<PAGE>

================================================================================

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D. C. 20549

                                    FORM 10-Q

           [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

                FOR THE QUARTERLY PERIOD ENDED: DECEMBER 29, 2007

                                       OR

          [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

             FOR THE TRANSITION PERIOD FROM __________ TO __________

                         COMMISSION FILE NUMBER 0-19725

                                 PERRIGO COMPANY
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

<TABLE>
<S>                                                          <C>
            MICHIGAN                                              38-2799573
(STATE OR OTHER JURISDICTION OF                                (I.R.S. EMPLOYER
 INCORPORATION OR ORGANIZATION)                              IDENTIFICATION NO.)
</TABLE>

<TABLE>
<S>                                                              <C>
       515 EASTERN AVENUE
       ALLEGAN, MICHIGAN                                            49010
     (ADDRESS OF PRINCIPAL                                       (ZIP CODE)
       EXECUTIVE OFFICES)
</TABLE>

                                 (269) 673-8451
              (REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)

                                 NOT APPLICABLE
              (FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR,
                          IF CHANGED SINCE LAST REPORT)

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, and (2) has been subject to such filing requirements
for the past 90 days. YES [X] NO [ ]

Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer or a smaller reporting company. See
definitions of "accelerated filer", "large accelerated filer" and "smaller
reporting company" in Rule 12b-2 of the Exchange Act. (Check one):

LARGE ACCELERATED FILER [X]                        ACCELERATED FILER [ ]

NON-ACCELERATED FILER [ ]                          SMALLER REPORTING COMPANY [ ]
(DO NOT CHECK IF A SMALLER REPORTING COMPANY)

Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). [ ] YES [X] NO

As of January 25, 2008 the registrant had 93,080,386 outstanding shares of
common stock.

================================================================================

<PAGE>

                                 PERRIGO COMPANY

                                    FORM 10-Q

                                      INDEX

<TABLE>
<CAPTION>
                                                                           PAGE
                                                                          NUMBER
                                                                          ------
<S>                                                                       <C>
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS                         1

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

Condensed consolidated statements of income -- For the quarters
and year-to-date ended December 29, 2007 and December 30, 2006               2

Condensed consolidated balance sheets -- December 29, 2007,
June 30, 2007, and December 30, 2006                                         3

Condensed consolidated statements of cash flows -- For the year-to-date
ended December 29, 2007 and December 30, 2006                                4

Notes to condensed consolidated financial statements                         5

Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations                                                       14

Item 3. Quantitative and Qualitative Disclosures About Market Risks         26

Item 4. Controls and Procedures                                             27

PART II. OTHER INFORMATION

Item 1. Legal Proceedings                                                   28

Item 1A.  Risk Factors                                                      28

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds         31

Item 4.  Submission of Matters to a Vote of Security Holders                31

Item 6. Exhibits                                                            32

SIGNATURES                                                                  33
</TABLE>

<PAGE>

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

Certain statements in this report are "forward-looking statements" within the
meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and
are subject to the safe harbor created thereby. These statements relate to
future events or the Company's future financial performance and involve known
and unknown risks, uncertainties and other factors that may cause the actual
results, levels of activity, performance or achievements of the Company or its
industry to be materially different from those expressed or implied by any
forward-looking statements. In particular, statements about the Company's
expectations, beliefs, plans, objectives, assumptions, future events or future
performance contained in this report, including certain statements contained in
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" are forward-looking statements. In some cases, forward-looking
statements can be identified by terminology such as "may," "will," "could,"
"would," "should," "expect," "plan," "anticipate," "intend," "believe,"
"estimate," "predict," "potential" or the negative of those terms or other
comparable terminology. Please see Item 1A of the Company's Form 10-K for the
year ended June 30, 2007 and Item 1A of this Form 10-Q for a discussion of
certain important risk factors that relate to forward-looking statements
contained in this report. The Company has based these forward-looking statements
on its current expectations, assumptions, estimates and projections. While the
Company believes these expectations, assumptions, estimates and projections are
reasonable, such forward-looking statements are only predictions and involve
known and unknown risks and uncertainties, many of which are beyond the
Company's control. These and other important factors may cause actual results,
performance or achievements to differ materially from those expressed or implied
by these forward-looking statements. The forward-looking statements in this
report are made only as of the date hereof, and unless otherwise required by
applicable securities laws, the Company disclaims any intention or obligation to
update or revise any forward-looking statements, whether as a result of new
information, future events or otherwise.


                                      -1-
<PAGE>

Item 1. Financial Statements (Unaudited)

                                 PERRIGO COMPANY
                   CONDENSED CONSOLIDATED STATEMENTS OF INCOME
                    (in thousands, except per share amounts)
                                   (unaudited)

<TABLE>
<CAPTION>
                                         Second Quarter        Year-to-Date
                                      -------------------   -------------------
                                        2008       2007       2008       2007
                                      --------   --------   --------   --------
<S>                                   <C>        <C>        <C>        <C>
Net sales                             $435,483   $370,629   $818,223   $710,844
Cost of sales                          305,071    274,147    571,093    521,547
                                      --------   --------   --------   --------
Gross profit                           130,412     96,482    247,130    189,297
                                      --------   --------   --------   --------

Operating expenses
   Distribution                          7,744      7,155     14,818     14,539
   Research and development             16,143     14,902     32,463     27,949
   Selling and administration           57,685     47,396    104,960     94,068
   Restructuring                            --        642         --        642
                                      --------   --------   --------   --------
      Total                             81,572     70,095    152,241    137,198

Operating income                        48,840     26,387     94,889     52,099
Interest, net                            3,674      3,300      8,329      7,886
Other income, net                         (969)    (2,258)    (2,152)    (2,319)
                                      --------   --------   --------   --------
Income before income taxes              46,135     25,345     88,712     46,532
Income tax expense                      11,846      4,257     20,404      8,562
                                      --------   --------   --------   --------
Net income                            $ 34,289   $ 21,088   $ 68,308   $ 37,970
                                      ========   ========   ========   ========

Earnings per share
   Basic                              $   0.37   $   0.23   $   0.73   $   0.41
   Diluted                            $   0.36   $   0.23   $   0.72   $   0.41

Weighted average shares outstanding
   Basic                                93,147     91,836     93,186     92,104
   Diluted                              95,283     93,506     95,104     93,595

Dividends declared per share          $ 0.0500   $ 0.0450   $ 0.0950   $ 0.0875
</TABLE>

     See accompanying notes to condensed consolidated financial statements.


                                       -2-

<PAGE>

                                 PERRIGO COMPANY
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                                 (in thousands)

<TABLE>
<CAPTION>
                                        December 29,    June 30,    December 30,
                                            2007          2007          2006
                                        ------------   ----------   ------------
                                         (unaudited)                 (unaudited)
<S>                                     <C>            <C>          <C>
Assets
Current assets
   Cash and cash equivalents             $   72,163    $   30,305    $   39,635
   Investment securities                     29,642        49,110        34,030
   Accounts receivable                      311,013       282,045       246,603
   Inventories                              326,002       295,114       322,624
   Current deferred income taxes             38,683        41,400        50,358
   Income taxes refundable                    4,568            --            --
   Assets held for sale                       2,746         2,746            --
   Prepaid expenses and other current
      assets                                 18,669        18,340        24,515
                                         ----------    ----------    ----------
      Total current assets                  803,486       719,060       717,765

Property and equipment                      687,068       664,096       629,325
   Less accumulated depreciation            358,068       333,024       308,999
                                         ----------    ----------    ----------
                                            329,000       331,072       320,326

Restricted cash                             400,000       422,000       400,000
Goodwill                                    212,934       196,218       188,272
Other intangible assets                     191,430       159,977       137,921
Non-current deferred income taxes            59,925        54,908        46,039
Other non-current assets                     42,535        41,919        43,740
                                         ----------    ----------    ----------
                                         $2,039,310    $1,925,154    $1,854,063
                                         ==========    ==========    ==========

Liabilities and Shareholders' Equity
Current liabilities
   Accounts payable                      $  194,214    $  164,318    $  173,008
   Notes payable                              3,937        11,776        18,333
   Payroll and related taxes                 44,673        46,226        41,049
   Accrued customer programs                 48,882        48,218        45,436
   Accrued liabilities                       40,137        47,333        44,328
   Accrued income taxes                          --        29,460        23,311
   Current deferred income taxes             20,320        17,125         6,193
   Current portion of long-term debt         16,539        15,381            --
                                         ----------    ----------    ----------
      Total current liabilities             368,702       379,837       351,658

Non-current liabilities
   Long-term debt                           648,077       650,762       668,784
   Non-current deferred income taxes        106,569       103,775       106,702
   Other non-current liabilities             99,566        36,311        34,646
                                         ----------    ----------    ----------
      Total non-current liabilities         854,212       790,848       810,132

Shareholders' equity
   Preferred stock, without par
      value, 10,000 shares authorized            --            --            --
   Common stock, without par value,
      200,000 shares authorized             505,076       519,419       509,910
   Accumulated other comprehensive
      income                                 79,470        56,676        31,456
   Retained earnings                        231,850       178,374       150,907
                                         ----------    ----------    ----------
      Total shareholders' equity            816,396       754,469       692,273
                                         ----------    ----------    ----------
                                         $2,039,310    $1,925,154    $1,854,063
                                         ==========    ==========    ==========

Supplemental Disclosures of Balance
   Sheet Information
   Allowance for doubtful accounts       $    8,944    $    9,421    $   12,198
   Allowance for inventory               $   36,184    $   36,210    $   39,098
   Working capital                       $  434,784    $  339,223    $  366,107
   Preferred stock, shares issued                --            --            --
   Common stock, shares issued               93,353        93,395        92,666
</TABLE>

     See accompanying notes to condensed consolidated financial statements.


