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

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

                                   FORM 10-Q/A
                                 AMENDMENT NO. 2

                QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                For the quarterly period ended September 29, 2001

                         COMMISSION FILE NUMBER 1-10827


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


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


ONE RAM RIDGE ROAD, SPRING VALLEY, NEW YORK                      10977
(Address of principal executive offices)                      (Zip Code)


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



         Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934 during the  preceding  twelve  months (or for such shorter  period that the
registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days. Yes X No_____


                                   32,016,652
       Number of shares of Common Stock outstanding as of November 7, 2001






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

       CERTAIN  STATEMENTS  IN THIS  FORM 10-Q MAY  CONSTITUTE  "FORWARD-LOOKING
STATEMENTS" WITHIN THE MEANING OF THE PRIVATE  SECURITIES  LITIGATION REFORM ACT
OF 1995,  INCLUDING THOSE CONCERNING  MANAGEMENT'S  EXPECTATIONS WITH RESPECT TO
FUTURE FINANCIAL  PERFORMANCE AND FUTURE EVENTS,  PARTICULARLY RELATING TO SALES
OF CURRENT  PRODUCTS AND THE  INTRODUCTION OF NEW  MANUFACTURED  AND DISTRIBUTED
PRODUCTS.  SUCH STATEMENTS  INVOLVE KNOWN AND UNKNOWN RISKS,  UNCERTAINTIES  AND
CONTINGENCIES,  MANY OF WHICH ARE BEYOND THE CONTROL OF THE COMPANY, WHICH COULD
CAUSE ACTUAL  RESULTS AND  OUTCOMES TO DIFFER  MATERIALLY  FROM THOSE  EXPRESSED
HEREIN.  FACTORS THAT MIGHT AFFECT SUCH FORWARD-LOOKING  STATEMENTS SET FORTH IN
THIS FORM 10-Q INCLUDE,  AMONG OTHERS,  (I) INCREASED  COMPETITION  FROM NEW AND
EXISTING  COMPETITORS AND PRICING  PRACTICES FROM SUCH  COMPETITORS  (ESPECIALLY
UPON COMPLETION OF EXCLUSIVITY  PERIODS),  (II) PRICING PRESSURES RESULTING FROM
THE CONTINUED  CONSOLIDATION BY THE COMPANY'S DISTRIBUTION  CHANNELS,  (III) THE
AMOUNT OF FUNDS AVAILABLE FOR INTERNAL RESEARCH AND DEVELOPMENT AND RESEARCH AND
DEVELOPMENT  JOINT  VENTURES,  (IV) RESEARCH AND  DEVELOPMENT  PROJECT DELAYS OR
DELAYS  AND  UNANTICIPATED  COSTS  IN  OBTAINING   REGULATORY   APPROVALS,   (V)
CONTINUATION  OF  DISTRIBUTION  RIGHTS UNDER  SIGNIFICANT  AGREEMENTS,  (VI) THE
CONTINUED ABILITY OF DISTRIBUTED PRODUCT SUPPLIERS TO MEET FUTURE DEMAND,  (VII)
THE COSTS AND OUTCOME OF ANY THREATENED OR PENDING LITIGATION,  INCLUDING PATENT
AND INFRINGEMENT CLAIMS AND (VIII) GENERAL INDUSTRY AND ECONOMIC CONDITIONS. ANY
FORWARD-LOOKING  STATEMENTS  INCLUDED  IN THIS FORM 10-Q ARE MADE AS OF THE DATE
HEREOF, BASED ON INFORMATION AVAILABLE TO THE COMPANY AS OF THE DATE HEREOF, AND
THE COMPANY ASSUMES NO OBLIGATION TO UPDATE ANY FORWARD-LOOKING STATEMENTS.

