, results of operations, financial condition or
liquidity.    ITEM 2.  UNREGISTERED SALES OF EQUITY SECURITIES
AND USE OF PROCEEDS Issuer Purchases of Equity
Securities(1) Quarter Ending March
28, 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)January
1, 2009 through
January
31, 2009

106,504

N/A

-

-February
1, 2009 through
February
28, 2009

1,279

N/A

-

-March
1, 2009 through
March
28, 2009

21,067

N/A

-

4,422,245Total

128,850

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 March 28, 2009.  The
repurchase program has no expiration date.   48   (2) The total number of shares purchased
represents 128,850 shares surrendered to Par to satisfy tax withholding
obligations in connection with the vesting of restricted stock issued to
employees and issuance of common shares in connection with the vesting of
restricted stock units issued to employees. (3) Based on the closing price of our
common stock on the New York Stock Exchange of $9.85 at March 27, 2009.    ITEM
6.  EXHIBITS  10.1 Separation
Agreement and Release by and between Par Pharmaceutical, Inc. and Veronica
Lubatkin dated as of March 6, 2009 (filed herewith). 10.2 Asset
Purchase Agreement by and among Par Pharmaceutical, Inc., QOL Medical, LLC and,
solely with respect to certain provisions, the members of QOL, dated as of March
31, 2009 (filed herewith). * 31.1 Certification
of the Principal Executive Officer (filed herewith). 31.2 Certification
of the Principal Financial Officer (filed herewith). 32.1 Certification
by the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (attached hereto). 32.2 Certification by the Chief Financial
Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002 (attached hereto).   * Indicates that portions of this
agreement have been omitted and filed separately with the SEC in a confidential
treatment request pursuant to Rule 24b-2 of the Exchange Act.   49     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:  May
6, 2009 /s/ Patrick G.
LePore Patrick G. LePore Chairman, President
and Chief Executive Officer     Date:  May
6, 2009 /s/ Lawrence A.
Kenyon Lawrence A. Kenyon Executive Vice
President and Chief Financial Officer     50   EXHIBIT
INDEX   Exhibit
Number Description   10.1 Separation
Agreement and Release by and between Par Pharmaceutical, Inc. and Veronica
Lubatkin dated as of March 6, 2009 (filed herewith). 10.2 Asset
Purchase Agreement by and among Par Pharmaceutical, Inc., QOL Medical, LLC and,
solely with respect to certain provisions, the members of QOL, dated as of March
31, 2009 (filed herewith). * 31.1 Certification
of the Principal Executive Officer (filed herewith). 31.2 Certification
of the Principal Financial Officer (filed herewith). 32.1 Certification
by the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (attached hereto). 32.2 Certification by the Chief Financial
Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002 (attached hereto).   * Indicates that portions of this
agreement have been omitted and filed separately with the SEC in a confidential
treatment request pursuant to Rule 24b-2 of the Exchange Act.    51