                                       -3-

<PAGE>

                                 PERRIGO COMPANY
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (in thousands)
                                   (unaudited)

<TABLE>
<CAPTION>
                                                    Year-To-Date
                                               ---------------------
                                                 2008         2007
                                               ---------   ---------
<S>                                            <C>         <C>
Cash Flows (For) From Operating Activities
   Net income                                  $  68,308   $  37,970
   Adjustments to derive cash flows
      Depreciation and amortization               30,983      27,681
      Share-based compensation                     3,930       5,718
      Deferred income taxes                        6,096      (4,248)
                                               ---------   ---------
   Sub-total                                     109,317      67,121

   Changes in operating assets and
      liabilities
      Accounts receivable                        (22,125)     (9,295)
      Inventories                                (24,238)    (22,919)
      Income taxes refundable                     (4,568)         --
      Accounts payable                            24,951      (4,034)
      Payroll and related taxes                   (2,605)    (12,658)
      Accrued customer programs                      664      (4,098)
      Accrued liabilities                         (6,663)       (937)
      Accrued income taxes                        10,266       9,480
      Other                                       10,131      (5,025)
                                               ---------   ---------
   Sub-total                                     (14,187)    (49,486)
                                               ---------   ---------
         Net cash from operating activities       95,130      17,635
                                               ---------   ---------

Cash Flows (For) From Investing Activities
   Purchase of securities                       (133,791)   (117,746)
   Proceeds from sales of securities             153,502     111,665
   Asset acquisition                             (12,401)         --
   Additions to property and equipment           (13,714)    (19,784)
   Proceeds from sales of property and
      equipment                                       --       2,613
                                               ---------   ---------
         Net cash for investing activities        (6,404)    (23,252)
                                               ---------   ---------

Cash Flows (For) From Financing Activities
   Repayments of short-term debt, net             (7,839)     (1,699)
   Borrowings of long-term debt                   50,000      60,000
   Repayments of long-term debt                  (55,000)    (15,000)
   Tax effect of stock transactions                1,115         (59)
   Issuance of common stock                       16,029       3,700
   Repurchases of common stock                   (35,417)    (15,547)
   Cash dividends                                 (8,898)     (8,116)
                                               ---------   ---------
         Net cash (for) from financing
            activities                           (40,010)     23,279
                                               ---------   ---------

         Net increase in cash and cash
            equivalents                           48,716      17,662
Cash and cash equivalents, at beginning of
   period                                         30,305      19,018
Effect of exchange rate changes on cash           (6,858)      2,955
                                               ---------   ---------
Cash and cash equivalents, at end of period    $  72,163   $  39,635
                                               =========   =========

Supplemental Disclosures of Cash Flow
   Information
   Cash paid/received during the period for:
      Interest paid                            $  19,561   $  18,254
      Interest received                        $  10,392   $   9,831
      Income taxes paid                        $  11,723   $   6,727
      Income taxes refunded                    $   1,288   $   1,369
</TABLE>

     See accompanying notes to condensed consolidated financial statements.


                                       -4-
<PAGE>

                                 PERRIGO COMPANY
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 29, 2007
                    (in thousands, except per share amounts)

Perrigo Company (Company) is a leading global healthcare supplier that develops,
manufactures and distributes over-the-counter (OTC) and prescription
pharmaceuticals, nutritional products, active pharmaceutical ingredients (API)
and consumer products. The Company is the world's largest manufacturer of OTC
pharmaceutical products for the store brand market. The Company's primary
markets and locations of manufacturing and logistics operations are the United
States, Israel, Mexico and the United Kingdom.

NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments (consisting of normal recurring
accruals and other adjustments) considered necessary for a fair presentation
have been included. The Company has reclassified certain amounts in prior years
to conform to the current year presentation. The amounts reclassified had no
effect on retained earnings or net income.

Operating results for the six months ended December 29, 2007 are not necessarily
indicative of the results that may be expected for the full year. The unaudited
condensed consolidated financial statements should be read in conjunction with
the consolidated financial statements and footnotes included in the Company's
annual report on Form 10-K for the year ended June 30, 2007.

New Accounting Pronouncements

In December 2007, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 141(R), "Business
Combinations", to further enhance the accounting and financial reporting related
to business combinations. SFAS No. 141(R) establishes principles and
requirements for how the acquirer in a business combination (i) recognizes and
measures in its financial statements the identifiable assets acquired, the
liabilities assumed, and any noncontrolling interest in the acquiree, (ii)
recognizes and measures the goodwill acquired in the business combination or a
gain from a bargain purchase, and (iii) determines what information to disclose
to enable users of the financial statements to evaluate the nature and financial
effects of the business combination. SFAS No. 141(R) 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. Therefore, the effects of the Company's adoption of SFAS No. 141(R)
will depend upon the extent and magnitude of acquisitions after June 28, 2009.
The most significant effect for the Company is expected to result from the new
requirement to capitalize in-process research and development costs, which are
currently required to be expensed in accordance with existing accounting
requirements and have been material in prior acquisitions.

In December 2007, the FASB issued SFAS No. 160, "Noncontrolling Interests in
Consolidated Financial


                                      -5-

<PAGE>

Statements--an amendment of ARB No. 51", to create accounting and reporting
standards for the noncontrolling interest in a subsidiary and for the
deconsolidation of a subsidiary. SFAS No. 160 establishes accounting and
reporting standards that require (i) the ownership interest in subsidiaries held
by parties other than the parent to be clearly identified and presented in the
consolidated balance sheet within equity, but separate from the parent's equity,
(ii) the amount of consolidated net income attributable to the parent and the
noncontrolling interest to be clearly identified and presented on the face of
the consolidated statement of income, (iii) changes in a parent's ownership
interest while the parent retains its controlling financial interest in its
subsidiary to be accounted for consistently, (iv) when a subsidiary is
deconsolidated, any retained noncontrolling equity investment in the former
subsidiary to be initially measured at fair value, and (v) entities to provide
sufficient disclosures that clearly identify and distinguish between the
interests of the parent and the interests of the noncontrolling owners. SFAS No.
160 applies to fiscal years, and interim periods within those fiscal years,
beginning on or after December 15, 2008, and prohibits early adoption. The
Company does not expect SFAS No. 160 to have a material effect on its
consolidated results of operations or its financial position.

In December 2007, the FASB ratified the consensus reached by the Emerging Issues
Task Force (EITF) on EITF Issue 07-1, "Accounting for Collaborative
Arrangements". EITF 07-1 focuses on defining a collaborative agreement as well
as the accounting for transactions between participants in a collaborative
agreement and between the participants in the arrangement and third parties. The
EITF concluded that both types of transactions should be reported in each
participant's respective income statement. EITF 07-1 is effective for financial
statements issued for fiscal years beginning after December 15, 2008, and
interim periods within those fiscal years and should be applied retrospectively
to all prior periods presented for all collaborative arrangements existing as of
the effective date. The Company does not expect EITF 07-1 to have a material
effect on its consolidated results of operations or its financial position.

The Company adopted the provisions of FASB Interpretation 48, "Accounting for
Uncertainty in Income Taxes--an interpretation of FASB Statement 109, Accounting
for Income Taxes" (FIN 48) on July 1, 2007. FIN 48 prescribes a recognition
threshold and measurement attribute for the financial statement recognition and
measurement of a tax position taken or expected to be taken in a tax return. The
Interpretation requires that the Company recognize in the financial statements
the impact of a tax position, if that position is more likely than not of being
sustained on audit, based on the technical merits of the position. FIN 48 also
provides guidance on derecognition, classification, interest and penalties,
accounting in interim periods and disclosure. Further information regarding the
adoption of FIN 48 is provided in Note I.

In February 2007, the FASB issued SFAS 159, "Establishing the Fair Value Option
for Financial Assets and Liabilities", to give companies the option to measure
eligible financial instruments at fair value. SFAS 159 is effective for fiscal
years beginning after November 15, 2007. An entity is prohibited from
retrospectively applying SFAS 159 unless it chooses early adoption in
conjunction with SFAS 157, "Fair Value Measurements". The Company does not
expect the adoption of this statement to have a material impact on its
consolidated results of operations or its financial position.

In September 2006, the FASB issued SFAS 157, "Fair Value Measurements". This
statement clarifies the definition of fair value, establishes a framework for
measuring fair value and expands the disclosures on fair value measurements.
SFAS 157 is effective for the Company's fiscal year ending June 27, 2009. On
December 14, 2007, the FASB issued Proposed FASB Staff Position (FSP) FAS 157-b.
FSP FAS 157-b proposes deferral of the effective date of SFAS 157 until fiscal
2010 for nonfinancial assets and nonfinancial liabilities except those items
recognized or disclosed at fair value on an annual or more


                                      -6-

<PAGE>

frequently recurring basis. FSP FAS 157-b will become effective upon issuance.
The Company has not yet determined if the adoption of this statement will have a
material impact on its results of operations or financial position.

NOTE B - EARNINGS PER SHARE

A reconciliation of the numerators and denominators used in the basic and
diluted earnings per share (EPS) calculation follows:

<TABLE>
<CAPTION>
                                                       Second Quarter        Year-to-Date
                                                      -----------------   -----------------
                                                        2008      2007      2008      2007
                                                      -------   -------   -------   -------
<S>                                                   <C>       <C>       <C>       <C>
Numerator:
Net income used for both basic and diluted EPS        $34,289   $21,088   $68,308   $37,970
                                                      =======   =======   =======   =======
Denominator:
Weighted average shares outstanding for basic EPS      93,147    91,836    93,186    92,104
Dilutive effect of share-based awards                   2,136     1,670     1,918     1,491
                                                      -------   -------   -------   -------
Weighted average shares outstanding for diluted EPS    95,283    93,506    95,104    93,595
                                                      =======   =======   =======   =======
</TABLE>

There were no share-based awards outstanding that were anti-dilutive for the
second quarter of fiscal 2008. Share-based awards outstanding that were
anti-dilutive for the second quarter of fiscal 2007 were 2,787. Year-to-date
share-based awards outstanding that were anti-dilutive were 310 and 2,702 for
fiscal 2008 and 2007, respectively. These share-based awards were excluded from
the diluted EPS calculation.

NOTE C - INVENTORIES

Inventories are summarized as follows:

<TABLE>
<CAPTION>
                  December 29,   June 30,   December 30,
                      2007         2007         2006
                  ------------   --------   ------------
<S>               <C>            <C>        <C>
Finished goods      $146,499     $135,974     $157,036
Work in process       83,427       77,241       81,293
Raw materials         96,076       81,899       84,295
                    --------     --------     --------
                    $326,002     $295,114     $322,624
                    ========     ========     ========
</TABLE>

The Company maintains an allowance for estimated obsolete or unmarketable
inventory based on the difference between the cost of inventory and its
estimated market value. The inventory balances stated above are net of an
inventory allowance of $36,184 at December 29, 2007, $36,210 at June 30, 2007
and $39,098 at December 30, 2006.