RESULTS OF OPERATIONS

GENERAL

       Net income of $30,912,000  for the nine-month  period ended September 29,
2001 increased  $32,417,000  from a net loss of ($1,505,000) for the nine months
ended September 30, 2000. The net income in the most recent period was favorably
impacted by the  reversal of a  previously  established  valuation  allowance of
$8,370,000  related to NOL  carryforwards.  The Company did not  recognize a tax
benefit for its losses in fiscal year 2000. A revenue  increase of  $93,436,000,
or 152%, from revenues  realized during the nine months ended September 30, 2000
led  to  the  significant  improvement,  reflecting  the  successful  launch  of
fluoxetine  (Prozac(R)) 10 mg and 20 mg tablets,  fluoxetine 40 mg capsules, and
megestrol acetate oral suspension (Megace(R) Oral Suspension). Net sales reached
an all time high of  $154,725,000  for the first nine months of fiscal year 2001
compared to net sales of $61,289,000 for the same period of last year. Following
the sales growth,  the gross  margins  increased to  $61,112,000,  or 39% of net
sales, for the nine-month period of 2001, from $15,188,000, or 25% of net sales,
in the same period of the prior year. The improved results included an increased
investment in research and development in 2001 totaling  $7,436,000 for the nine
months, an increase of $2,102,000 from the comparable  period of 2000.  Selling,
general  and  administrative  costs  for the most  recent  nine-month  period of
$15,385,000  increased  by an  absolute  dollar  amount of  $4,180,000  from the
corresponding  period  of the  prior  year,  primarily  due  to  the  additional
marketing  programs,  shipping costs and legal fees  associated with new product
launches.

       Third  quarter 2001 net income of  $26,850,000,  including the income tax
benefit of $8,370,000  related to  previously  unrecognized  NOL  carryforwards,
increased  $26,576,000  from  the  corresponding  quarter  of  the  prior  year,
reflecting the increased sales and gross margin growth  described  above. In the
third  quarter of 2001,  the Company  incurred  higher  costs for  research  and
development, marketing, legal fees, shipping and personnel compared to the third
quarter of 2000.  Third  quarter 2001 revenues and net income  represent  record
highs for any quarter in the Company's  history and exceed the annual totals for
any fiscal year since 1989.

       In  addition  to its own  product  development  program,  the Company has
several  strategic  alliances  through  which  it  co-develops  and  distributes
products.  As a result of its  internal  program and  strategic  alliances,  the
Company's  pipeline of potential  products includes 23 ANDAs (five of which have
been tentatively  approved),  pending with, and awaiting approval from, the FDA.
The Company pays a percentage of the gross profits to its strategic  partners on
sales  of  products  covered  by its  distribution  agreements  (see  "Notes  to
Financial Statements-Distribution and Supply Agreements").


       In July 2001 and August 2001,  the FDA granted  approvals  for three ANDA
submissions,  one each by Par, Reddy and Alphapharm,  for megestrol acetate oral
suspension  and  fluoxetine  40 mg capsules  and 10 and 20 mg tablets,  which as
first-to-file  opportunities  entitled  the Company up to 180 days of  marketing
exclusivity  for the products.  Par's ANDA  approval for megestrol  acetate oral
suspension,  which had an estimated  $180 million of annual brand sales in 2000,
is not subject to any profit  sharing  agreements.  Reddy's  ANDA  approval  for
fluoxetine  40mg  capsules,  which had an estimated $275 million of annual brand
sales in 2000,  is covered  under the Reddy  Development  and Supply  Agreement.
Alphapharm's ANDA approval for fluoxetine 10 mg tablets,  which had an estimated
$70 million of annual brand sales in 2000, and 20 mg tablets,  which the Company
believes should be able to compete for a share of the fluoxetine capsule market,
are covered under the Genpharm Additional Product Agreement. Generic competitors
of the Company received 180 days marketing  exclusivity for fluoxetine 10 mg and
20 mg capsules. Fluoxetine 20 mg capsules had an estimated annual brand sales of
nearly $2 billion in 2000.  Annual brand sales are based on the Company's market
research.  The Company began marketing megestrol acetate oral suspension in July
2001 and all  three  strengths  of  fluoxetine  in August  2001  (see  "Notes to
Financial Statements-Distribution and Supply Agreements" ).

       Critical  to  the  continued   improvement  in  the  Company's  financial
condition is the introduction of new  manufactured  and distributed  products at
selling prices that generate significant gross margin. The Company,  through its
internal development program and strategic alliances, is committed to developing
new products that have limited  competition  and longer product life cycles.  In
addition to new product introductions  expected as part of its various strategic
alliances,  the Company plans to continue to invest in research and  development
efforts  while  seeking  additional  products  for sale through new and existing
distribution  agreements,   additional  first-to-file  opportunities,   vertical
integration with raw material suppliers and unique dosage forms and strengths to
differentiate  its  products  in the  marketplace.  The  Company  is  engaged in
efforts, subject to FDA approval and other factors, to introduce new products as
a  result  of  its  research  and  development   efforts  and  distribution  and
development  agreements  with third parties.  No assurance can be given that the
Company will obtain or develop any additional products for sale.