NOTE D - GOODWILL

Goodwill allocated to the Consumer Healthcare segment is tested annually for
impairment in the second quarter of the fiscal year. The current year testing
resulted in no impairment charge related to the Consumer Healthcare segment. The
goodwill allocated to the API and Rx Pharmaceuticals segments is tested for
impairment annually in the third quarter of the fiscal year.


                                      -7-

<PAGE>

There were no acquisitions, dispositions or impairments of goodwill during the
first half of fiscal 2008. Changes in the carrying amount of goodwill, by
reportable segment, are as follows:

<TABLE>
<CAPTION>
                                   Consumer    Rx Pharma-
                                  Healthcare    ceuticals     API       Total
                                  ----------   ----------   -------   --------
<S>                               <C>          <C>          <C>       <C>
Balance as of June 30, 2007         $47,048      $72,426    $76,744   $196,218
Goodwill adjustment                      --        3,332      3,677      7,009
Currency translation adjustment       1,487        3,940      4,280      9,707
                                    -------      -------    -------   --------
Balance as of December 29, 2007     $48,535      $79,698    $84,701   $212,934
                                    =======      =======    =======   ========
</TABLE>

As further discussed in Note I, upon adoption of FIN 48 on July 1, 2007, the
Company recorded a $6,108 adjustment to goodwill for the Rx Pharmaceuticals and
API segments. A second quarter FIN 48 adjustment of $567 was made to the API
segment. Because the adjustments reflect additional unrecognized tax benefits
related to pre-acquisition tax uncertainties associated with the acquisition of
Agis, they were recorded as additional goodwill, rather than as a charge to
retained earnings for the first quarter, when FIN 48 was adopted, or earnings in
the second quarter in accordance with EITF 93-7, "Uncertainties Related to
Income Taxes in a Purchase Business Combination" (EITF 93-7).

In addition, during the second quarter of fiscal 2008, the Company recorded a
second adjustment to goodwill for the API segment of $334. This adjustment was
to record a deferred tax liability for income taxes related to pre-acquisition
earnings. In accordance with EITF 93-7, the Company treated this item as an
uncertain tax position at the time of the acquisition.

NOTE E - INTANGIBLE ASSETS

Intangible assets and related accumulated amortization consist of the following:

<TABLE>
<CAPTION>
                                    December 29, 2007           June 30, 2007
                                 -----------------------   -----------------------
                                             Accumulated               Accumulated
                                   Gross    Amortization     Gross    Amortization
                                 --------   ------------   --------   ------------
<S>                              <C>        <C>            <C>        <C>
Developed product technology /
   formulation                   $196,972      $30,153     $154,923      $21,490
Distribution and license
   agreements                      25,139        9,413       24,790        7,593
Customer relationships              4,900        4,366        4,900        4,018
   Trademarks                      10,705        2,354       10,235        1,770
                                 --------      -------     --------      -------
      Total                      $237,716      $46,286     $194,848      $34,871
                                 ========      =======     ========      =======
</TABLE>

The Company recorded a charge for amortization expense of $9,266 and $6,424 for
the first half of fiscal 2008 and 2007, respectively, for intangible assets
subject to amortization.


                                      -8-

<PAGE>

The estimated amortization expense for each of the following five years is as
follows:

<TABLE>
<CAPTION>
Fiscal Year    Amount
-----------   -------
<S>           <C>
   2008(1)    $ 9,200
   2009        17,900
   2010        16,400
   2011        15,200
   2012        15,200
</TABLE>

----------
(1)  Reflects remaining six months of fiscal 2008.

NOTE F - OUTSTANDING DEBT

Total borrowings outstanding are summarized as follows:

<TABLE>
<CAPTION>
                                               December 29,   June 30,   December 30,
                                                   2007         2007          2006
                                               ------------   --------   -------------
<S>                                            <C>            <C>        <C>
Short-term debt:
   Swingline loan                                $  3,937     $ 11,776      $ 18,333
   Current portion of long-term debt               16,539       15,381            --
                                                 --------     --------      --------
      Total                                        20,476       27,157        18,333
                                                 --------     --------      --------
Long-term debt:
   Revolving line of credit                       115,000      120,000       125,000
   Term loan                                      100,000      100,000       100,000
   Letter of undertaking - Israel subsidiary      400,000      400,000       400,000
   Debenture - Israel subsidiary                   33,077       30,762        43,784
                                                 --------     --------      --------
      Total                                       648,077      650,762       668,784
                                                 --------     --------      --------
      Total debt                                 $668,553     $677,919      $687,117
                                                 ========     ========      ========
</TABLE>

The terms of the loan related to the letter of undertaking indicated above
require that the Company maintain a deposit of $400,000 in an uninsured account
with the lender as security for the loan. The deposit is classified as
restricted cash in the balance sheet as a non-current asset.

NOTE G - SHAREHOLDERS' EQUITY

The Company has a common stock repurchase program. Purchases are made on the
open market, subject to market conditions, and are funded by available cash or
borrowings. All common stock repurchased by the Company becomes authorized but
unissued stock and is available for reissuance in the future for general
corporate purposes. The Company has a 10b5-1 plan that allows brokers selected
by the Company to repurchase shares on behalf of the Company at times when it
would ordinarily not be in the market because of the Company's trading policies.
The Company repurchased 1,061 shares of its common stock for $31,137 and 251
shares of its common stock for $4,309 during the second quarter of fiscal 2008
and 2007, respectively. Year-to-date, the Company repurchased 1,263 shares of
its common stock for $35,417 and 961 shares for $15,547 in fiscal 2008 and 2007,
respectively. Year-to-date, private party transactions accounted for 28 shares
and 18 shares in fiscal 2008 and 2007, respectively.


                                      -9-
<PAGE>

NOTE H - COMPREHENSIVE INCOME

Comprehensive income is comprised of all changes in shareholders' equity during
the period other than from transactions with shareholders. Comprehensive income
consists of the following:

<TABLE>
<CAPTION>
                                                      Second Quarter       Year-to-Date
                                                    -----------------   -----------------
                                                      2008      2007      2008      2007
                                                    -------   -------   -------   -------
<S>                                                 <C>       <C>       <C>       <C>
Net income                                          $34,289   $21,088   $68,308   $37,970
Other comprehensive income (loss):
   Change in fair value of derivative
      instruments, net of tax                        (1,581)       78    (3,243)   (1,708)
   Foreign currency translation adjustments          34,847    14,151    27,270    30,448
   Change in fair value of investment securities,
      net of tax                                     (1,428)     (234)     (999)     (877)
   Pension and post-retirement liability
      adjustments, net of tax                          (233)       --      (233)       --
                                                    -------   -------   -------   -------
Comprehensive income                                $65,894   $35,083   $91,103   $65,833
                                                    =======   =======   =======   =======
</TABLE>

NOTE I - INCOME TAXES

Upon adoption of FIN 48 on July 1, 2007, the Company's total unrecognized tax
benefits amounted to $43,833, all of which was included in other non-current
liabilities. A portion of this liability, $5,934, was accounted for as a
reduction to the July 1, 2007 balance of retained earnings and $6,108 was
accounted for as an increase to goodwill, as further discussed in Note D. The
remaining $31,791 was reclassified from current accrued income taxes to other
non-current liabilities. During the first six months of fiscal year 2008, the
liability for uncertain tax positions increased by $10,252 (including currency
impacts) related to current year activity, of which $567 was accounted for as an
increase to goodwill, as further discussed in Note D, bringing the Company's
total unrecognized tax benefits to $54,085 as of December 29, 2007.

The Company recognizes accrued interest and penalties related to unrecognized
tax benefits in tax expense. Total interest and penalties included in
non-current liabilities at July 1, 2007 amounted to $9,216 (net of tax benefit).
During the first six months of fiscal year 2008, the liability for interest and
penalties increased $2,511 (net of tax and including currency impacts).

As of July 1, 2007, the Company had unrecognized tax benefits of $37,725, which,
if recognized, would favorably affect the effective income tax rate in future
periods.

Tax years subject to examination in the U.S. by the IRS include all fiscal years
after 2004. Additionally, the Israeli Tax Authority is currently auditing the
Company for years ended December 2003, December 2004 and May 2005. In January
2008, the Company was notified by the German Tax Authority that it will be
audited for the years ended December 2003, December 2004, May 2005, May 2006 and
May 2007.


                                      -10-

<PAGE>

The Company anticipates that the total amount of liability for unrecognized tax
benefits may change due to the settlement of audits and the expiration of
statutes of limitations in the next 12 months. However, given the status of
examinations the Company cannot reliably estimate the range of a potential
change at this time.

NOTE J - COMMITMENTS AND CONTINGENCIES

Several Arkansas counties, including Independence County, have filed a lawsuit
against the Company and various manufacturers and distributors of products
containing pseudoephedrine, which is used to produce methamphetamine, an illegal
drug. The Company has been informed that other counties in Arkansas may join in
the lawsuit as plaintiffs. Through this lawsuit, the plaintiff counties seek to
recoup as damages some of the expenses they have incurred to combat
methamphetamine use and addiction. They also seek punitive damages, disgorgement
of profits and attorneys' fees. The Company believes that the lawsuit is without
merit and is vigorously defending against it. At this early stage, the Company
cannot predict whether this issue will have a material impact on its results of
operations.

In addition to the foregoing discussion, the Company has pending certain other
legal actions and claims incurred in the normal course of business. The Company
believes that it has meritorious defenses to these lawsuits and/or is covered by
insurance and is actively pursuing the defense thereof. The Company believes the
resolution of all of these matters will not have a material adverse effect on
its financial condition and future results of operations. However, depending on
the amount and timing of an unfavorable resolution of these lawsuits, the
Company's future results of operations or cash flow could be materially impacted
in a particular period.

The Company's Israeli subsidiary has provided a guaranty to a bank to secure the
debt of a 50% owned joint venture for approximately $500, not to exceed 50% of
the joint venture's debt, that is not recorded on the Company's condensed
consolidated balance sheets as of December 29, 2007.


                                      -11-

<PAGE>

NOTE K - SEGMENT INFORMATION

The Company has three reportable segments, aligned primarily by product:
Consumer Healthcare, Rx Pharmaceuticals and API, as well as an Other category.
The majority of corporate expenses, which generally represent shared services,
are charged to operating segments as part of a corporate allocation. Unallocated
expenses relate to certain corporate services that are not allocated to the
segments. The year-to-date 2008 unallocated expenses include a $1,900 reduction
in administrative costs due to the favorable settlement of a pre-acquisition
legal claim related to Agis in the first quarter.

<TABLE>
<CAPTION>
                                  Consumer    Rx Pharma-                       Unallocated
                                 Healthcare    ceuticals     API      Other      expenses      Total
                                 ----------   ----------   -------   -------   -----------   --------
<S>                              <C>          <C>          <C>       <C>       <C>           <C>
Second Quarter 2008
   Net sales                      $320,205      $38,655    $34,608   $42,015          --     $435,483
   Operating income               $ 38,521      $ 8,356    $ 3,425   $ 3,292     $(4,754)    $ 48,840
   Amortization of intangibles    $    857      $ 3,291    $   485   $   254          --     $  4,887

Second Quarter 2007
   Net sales                      $275,947      $28,260    $28,633   $37,789          --     $370,629
   Operating income               $ 17,420      $ 3,686    $ 5,929   $ 2,976     $(3,624)    $ 26,387
   Amortization of intangibles    $    720      $ 1,929    $   434   $   241          --     $  3,324

Year-to-Date 2008
   Net sales                      $588,464      $73,615    $73,422   $82,722          --     $818,223
   Operating income               $ 68,070      $15,801    $10,701   $ 5,781     $(5,464)    $ 94,889
   Amortization of intangibles    $  1,710      $ 6,053    $   935   $   568          --     $  9,266

Year-to-Date 2007
   Net sales                      $517,756      $59,685    $58,412   $74,991          --     $710,844
   Operating income               $ 34,520      $ 9,473    $10,587   $ 5,640     $(8,121)    $ 52,099
   Amortization of intangibles    $  1,567      $ 3,513    $   863   $   481                 $  6,424
</TABLE>

NOTE L - RESTRUCTURING

In the fourth quarter of fiscal 2006, as a result of an ongoing review of its
Consumer Healthcare operating strategies, the Company's Board of Directors
approved plans to exit two unprofitable product lines, effervescent tablets and
psyllium-based laxatives. This action resulted in the sale of one Michigan plant
and the closure of an additional Michigan plant, both in the second quarter of
fiscal 2007. The Company recorded a gain of $1,276 in the second quarter of
fiscal 2007 based on the cash proceeds from the sale of the plant. The gain is
included in the restructuring line of the consolidated statement of income. The
Company also recorded a $1,500 note receivable from the buyer of the plant. This
amount, reflecting further gain on the sale of the plant, was deferred and is
being recognized as the note is repaid over the next four years. As of December
29, 2007, the net book value of the assets associated with the second plant is
included in the assets held for sale line item on the Company's consolidated
balance sheet. In addition, the Company incurred a charge of $1,918 in the
second quarter of fiscal 2007 for employee-related and plant shutdown costs. The
employee-related charge was $1,151 for termination benefits for 72 employees,
all of which was paid by the end of fiscal 2007.


                                      -12-

<PAGE>

NOTE M - SUBSEQUENT EVENTS

License Agreement Termination - Subsequent to its second quarter end, the
Company's Israeli subsidiary and a customer agreed to terminate a license
agreement. The termination agreement states that the Company's Israeli
subsidiary is to receive from the customer $8,500 in lieu of expected future
minimum royalty payments. The Company will recognize the full amount in net
sales in the third quarter of fiscal 2008. In addition, as part of the Agis
acquisition in March 2005, the Company recorded an intangible asset related to
this license agreement. In conjunction with the termination of the agreement,
the Company will write-off the remaining net book value of approximately $3,500
in the third quarter of fiscal 2008.

Business Combination - On January 9, 2008, the Company announced that it
acquired 100% of the outstanding shares of privately held Galpharm Healthcare
Ltd. for approximately $86,000. The Company paid approximately $57,000 in cash
and assumed approximately $29,000 of existing debt, which was repaid
immediately. Galpharm is a leading supplier of over-the-counter store brand
pharmaceutical products sold by super markets, drug stores and pharmacies in the
United Kingdom. The acquisition of Galpharm expands the Company's global
presence and complements its existing United Kingdom business. Galpharm's
results of operations will be recorded in the Company's Consumer Healthcare
reporting segment. The Company is in the process of determining the purchase
price allocation and expects certain amounts to be allocated to goodwill and
other intangible assets. Upon completion of the purchase price allocation
process the amounts related to goodwill and other intangible assets, as well as
other major asset and liability categories of Galpharm and its results of
operations will be disclosed in the Company's third quarter of fiscal 2008
consolidated financial statements.


                                      -13-

<PAGE>

Item 2.

                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
                    SECOND QUARTER FISCAL YEARS 2008 AND 2007
                    (in thousands, except per share amounts)

OVERVIEW

Segments - The Company has three reportable segments, aligned primarily by
product: Consumer Healthcare, Rx Pharmaceuticals and API, as well as an Other
category. Certain segment information for prior periods has been reclassified to
conform to the current year presentation. The amounts reclassified had no effect
on retained earnings or net income on either a consolidated or reportable
segment basis. The Consumer Healthcare segment includes the U.S., U.K. and
Mexico operations supporting the sale of OTC pharmaceutical and nutritional
products worldwide. The Rx Pharmaceuticals segment supports the development and
sale of prescription drug products. The API segment supports the development and
manufacturing of API products in Israel and Germany, with sales to customers
worldwide. The Other category consists of two operating segments, Israel
Consumer Products and Israel Pharmaceutical and Diagnostic Products, with sales
primarily to the Israeli market, including cosmetics, toiletries, detergents,
manufactured and imported pharmaceutical products and medical diagnostic
products. Neither of these operating segments meets the quantitative thresholds
required to be separately reportable segments.

Seasonality - The Company's sales of OTC pharmaceutical and nutritional products
are subject to the seasonal demands for cough/cold/flu and allergy products.
Accordingly, operating results for the first half of fiscal 2008 are not
necessarily indicative of the results that may be expected for a full year.

Current Year Results - Net sales for the second quarter of fiscal 2008 were
$435,483, an increase of 17% over fiscal 2007. The increase spanned all the
Company's segments, driven primarily by the Consumer Healthcare segment. New
product sales for the second quarter of fiscal 2008 were approximately $13,900.
Gross profit was $130,412, an increase of 35% over fiscal 2007, driven primarily
by the Consumer Healthcare and Rx Pharmaceuticals segments. Fiscal 2007 gross
profit was negatively impacted by the acetaminophen product recall discussed
below. The gross profit percentage in the second quarter of fiscal 2008 was
29.9%, up from 26.0% last year. Operating expenses in the second quarter of
fiscal 2008 were $81,572, an increase of 16% over fiscal 2007, which included a
net restructuring charge of $642. Operating expenses as a percent of net sales
were 18.7%, down slightly from 18.9% in the second quarter of fiscal 2007. Net
income was $34,289, an increase of 63% from fiscal 2007, driven primarily by the
increase in operating income from the Consumer Healthcare and Rx Pharmaceuticals
segments, offset by a higher effective tax rate in fiscal 2008 compared to
fiscal 2007.

Net sales for the first half of fiscal 2008 were $818,223, an increase of 15%
over fiscal 2007. The increase spanned all of the Company's segments and
included new product sales of approximately $24,800. Gross profit was $247,130,
up 31% over fiscal 2007, and the increase spanned all of the Company's segments.
Fiscal 2007 gross profit was negatively impacted by the acetaminophen product
recall by approximately $6,500. The gross profit percentage in the first half of
fiscal 2008 was 30.2%, up from 26.6% last year. Operating expenses were
$152,241, an increase of 11% over fiscal 2007, but as a percent of sales were
slightly lower than fiscal 2007. Net income was $68,308, an increase of 80% from
fiscal 2007, driven primarily by the increase in operating income from the
Consumer Healthcare and Rx Pharmaceuticals segments, offset by a higher
effective tax rate in fiscal 2008 compared to fiscal 2007.

Further details related to current year results are included in the following
Results of Operations.


                                      -14-

<PAGE>

Product Recall - On November 9, 2006, the Company initiated a voluntary
retail-level recall of certain lots of its acetaminophen 500 mg caplets
containing raw material purchased from a third-party supplier. The total cost of
the recall was approximately $6,500, of which $5,000 was recorded in the second
quarter of fiscal 2007. The charge included sales returns and refunds, handling
of on-hand inventories, disposal of inventory and management of consumer
inquiries. There were no additional charges recorded for this recall during the
first half of fiscal 2008 as it has been essentially completed.

Events Impacting Future Results - In December 2007, the Company announced that
the U.S. Food and Drug Administration granted final approval to Dexcel Pharma
Technologies, Ltd. for 20 mg Omeprazole delayed-release tablets. Omeprazole is
indicated for the treatment of frequent heartburn. Through a partnership with
Dexcel, the Company will be the exclusive marketer and distributor of this
product for the store brand over-the-counter market in the United States. The
Company expects to begin shipping its product during the third quarter of fiscal
2008, with full year annual sales anticipated to be in the range of $150,000 to
$200,000. The addition of Omeprazole to the Company's existing product portfolio
is expected to have a material positive impact on the Company's operating
results starting in the third quarter of fiscal 2008 and beyond.

Also in December 2007, the Company's U.K. subsidiary was notified by a customer
of the expected loss of future contract manufacturing business beginning in
fiscal 2009. The projected loss of approximately $20,000 in annual sales is
expected to have an adverse impact on the Company's ongoing operating results
beginning in fiscal 2009.

Subsequent to its second quarter end, the Company's Israeli subsidiary and a
customer agreed to terminate a license agreement. The termination agreement
states that the Company's Israeli subsidiary is to receive from the customer
$8,500 in lieu of expected future minimum royalty payments. The Company will
recognize the full amount in net sales in the third quarter of fiscal 2008. In
addition, as part of the Agis acquisition in March 2005, the Company recorded
an intangible asset related to this license agreement. In conjunction with the
termination of the agreement, the Company will write-off the remaining net book
value of approximately $3,500 in the third quarter of fiscal 2008.