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

NET SALES

       Net sales for the nine months ended  September  29, 2001 of  $154,725,000
increased  $93,436,000,   or  152%,  from  net  sales  of  $61,289,000  for  the
corresponding  nine-month  period  of 2000.  The sales  increase  was due to the
launch of fluoxetine 10 mg and 20 mg tablets sold under a distribution agreement
with  Genpharm,  fluoxetine 40 mg capsules sold under a  distribution  agreement
with Reddy, and megestrol  acetate oral suspension  manufactured by the Company.
Net sales of distributed products,  which consist of products manufactured under
contract and licensed  products,  were  approximately  63% of the  Company's net
sales in each of the comparable nine-month periods. The Company is substantially
dependent upon distributed products for its sales, and as the Company introduces
new products under its distribution  agreements,  it is expected that this trend
will  continue.  Any  inability  by  suppliers  to meet  expected  demand  could
adversely affect future sales.

       Net  sales  of  $99,724,000  for the  third  quarter  of  2001  increased
$79,288,000,  or 388%, from $20,436,000 for the  corresponding  quarter of 2000,
primarily due to the introduction of new products during the quarter.  Net sales
of distributed  products were approximately 67% of the Company's total net sales
in the most recent quarter  compared to  approximately  66% of the total for the
same quarter of last year.

       For the nine and three-month  periods ended September 29, 2001, net sales
of  fluoxetine  and  megestrol  acetate oral  suspension  were  $56,521,000  and
$21,906,000, respectively. Based on the Company's market research for the twelve
weeks ended October 26, 2001, Par had captured approximately 79.7 percent of new
generic and brand prescriptions in the U.S. market for 40 mg fluoxetine and 22.6
percent  of new  generic  prescriptions  in  the  U.S.  market  for 10 and 20 mg

                                      -2-


fluoxetine.  In addition,  the Company held a 43.8 percent  share of new generic
and brand prescriptions in the U.S. market for megestrol acetate oral suspension
for the thirteen weeks ended October 26, 2001.

         The Company  recognizes revenue at the time its products are shipped to
its  customers  as, at that  time,  the risk of loss or  physical  damage to the
product passes to the customer,  and the obligations of customers to pay for the
products  are not  dependent  on the  resale  of the  product  or the  Company's
assistance in such resale. As is common in the Company's industry, customers are
permitted to return unused product,  after approval from the Company,  up to 180
days  before  and one year  after the  expiration  date for the  product's  lot.
Additionally,  certain  customers are eligible for price rebates,  offered as an
incentive to increase sales volume, on the basis of the volume of purchases of a
product over a specified period which generally ranges from one to three months,
and  certain  customers  are  credited  with  chargebacks  on the basis of their
resales to end-use  customers,  such as HMO's,  which have  contracted  with the
Company for quantity discounts.  In each instance the Company has the historical
experience and access to other information,  including the total demand for each
drug the Company manufactures, the Company's market share, the recent or pending
introduction of new drugs,  the inventory  practices of the Company's  customers
and the resales by its customers to end-users having contracts with the Company,
necessary to reasonably  estimate the amount of such returns or allowances,  and
records reserves for such returns or allowances at the time of sale.

         In  addition to granting  the  returns or price  adjustments  discussed
above, the Company may offer price protection,  or shelf-stock adjustment,  with
respect  to sales of new  generic  drugs for  which it has a market  exclusivity
period.  To account for the fact that the price of such drugs may  decline  when
additional  generic  manufacturers  introduce  and market a  comparable  generic
product at the end of the exclusivity  period,  such plans,  which are common in
the  industry,  generally  provide the Company will credit its customers for the
difference  between the Company's new price at the end of the exclusivity period
and the price at which the Company sold the  customers  the product with respect
to the quantity  remaining on the customer's shelf at the end of the exclusivity
period.  As a  result,  the total  price  protection  the  Company  will  credit
customers with at the end of an exclusivity  period will depend on the amount by
which the price declines as the result of the introduction of comparable generic
products by additional manufacturers, and the shelf stock customers will have at
the end of the  exclusivity  period.  In the Company's  experience the amount by
which the price of a drug may decline at the end of an  exclusivity  period will
depend in part on the number of additional generic  manufacturers that introduce
and market a  comparable  product,  and  Company  estimates  the amount by which
prices  will  decline  based on its  monitoring  of the number and status of FDA
applications  and tentative  approvals and its historical  experience with other
drugs for which the Company had market  exclusivity.  The Company  estimates the
amount of shelf stock that will remain at the end of an exclusivity period based
on both its knowledge of the  inventory  practices  for  wholesalers  and retail
distributors and conversations it has with its major wholesale customers.  Using
these factors,  the Company can reasonably  estimate the total price  protection
credit it will have to issue at the end of an  exclusivity  period.  The Company
records  periodic  charges  (reductions of sales) to accrue this amount over the
exclusivity  period, with the aggregate charge allocated to each period based on
the Company's  projection of its sales, over the exclusivity period, of the drug
in question.