Business Combination - On January 9, 2008, the Company announced that it
acquired 100% of the outstanding shares of privately held Galpharm Healthcare
Ltd. for approximately $86,000. The Company paid approximately $57,000 in cash
and assumed approximately $29,000 of existing debt, which was repaid
immediately. Galpharm is a leading supplier of over-the-counter store brand
pharmaceutical products sold by super markets, drug stores and pharmacies in the
United Kingdom. The acquisition of Galpharm expands the Company's global
presence and complements its existing United Kingdom business. Galpharm's
results of operations will be recorded in the Company's Consumer Healthcare
reporting segment. The Company is in the process of determining the purchase
price allocation and expects certain amounts to be allocated to goodwill and
other intangible assets. Upon completion of the purchase price allocation
process the amounts related to goodwill and other intangible assets, as well as
other major asset and liability categories of Galpharm and its results of
operations will be disclosed in the Company's third quarter of fiscal 2008
consolidated financial statements.


                                      -15-

<PAGE>

RESULTS OF OPERATIONS

CONSUMER HEALTHCARE

<TABLE>
<CAPTION>
                          Second Quarter         Year-to-Date
                       -------------------   -------------------
                         2008       2007       2008       2007
                       --------   --------   --------   --------
<S>                    <C>        <C>        <C>        <C>
Net sales              $320,205   $275,947   $588,464   $517,756
Gross profit           $ 86,236   $ 59,346   $158,123   $115,547
Gross profit %             26.9%      21.5%      26.9%      22.3%
Operating expenses     $ 47,715   $ 41,926   $ 90,053   $ 81,027
Operating expenses %       14.9%      15.2%      15.3%      15.6%
Operating income       $ 38,521   $ 17,420   $ 68,070   $ 34,520
Operating income %         12.0%       6.3%      11.6%       6.7%
</TABLE>

Net Sales

Second quarter net sales for fiscal 2008 increased 16% or $44,258 compared to
fiscal 2007. The increase was comprised of $37,531 of domestic and $6,727 of
international sales. The domestic increase resulted from $6,500 of new product
sales, primarily in the smoking cessation and cough/cold categories, along with
a $41,400 increase from higher unit sales of existing products in the smoking
cessation and analgesics categories, as well as certain gastrointestinal and
cough/cold products. A large portion of this increase was the result of a
continued absence in the OTC marketplace of a key competitor during the quarter.
These combined domestic increases were partially offset by a $10,400 sales
decline in certain gastrointestinal, nutrition and cough/cold products. Of this
decrease, approximately $7,700 was due to the Company's strategic exit of both
fiber laxative and effervescent cough/cold product lines in the second quarter
of fiscal 2007. The increase in international sales was driven primarily by new
product sales of $3,400, increased volume on existing products of $900 and
favorable foreign currency exchange of $2,400.

Year-to-date net sales for fiscal 2008 increased 14% or $70,708 compared to
fiscal 2007. The increase was comprised of $56,861 of domestic and $13,847 of
international sales. The domestic increase resulted from $13,300 of new product
sales, primarily in the smoking cessation, nutrition and cough/cold categories,
along with a $61,100 increase from higher unit sales of existing products in the
smoking cessation and analgesics categories, as well as certain gastrointestinal
and cough/cold products. A large portion of this increase was the result of a
continued absence in the OTC marketplace of a key competitor during the quarter.
These combined domestic increases were partially offset by a $23,800 sales
decline in certain gastrointestinal, nutrition and cough/cold products. Of this
decrease, approximately $15,200 was due to the Company's strategic exit of both
fiber laxative and effervescent cough/cold product lines in the second quarter
of fiscal 2007. The increase in international sales was driven primarily by new
product sales of $6,400, increased volume on existing products of $2,700 and
favorable foreign currency exchange of $4,700.

Gross Profit

Second quarter gross profit for fiscal 2008 increased 45% or $26,890 compared to
fiscal 2007. The


                                      -16-
<PAGE>

increase resulted from higher gross margins attributed to new products, a
favorable mix of products sold domestically and production efficiencies driven
by higher volumes. In addition, second quarter 2007 included costs related to
the product recall described above.

Year-to-date gross profit for fiscal 2008 increased 37% or $42,576 compared to
fiscal 2007. The increase resulted from higher gross margins attributed to new
products, a favorable mix of products sold both domestically and internationally
and production efficiencies driven by higher volumes. In addition, year-to-date
fiscal 2007 included higher inventory obsolescence costs, as well as costs
related to the product recall.

Operating Expenses

Second quarter operating expenses for fiscal 2008 increased 14% or $5,789
compared to fiscal 2007. The increase was related primarily to administrative
expenses of $4,700 and selling expense of approximately $800. The administrative
expense increase was due primarily to higher wages and benefits, as well as the
absence of a one-time favorable insurance settlement of $1,200 recorded in the
second quarter of fiscal 2007. The majority of the increase in selling costs
related to higher commissions.

Year-to-date operating expenses for fiscal 2008 increased 11% or $9,026 compared
to fiscal 2007. The increase was related primarily to administrative expenses of
approximately $3,700, research and development costs of approximately $2,700 and
selling expense of approximately $2,500. The research and development increase
was due to the timing of clinical studies, and the majority of the increase in
selling costs related to the timing of promotional activities and higher
commissions. The administrative expense increase was due primarily to higher
wages and benefits, as well as the absence of a one-time favorable insurance
settlement of $1,200 recorded in the second quarter of fiscal 2007.

RX PHARMACEUTICALS

<TABLE>
<CAPTION>
                         Second Quarter       Year-to-Date
                       -----------------   -----------------
                         2008      2007      2008      2007
                       -------   -------   -------   -------
<S>                    <C>       <C>       <C>       <C>
Net sales              $38,655   $28,260   $73,615   $59,685

Gross profit           $17,737   $11,387   $32,855   $25,174
Gross profit %            45.9%     40.3%     44.6%     42.2%

Operating expenses     $ 9,381   $ 7,701   $17,054   $15,701
Operating expenses %      24.3%     27.3%     23.2%     26.3%

Operating income       $ 8,356   $ 3,686   $15,801   $ 9,473
Operating income %        21.6%     13.0%     21.5%     15.9%
</TABLE>

Net Sales

Second quarter net sales for fiscal 2008 increased 37% or $10,395 compared to
fiscal 2007. This increase was due primarily to sales of approximately $6,900
attributable to products acquired from Glades Pharmaceuticals, LLC (Glades),
increased sales volumes on the Company's existing portfolio of products of
approximately $6,600, new product sales of approximately $1,100 and the absence
of a $1,700 charge for customer-related programs in the second quarter of fiscal
2007. These increases were


                                      -17-

<PAGE>

partially offset by pricing pressure due to continued competition in the
marketplace for generic drugs.

Year-to-date net sales for fiscal 2008 increased 23% or $13,930 compared to
fiscal 2007. This increase was due primarily to sales of approximately $13,500
attributable to products acquired from Glades, increased sales volumes on the
Company's existing portfolio of products of approximately $4,700, new product
sales of approximately $1,700 and the absence of a $5,000 charge for
customer-related programs in the first half of fiscal 2007. These increases were
partially offset by $10,800 in pricing pressure due to increased competition on
existing products.

Fiscal 2007 results included a reduction to sales related to the Company's
customer programs in the Rx Pharmaceuticals segment as noted above. Customer
programs are common in the industry and include such items as rebates and
chargebacks. The determination of the liability for these programs involves a
significant amount of estimation. The Company has a methodology by which it
accrues and validates its accrual of these expenses. This methodology includes
several variables: inventory reports supplied by wholesalers that indicate
inventory levels, detailed computations using historical payments and estimated
sell-through to retailers with varying contract prices. The Company had been
monitoring its methodology and made material changes to certain of these
estimates in the first half of fiscal 2007 that led to the $5,000 charge. The
changes to the estimates were intended to further enhance the accuracy and
reliability of the calculation of the liability and to reduce the risk of
incremental charges for customer programs beyond the first and second quarter
fiscal 2007 charges. There have been no material adjustments for customer
program liabilities subsequent to the second quarter of fiscal 2007.

Gross Profit

Second quarter gross profit for fiscal 2008 increased 56% or $6,350 compared to
fiscal 2007. The increase was due primarily to the strong gross margin on
products acquired from Glades, as well as increased volume and favorable product
mix. These increases were partially offset by pricing pressure on existing
products.

Year-to-date gross profit for fiscal 2008 increased 31% or $7,681 compared to
fiscal 2007. The increase was due primarily to the strong gross margin on
products acquired from Glades, increased volume and favorable product mix, as
well as lower inventory related costs. These increases were partially offset by
pricing pressure on existing products.

Operating Expenses

Second quarter operating expenses for fiscal 2008 increased 22% or $1,680
compared to fiscal 2007. Year-to-date operating expenses for fiscal 2008
increased 9% or $1,353 compared to fiscal 2007. These increases were due
primarily to higher employee-related costs.


                                      -18-

<PAGE>

API

<TABLE>
<CAPTION>
                         Second Quarter       Year-to-Date
                       -----------------   -----------------
                         2008      2007      2008      2007
                       -------   -------   -------   -------
<S>                    <C>       <C>       <C>       <C>
Net sales              $34,608   $28,633   $73,422   $58,412

Gross profit           $11,814   $12,242   $27,146   $22,319
Gross profit %            34.1%     42.8%     37.0%     38.2%

Operating expenses     $ 8,389   $ 6,313   $16,445   $11,732
Operating expenses %      24.2%     22.0%     22.4%     20.1%

Operating income       $ 3,425   $ 5,929   $10,701   $10,587
Operating income %         9.9%     20.7%     14.6%     18.1%
</TABLE>

Net Sales

Second quarter net sales for fiscal 2008 increased 21% or $5,975 compared to
fiscal 2007. This increase was due primarily to increased volume on existing
products of approximately $6,600 and new product sales of approximately $3,000,
partially offset by a decline of approximately $3,600 in sales of a key product.

Year-to-date net sales for fiscal 2008 increased 26% or $15,010 compared to
fiscal 2007. This increase was due primarily to increased volume of certain key
products of approximately $17,000 and new product sales of approximately $3,400.
These increases were partially offset by a decline of approximately $5,400 in
sales of a key product. The net sales of API are highly dependent on the level
of competition in the marketplace for a specific material and the ordering
patterns of customers on a quarter over quarter basis. The current trend of
increased sales may not continue due to this dependency.

Gross Profit

Second quarter gross profit for fiscal 2008 decreased 3% or $428 compared to
fiscal 2007. This decrease was due primarily to approximately $3,300 of higher
production costs, mostly offset by approximately $2,900 of favorable changes in
the sales mix of products. The gross profit percentage for second quarter fiscal
2008 decreased 8.7 percentage points over fiscal 2007 due primarily to the
higher productions costs.

Year-to-date gross profit for fiscal 2008 increased 22% or $4,827 compared to
fiscal 2007. This increase was due primarily to favorable changes in the sales
mix of products as well as fixed overhead costs spread over increased production
levels. This increase was partially offset by higher production costs.

Operating Expenses

Second quarter operating expenses for fiscal 2008 increased 33% or $2,076
compared to fiscal 2007. The increase was due primarily to approximately $900 of
additional research and development costs related to experimental materials and
subcontractor expense as well as approximately $1,000 of higher employee-related
costs and changes in the foreign exchange rate.

Year-to-date operating expenses for fiscal 2008 increased 40% or $4,713 compared
to fiscal 2007. The


                                      -19-

<PAGE>

increase was due primarily to approximately $1,700 of additional research and
development costs related to experimental materials and subcontractor expense as
well as approximately $2,300 of higher employee-related costs and changes in the
foreign exchange rate.

OTHER

The Other category includes two operating segments: Israel Consumer Products and
Israel Pharmaceutical and Diagnostic Products. Neither of these operating
segments individually meets the quantitative thresholds required to be a
reportable segment.

<TABLE>
<CAPTION>
                         Second Quarter       Year-to-Date
                       -----------------   -----------------
                         2008      2007      2008      2007
                       -------   -------   -------   -------
<S>                    <C>       <C>       <C>       <C>
Net sales              $42,015   $37,789   $82,722   $74,991

Gross profit           $14,625   $13,507   $29,005   $26,257
Gross profit %            34.8%     35.7%     35.1%     35.0%

Operating expenses     $11,333   $10,531   $23,224   $20,617
Operating expenses %      27.0%     27.8%     28.1%     27.5%

Operating income       $ 3,292   $ 2,976   $ 5,781   $ 5,640
Operating income %         7.8%      7.9%      7.0%      7.5%
</TABLE>

Second quarter net sales for fiscal 2008 increased 11% or $4,226 compared to
fiscal 2007. The increase was due primarily to approximately $3,000 of changes
in the foreign exchange rate as well as approximately $1,900 due to changes in
the sales mix of products. This increase was partially offset by $700 related to
a one-time selling tax assessment. Year-to-date net sales for fiscal 2008
increased 10% or $7,731 compared to fiscal 2007. This increase was due primarily
to approximately $4,900 of changes in the foreign exchange rate, as well as
approximately $2,800 related to changes in the sales mix of products, primarily
in the Pharmaceutical and Diagnostic Products business.

Second quarter gross profit for fiscal 2008 increased 8% or $1,118 compared to
fiscal 2007, due primarily to changes in the foreign exchange rate. Year-to-date
gross profit for fiscal 2008 increased 10% or $2,748 compared to fiscal 2007.
The increase was due primarily to approximately $1,700 of benefit from foreign
exchange rate fluctuations and $1,000 due to changes in the sales mix of
products.

Second quarter operating expense for fiscal 2008 increased 8% or $802 compared
to fiscal 2007 due mainly to changes in the foreign exchange rate and higher
employee-related costs. Year-to-date operating expenses for fiscal 2008
increased 13% or $2,607 compared to fiscal 2007 due primarily to increased
promotional activities, changes in the foreign exchange rate and higher
employee-related costs.


                                      -20-

<PAGE>

UNALLOCATED EXPENSES

<TABLE>
<CAPTION>
                      Second Quarter     Year-to-Date
                     ---------------   ---------------
                      2008     2007     2008     2007
                     ------   ------   ------   ------
<S>                  <C>      <C>      <C>      <C>
Operating expenses   $4,754   $3,624   $5,464   $8,121
</TABLE>

Unallocated expenses were comprised of certain corporate services that were not
allocated to the segments. Unallocated expenses for the second quarter of fiscal
2008 increased 31% or $1,130 compared to fiscal 2007 due primarily to higher
employee wages and benefits.

Year-to-date unallocated expenses decreased 33% or $2,657 compared to fiscal
2007. The decrease in fiscal 2008 was due primarily to a $1,900 favorable
settlement of a pre-acquisition legal claim related to Agis recorded in the
first quarter of fiscal 2008, along with one-time employee-related expenses of
$900 in fiscal 2007 not repeated in fiscal 2008. These decreases were partially
offset by higher employee wages and benefits in fiscal 2008.

INTEREST AND OTHER (CONSOLIDATED)

Interest expense for the second quarter was $9,002 for fiscal 2008 and $8,431
for fiscal 2007. Interest income for the second quarter was $5,328 for fiscal
2008 and $5,131 for fiscal 2007. Other income, net was $969 for the second
quarter of fiscal 2008 compared to $2,258 for the second quarter of fiscal 2007.
The decrease in other income for the second quarter of fiscal 2008 was due
primarily to foreign currency transaction losses.

Year-to-date interest expense was $18,846 for fiscal 2008 and $17,771 for fiscal
2007. Year-to-date interest income was $10,517 for fiscal 2008 and $9,885 for
fiscal 2007. Year-to-date other income, net was $2,152 and $2,319 for fiscal
2008 and 2007, respectively.

INCOME TAXES (CONSOLIDATED)

The effective tax rate for the second quarter was 25.7% for fiscal 2008 and
16.8% for fiscal 2007. Year-to-date the effective tax rate was 23.0% for fiscal
2008 and 18.4% for fiscal 2007. The effective tax rate for the second quarter of
fiscal 2007 included the favorable impact of the newly enacted Tax Relief and
Healthcare Act of 2006 (the Act). Among other provisions, the Act provides for
the restoration of the research and development tax credit, applied
retroactively to January 1, 2006. Accordingly, tax expense in the second quarter
of fiscal 2007 was reduced approximately $1,300 to reflect the one-time impact
of the retroactive application of the Act. During the first quarter of fiscal
2008, the Company received a favorable tax ruling in Israel. This ruling, which
the Company had projected to receive during fiscal 2008, resulted in a one-time
benefit of $4,222, or a 4.8 percentage point reduction in the year-to-date
effective tax rate.

Foreign source income for the first six months of fiscal 2008 was 45.0% of total
income before income taxes, down from 80.0% in the same period of fiscal 2007.
Foreign source income is generally derived from jurisdictions with a lower tax
rate than the U.S. statutory rate.

The Company estimates the annualized effective tax rate for fiscal 2008 will be
between 21% and 24%.


                                      -21-
<PAGE>

FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES

Cash, cash equivalents and investment securities increased $28,140 to $101,805
at December 29, 2007 from $73,665 at December 30, 2006. Working capital,
including cash, increased $68,677 to $434,784 at December 29, 2007 from $366,107
at December 30, 2006. The increase in working capital was due primarily to the
increase in cash and cash equivalents and accounts receivable associated with
higher sales volume.

Year-to-date net cash provided from operating activities increased by $77,495 to
$95,130 for fiscal 2008 compared to $17,635 for fiscal 2007. The increase in
cash from operations was related primarily to increased earnings for fiscal 2008
compared to fiscal 2007 and general fluctuations in the timing of the overall
procurement-to-pay cycle on accounts payable versus last year.

Year-to-date net cash used for investing activities decreased $16,848 to $6,404
for fiscal 2008 compared to $23,252 for fiscal 2007 due primarily to lower
capital expenditures and a net increase in the proceeds on sales of investment
securities, partially offset by the funding of the Qualis, Inc. asset
acquisition in the first quarter of fiscal 2008.

Year-to-date capital expenditures for facilities and equipment were for normal
replacement and productivity enhancements. Capital expenditures are anticipated
to be $40,000 to $50,000 for fiscal 2008.

Year-to-date net cash used for financing activities increased $63,289 to $40,010
for fiscal 2008 compared to cash provided from financing activities of $23,279
for fiscal 2007. The increase in cash used for financing activities was due
primarily to increased repurchases of common stock, increased re-payments of
short and long-term debt and decreased borrowings of long-term debt, which were
slightly offset by increased cash generated from the issuance of common stock.

The Company repurchased 1,061 shares of its common stock for $31,137 and 251
shares for $4,309 during the second quarter of fiscal 2008 and 2007,
respectively. Year-to-date, the Company repurchased 1,263 shares of its common
stock for $35,417 and 961 shares for $15,547 in fiscal 2008 and 2007,
respectively. Private party transactions accounted for 28 shares and 5 shares in
the second quarter of fiscal 2008 and 2007, respectively. Year-to-date, private
party transactions accounted for 28 shares and 18 shares in fiscal 2008 and
2007, respectively.

The Company paid quarterly dividends totaling $8,898 and $8,116, or $0.095 and
$0.0875 per share, for the first half of fiscal 2008 and 2007, respectively. The
declaration and payment of dividends, if any, is subject to the discretion of
the Board of Directors and will depend on the earnings, financial condition and
capital and surplus requirements of the Company and other factors the Board of
Directors may consider relevant.

GUARANTIES AND CONTRACTUAL OBLIGATIONS

The Company's Israeli subsidiary has provided a guaranty to a bank to secure the
debt of a 50% owned joint venture for approximately $500, not to exceed 50% of
the joint venture's debt, that is not recorded on the Company's condensed
consolidated balance sheets as of December 29, 2007.

During the second quarter of fiscal 2008, no material change in contractual
obligations occurred.


                                      -22-

<PAGE>

CRITICAL ACCOUNTING POLICIES

Determination of certain amounts in the Company's financial statements requires
the use of estimates. These estimates are based upon the Company's historical
experiences combined with management's understanding of current facts and
circumstances. Although the estimates are considered reasonable, actual results
could differ from the estimates. The accounting policies, discussed below, are
considered by management to require the most judgment and are critical in the
preparation of the financial statements. These policies are reviewed by the
Audit Committee. Other significant accounting policies are included in Note A of
the notes to the consolidated financial statements in the Company's annual
report on Form 10-K for the fiscal year ended June 30, 2007.

Revenue Recognition and Customer Programs - The Company records revenues from
product sales when the goods are shipped to the customer. For customers with
Free on Board destination terms, a provision is recorded to exclude shipments
estimated to be in-transit to these customers at the end of the reporting
period. A provision is recorded and accounts receivable are reduced as revenues
are recognized for estimated losses on credit sales due to customer claims for
discounts, price discrepancies, returned goods and other items. A liability is
recorded as revenues are recognized for estimated customer program liabilities,
as discussed below.

The Company maintains accruals for customer programs that consist primarily of
chargebacks, rebates and shelf stock adjustments. Certain of these accruals are
recorded in the balance sheet as current liabilities and others are recorded as
a reduction in accounts receivable.

A chargeback relates to an agreement the Company has with a wholesaler, a
pharmaceutical buying group or a retail customer that will ultimately purchase
product from a wholesaler for a contracted price that is different than the
Company's price to the wholesaler. The wholesaler will issue an invoice to the
Company for the difference in the contract prices. The accrual for chargebacks
is based on historical chargeback experience and estimated wholesaler inventory
levels, as well as expected sell-through levels by wholesalers to retailers.

Rebates are payments issued to the customer when certain criteria are met, which
may include specific levels of product purchases, introduction of new products
or other objectives. The accrual for rebates is based on contractual agreements
and estimated purchasing levels by customers with such programs. Medicaid
rebates are payments made to states for pharmaceutical products covered by the
program. The accrual for Medicaid rebates is based on historical trends of
rebates paid and current period sales activity.

Shelf stock adjustments are credits issued to reflect decreases in the selling
price of a product and are based upon estimates of the amount of product
remaining in a customer's inventory at the time of the anticipated price
reduction. In many cases, the customer is contractually entitled to such a
credit. The accrual for shelf stock adjustments is based on specified terms with
certain customers, estimated launch dates of competing products and estimated
declines in market price.


                                      -23-

<PAGE>

Changes in these estimates and assumptions related to customer programs may
result in additional accruals. The following table summarizes the activity
included in the balance sheet for accounts receivable allowances and customer
program accruals:

<TABLE>
<CAPTION>
                               Year-to-Date   Year-to-Date
                                   2008           2007
                               ------------   ------------
<S>                            <C>            <C>
CUSTOMER RELATED ACCRUALS
Balance, beginning of period    $  51,656      $  54,456
   Provision recorded             123,433         97,125
   Credits processed             (123,293)      (103,676)
                                ---------      ---------
Balance, end of the period      $  51,796      $  47,905
                                =========      =========
</TABLE>

Allowance for Doubtful Accounts - The Company maintains an allowance for
doubtful accounts that reduces receivables to amounts that are expected to be
collected. In estimating the allowance, management considers factors such as
current overall economic conditions, industry-specific economic conditions,
historical and anticipated customer performance, historical experience with
write-offs and the level of past-due amounts. Changes in these conditions may
result in additional allowances. The allowance for doubtful accounts was $8,944
at December 29, 2007, $9,421 at June 30, 2007 and $12,198 at December 30, 2006.

Allowance for Inventory - The Company maintains an allowance for estimated
obsolete or unmarketable inventory based on the difference between the cost of
the inventory and its estimated market value. In estimating the allowance,
management considers factors such as excess or slow moving inventories, product
expiration dating, products on quality hold, current and future customer demand
and market conditions. Changes in these conditions may result in additional
allowances. The allowance for inventory was $36,184 at December 29, 2007,
$36,210 at June 30, 2007 and $39,098 at December 30, 2006.

Goodwill - Goodwill is tested for impairment annually or more frequently if
changes in circumstances or the occurrence of events suggest impairment exists.
The test for impairment requires the Company to make several estimates about
fair value, most of which are based on projected future cash flows. The
estimates associated with the goodwill impairment tests are considered critical
due to the judgments required in determining fair value amounts, including
projected future cash flows. Changes in these estimates may result in the
recognition of an impairment loss. Goodwill allocated to the Consumer Healthcare
segment is tested annually for impairment in the second quarter of the fiscal
year. The current year testing resulted in no impairment charge related to the
Consumer Healthcare segment. The goodwill allocated to the API and Rx
Pharmaceuticals segments is tested for impairment annually in the third quarter
of the fiscal year. The Company's API business is heavily dependent on new
products currently under development. Although not anticipated at this time, the
termination of certain key product development projects could have a materially
adverse impact on the future results of the API segment, which may include a
charge for goodwill impairment. Goodwill was $212,934 at December 29, 2007,
$196,218 at June 30, 2007 and $188,272 at December 30, 2006.

Other Intangible Assets - Other intangible assets subject to amortization
consist of developed product technology / formulation, distribution and license
agreements, customer relationships and trademarks. Most of these assets are
related to the Agis acquisition and are amortized over their estimated useful
economic lives using the straight-line method. An accelerated method of
amortization is used for customer relationships. For intangible assets subject
to amortization, an impairment analysis is performed whenever events or changes
in circumstances indicate that the carrying amount of the assets may not be


                                      -24-

<PAGE>

recoverable. An impairment loss is recognized if the carrying amount of the
asset is not recoverable and its carrying amount exceeds its fair value. Other
intangible assets had a net carrying value of $191,430 at December 29, 2007,
$159,977 at June 30, 2007 and $137,921 at December 30, 2006.

Product Liability and Workers' Compensation - The Company maintains accruals to
provide for claims incurred that are related to product liability and workers'
compensation. In estimating these accruals, management considers actuarial
valuations of exposure based on loss experience. These actuarial valuations
include significant estimates and assumptions, including, but not limited to,
loss development, interest rates, product sales, litigation costs, accident
severity and payroll expenses. Changes in these estimates and assumptions may
result in additional accruals. The accrual for product liability claims was
$2,573 at December 29, 2007, $2,641 at June 30, 2007 and $2,926 at December 30,
2006. The accrual for workers' compensation claims was $1,467 at December 29,
2007, $1,391 at June 30, 2007 and $1,662 at December 30, 2006.

Income Taxes - The Company's effective income tax rate is based on income,
statutory tax rates, special tax benefits and tax planning opportunities
available to the Company in the various jurisdictions in which it operates. Tax
laws are complex and subject to different interpretations by the taxpayer and
respective governmental taxing authorities. Significant judgment is required in
determining the Company's tax expense and in evaluating tax positions. Tax
positions are reviewed quarterly and balances are adjusted as new information
becomes available.

The Company has established valuation allowances against a portion of the
non-U.S. net operating losses and state-related net operating losses to reflect
the uncertainty of its ability to fully utilize these benefits given the limited
carryforward periods permitted by the various jurisdictions. The evaluation of
the realizability of the Company's net operating losses requires the use of
considerable management judgment to estimate the future taxable income for the
various jurisdictions, for which the ultimate amounts and timing of such
realization may differ. The valuation allowance can also be impacted by changes
in the tax regulations.

Significant judgment is required in determining the Company's contingent tax
liabilities. The Company has established contingent tax liabilities using
management's best judgment and adjusts these liabilities as warranted by
changing facts and circumstances. A change in tax liabilities in any given
period could have a significant impact on the Company's results of operations
and cash flows for that period.


                                      -25-

<PAGE>

Item 3. Quantitative and Qualitative Disclosures About Market Risks (dollars in
thousands)

The Company is exposed to market risks due to changes in currency exchange rates
and interest rates.

The Company is exposed to interest rate changes primarily as a result of
interest expense on borrowings used to finance the Agis acquisition and working
capital requirements and interest income earned on its investment of cash on
hand. As of December 29, 2007, the Company had invested cash, cash equivalents
and investment securities of $101,805 and short and long-term debt, net of
restricted cash, of $268,553.

The Company enters into certain derivative financial instruments, when available
on a cost-effective basis, to hedge its underlying economic exposure,
particularly related to the management of interest rate risk. Because of the use
of certain derivative financial instruments, the Company believes that a
significant fluctuation in interest rates in the near future will not have a
material impact on the Company's consolidated financial statements. These
instruments are managed on a consolidated basis to efficiently net exposures and
thus take advantage of any natural offsets. Derivative financial instruments are
not used for speculative purposes. Gains and losses on hedging transactions are
offset by gains and losses on the underlying exposures being hedged.

The Company has operations in the U.K., Israel, Germany and Mexico. These
operations transact business in their local currency and foreign currencies,
thereby creating exposures to changes in exchange rates. Significant currency
fluctuations could adversely impact foreign revenues; however, the Company
cannot predict future changes in foreign currency exposure.


                                      -26-

<PAGE>

Item 4. Controls and Procedures

As of December 29, 2007, the Company's management, including its Chief Executive
Officer and its Chief Financial Officer, has performed an interim review of the
effectiveness of the Company's disclosure controls and procedures pursuant to
Rule 13a-15(b) of the Securities Exchange Act of 1934. Based on that review, the
Chief Executive Officer and Chief Financial Officer have concluded the Company's
disclosure controls and procedures are effective in ensuring that all material
information relating to the Company and its consolidated subsidiaries required
to be included in the Company's periodic SEC filings would be made known to them
by others within those entities in a timely manner and that no changes are
required at this time.

In connection with the interim evaluation by the Company's management, including
its Chief Executive Officer and Chief Financial Officer, of the Company's
internal control over financial reporting pursuant to Rule 13a-15(d) of the
Securities Exchange Act of 1934, no changes during the quarter ended December
29, 2007 were identified that have materially affected, or are reasonably likely
to materially affect, the Company's internal control over financial reporting.


                                      -27-

<PAGE>

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

There were no material changes to Legal Proceedings in the current quarter.

Item 1A. Risk Factors (dollars in thousands)

The Company's Annual Report on Form 10-K filed for the fiscal year ended June
30, 2007 includes a detailed discussion of the Company's risk factors. Other
than the items noted below, there have been no material changes to the risk
factors that were included in the Form 10-K during the first half of fiscal
2008.

Regulatory Environment

The Non-Prescription Drug Advisory Committee ("NDAC") met on October 18-19, 2007
in response to a March 2007 Citizen's Petition that recommended, among other
things, the withdrawal of cough and cold products for use in children six years
of age and younger. At the NDAC meeting, the panel recommended to the FDA that
cough and cold products not be used for children under two years of age.
Manufacturers, including Perrigo, withdrew products specifically marketed to
infants from the market prior to the NDAC meeting. The impact on the Company of
withdrawing these products from the market was immaterial. In addition, the
panel recommended clinical studies be conducted on the use of these products for
children ages two to under twelve and that certain label changes be made for
cough and cold products. The panel was divided on the issue of whether or not
cough and cold products should be marketed to children under six years of age.
The recommendations by the NDAC are not binding on the FDA.

On January 17, 2008, the FDA issued a Public Health Advisory recommending that
cough and cold products not be used for children under two years of age and
stating that it strongly supported the actions of many pharmaceutical
manufacturers to voluntarily withdraw from the market cough and cold products
for use in that age group. Further, the FDA has assembled a working group to
review the OTC monograph for cough and cold medicines for children ages two to
under twelve. The FDA has indicated that it will make recommendations this
spring on the use of these medicines in that age group. The FDA has also
indicated that the recommendations could include removing pediatric cough and
cold products from the marketplace altogether by issuing a proposed rule
recommending OTC cough and cold products for children under twelve not be
generally recognized as safe and effective.

It is not known at this time what, if any, further action the FDA or industry
will take in response to recommendations of the NDAC. Certain actions by the
FDA, such as removing children's cough and cold products from the marketplace,
or mandating label and packaging changes, could have an adverse effect on the
operating results of the Company.

The Company's fiscal 2007 revenues for cough and cold products marketed solely
for use in children ages two to under twelve years old were approximately
$12,000.

The FDA held a public meeting on November 14, 2007 to explore the public health
benefit of creating a


                                      -28-

<PAGE>

new Behind-The-Counter ("BTC") class of drugs. Drugs placed in this category
would be available without a prescription, but only after intervention by a
pharmacist. It is not known at this time what, if any, action the FDA will take
in response to this issue. Certain actions by the FDA, such as moving certain
OTC products to BTC, could have a material adverse effect on the operating
results of the Company.

All facilities where Rx and OTC drugs are manufactured, tested, packaged, stored
or distributed must comply with FDA "Current Good Manufacturing Practices"
(cGMPs). All of the Company's ANDA, NDA and OTC drug products are manufactured,
tested, packaged, stored and distributed according to cGMP regulations.
Effective June 25, 2008, all facilities where dietary supplements are
manufactured, tested, packaged, stored or distributed must comply with the final
Good Manufacturing Practice regulations for dietary supplements published in the
Federal Register on June 25, 2007. The FDA performs periodic audits to ensure
that the Company's facilities remain in compliance with all appropriate
regulations. The failure of a facility to be in compliance may lead to a breach
of representations made to store brand customers or to regulatory action against
the products made in that facility, including seizure, injunction or recall.

Dextromethorphan

The Company manufactures several products that contain the active ingredient
dextromethorphan which is indicated for cough suppression. Dextromethorphan has
come under scrutiny because of its potential to be abused. Some states have
introduced legislation that, if passed, could require restricted access to
dextromethorphan in finished dosage forms. Such legislation placing age
restrictions on the purchase of OTC products containing dextromethorphan was
passed at the local level by Suffolk County, New York and by the City of
Jerseyville, Illinois. At least one state has passed legislation restricting the
bulk sale of dextromethorphan. Similarly, on the federal level, the U.S. House
of Representatives passed the Dextromethorphan Distribution Act of 2007, which
prohibits the illicit distribution of bulk, unfinished dextromethorphan to any
person other than FDA-registered producers of drugs and devices. The legislation
is now pending consideration by the U.S. Senate, where a companion bill has been
introduced.

In October of 2007, the Dextromethorphan Abuse Reduction Act of 2007 was
introduced, which would prevent teens under the age of 18 from purchasing OTC
cough medicine containing dextromethorphan in finished dosages and
concentrations. Legislation imposing similar age restrictions on purchases of
dextromethorphan in finished dosages has also been introduced by at least one
state. It is possible that any of the states or the federal government could
introduce and pass legislation imposing additional or different restrictions on
the sale of dextromethorphan in finished dosage form, including but not limited
to, requiring a minimum age to purchase product, limiting the amount a consumer
may purchase, requiring a prescription and/or placing the product in a more
controlled position of sale behind the pharmacy counter of a retailer. Products
containing dextromethorphan generated revenues of approximately $49,000 in the
first half of fiscal 2008 and $68,000 in the full 2007 fiscal year. The Company
cannot predict whether any of the proposed legislation will be passed or, if it
is passed, its impact on future revenues attributable to these products.


                                      -29-

<PAGE>

Phenylephrine

The NDAC also met on December 14, 2007 to discuss the efficacy and safety of
phenylephrine, an active ingredient used in various cough and cold products as a
decongestant. The NDAC vote recommended that available data "is supportive" of
the effectiveness of phenylephrine at 10 milligrams. In addition, the NDAC
recommended additional studies to assess the efficacy and safety of a 25
milligram dose of phenylephrine. The recommendations by the NDAC are not binding
on the FDA. It is not known at this time what, if any, further action the FDA or
industry will take in response to recommendations of the NDAC. Certain actions
by the FDA, such as mandating label and packaging changes, could have an adverse
effect on the operating results of the Company.

Healthcare and Legal Reforms

In July 2007, the Centers for Medicare & Medicaid Services (CMS) issued a final
rule for the calculation of the Average Manufacturer Price (AMP), which
pharmaceutical companies are required to report to the CMS. The CMS intends to
now use this calculation to help determine reimbursements to pharmacies that
dispense medicines to Medicaid beneficiaries. Prior to this ruling, the CMS used
the Average Wholesaler Price (AWP) in the calculation of the reimbursement.
Additionally, the CMS has decided to publish manufacturer-specific AMP data. In
mid-December 2007, a preliminary injunction was granted, resulting in
postponement of the actual implementation of the rule. The next court hearing is
expected to be before the end of February 2008. The Company does not know how
the new reimbursement model will affect the Company's pharmacy customers and to
what extent these customers will seek to pass on any increased Medicaid costs to
the Company. It is also unknown how this will impact consumers' access to
generic medicines, which could significantly affect the market for these
products. The Company does not know how the sharing of manufacturer-specific
data may impact competition in the marketplace.


                                      -30-

<PAGE>

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds (in
thousands, except per share amounts)

On February 8, 2007, the Board of Directors approved a plan to repurchase shares
of common stock with a value of up to $60,000. This plan will expire on February
9, 2009. The Company has a 10b5-1 plan that allows brokers selected by the
Company to repurchase shares on behalf of the Company at times when it would
ordinarily not be in the market because of the Company's trading policies. The
amount of common stock repurchased in accordance with the 10b5-1 plan on any
given day is determined by the plan's formula, which is generally based on the
market price of the Company's stock. All common stock repurchased by the Company
becomes authorized but unissued stock and is available for reissuance in the
future for general corporate purposes.

The table below lists the Company's repurchases of shares of common stock during
its most recently completed quarter:

<TABLE>
<CAPTION>
                                   Total          Average     Total Number of Shares    Value of Shares
                             Number of Shares   Price Paid     Purchased as Part of      Available for
        Fiscal 2008            Purchased (1)     per Share   Publicly Announced Plans       Purchase
--------------------------   ----------------   ----------   ------------------------   ---------------
<S>                          <C>                <C>          <C>                        <C>
                                                                                            $52,582
September 30 to November 3          220           $22.35                192                 $48,267
November 4 to December 1            471           $30.24                471                 $34,033
December 2 to December 29           370           $32.35                370                 $22,060
                                  -----                               -----
Total                             1,061                               1,033
</TABLE>

(1)  Private party transactions accounted for the purchase of 28 shares in the
     period from September 30 to November 3.

On February 1, 2008, the Board of Directors approved a plan to repurchase
additional shares of common stock with a value of up to $150,000. This plan
will expire on February 2, 2010.

Item 4. Submission of Matters to a Vote of Security Holders

At the Company's Annual Shareholders' Meeting held on October 30, 2007, the
Company's shareholders voted on the following matter:

1. Election of three directors of the Company:

The tabulation of votes provided by the Inspector of Election was as follows:

<TABLE>
<CAPTION>
       Nominee             For       Withheld
       -------         ----------   ----------
<S>                    <C>          <C>
Laurie Brlas           76,349,618    7,420,414
Michael J. Jandernoa   61,606,162   22,163,870
Joseph C. Papa         79,319,621    4,450,411
</TABLE>


                                      -31-

<PAGE>

Item 6. Exhibits

<TABLE>
<CAPTION>
Exhibit Number   Description
--------------   -----------
<S>              <C>
     3.1         Registrant's Bylaws, as amended as of October 30, 2007,
                 incorporated by reference from Exhibit 3.1 to the Registrant's
                 Current Report on Form 8-K filed on November 2, 2007.

     10.2        Registrant's Nonqualified Deferred Compensation Plan, as
                 amended as of October 10, 2007 and effective January 1, 2007,
                 incorporated by reference from Exhibit 10.1 to the Registrant's
                 Current Report on Form 8-K filed on October 11, 2007.

     31          Rule 13a-14(a) Certifications.

     32          Section 1350 Certifications.
</TABLE>


                                      -32-

<PAGE>

                                   SIGNATURES

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

                                       PERRIGO COMPANY
                                       (Registrant)


Date: February 5, 2008                 By: /s/ Joseph C. Papa
                                           -------------------------------------
                                           Joseph C. Papa
                                           President and Chief Executive Officer


Date: February 5, 2008                 By: /s/ Judy L. Brown
                                           -------------------------------------
                                           Judy L. Brown
                                           Executive Vice President and Chief
                                           Financial Officer
                                           (Principal Accounting and Financial
                                           Officer)


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