         At  September  30, 2001 the Company was within the  exclusivity  period
with respect to two drugs;  megestrol  acetate oral  suspension and  fluoxetine.
With respect to megestrol  acetate oral  suspension,  for which the  exclusivity
period ends in mid-January, 2002, the Company did not record a reserve for price
protection  credits,  as  the  Company  does  not  foresee  that  other  generic
manufacturers will introduce and market a comparable product in the near future.
With  respect  to  fluoxetine,   for  which  the  exclusivity   period  ends  in
late-January,  2002, at September  30, 2001 the Company had  established a price
protection  reserve of approximately $28 million,  based on its estimate that at
the end of its  exclusivity  period  between  eight and ten  additional  generic
manufacturers  will  introduce and market  comparable  products for the 10mg and
20mg tablets and between one and three additional  manufacturers  will introduce
and market a comparable product for the 40 mg capsules.

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


                                      -3-


GROSS MARGIN

       The gross  margin of  $61,112,000  (39% of net sales) for the  nine-month
period ended September 29, 2001 increased  $45,924,000  from $15,188,000 (25% of
net  sales) in the  corresponding  period of the prior  year.  The gross  margin
improvement was achieved through  additional  contributions from sales of higher
margin new products, and to a lesser extent, increased sales of certain existing
products and more favorable manufacturing overhead variances.

       The third  quarter  2001 gross margin of  $41,563,000  (42% of net sales)
increased  $36,400,000  from $5,163,000 (25% of net sales) in the  corresponding
quarter of the prior year.  The higher gross margins in the most recent  quarter
reflect the launch of higher margin new products,  and to a lesser extent,  more
favorable manufacturing overhead variances.

       For  the  nine  and   three-month   periods  ended  September  29,  2001,
fluoxetine,  which is subject to profit  sharing  agreements  with  Genpharm and
Reddy,  contributed  approximately  $18,900,000 to the margin  improvement while
megestrol acetate oral suspension contributed  approximately  $17,000,000.  As a
result  of  the  180-day  marketing  exclusivity  granted  to  the  Company  for
fluoxetine and megestrol acetate oral suspension,  pricing for these products is
such that they yield  relatively high gross margins,  before  applicable  profit
splits,  (but  after the  reduction  of sales for the price  protection  reserve
discussed  above)  during  the  exclusivity   period.  The  180  days  marketing
exclusivity  will  extend  into  late  January-2002  for  fluoxetine  and  until
mid-January 2002 for megestrol acetate oral suspension.  As discussed above, the
Company  currently  anticipates  that  at  the  end of  its  exclusivity  period
additional  generic  manufacturers  will introduce and market  fluoxetine.  As a
result,  the Company's gross margin,  as a percentage of sales,  from fluoxetine
may be expected to decline in the  future.  The  Company's  gross  margin,  as a
percentage of sales, for megestrol acetate oral suspension could also decline if
additional manufacturers introduce and market a comparable generic product.

       Inventory   write-offs  amounted  to  $1,195,000  and  $729,000  for  the
nine-month  and  three-month  periods ended  September  29, 2001,  respectively,
compared to $1,010,000  and $180,000 in the  corresponding  periods of the prior
year.  The inventory  write-offs,  taken in the normal  course of business,  are
primarily related to work-in-process inventory not meeting the Company's quality
control  standards  and the  disposal  of finished  products  due to short shelf
lives.  The higher  inventory  write-offs  in the most recent  year  include the
disposal of validation batches related to manufacturing process improvements.

OPERATING EXPENSES

  RESEARCH AND DEVELOPMENT

       In the nine-month  period ended September 29, 2001, the Company  incurred
research and development  expenses of $7,436,000  compared to $5,334,000 for the
corresponding  nine months of the prior year. The increased costs were primarily
attributable to higher  material,  bio-study and personnel costs, and additional
payments for  formulation  development  work  performed for PRI by  unaffiliated
companies.  Annual research and development costs in 2001 are expected to exceed
the total for fiscal year 2000. The Company's  domestic research and development
program is integrated with IPR, its research  operation in Israel.  Research and
development expenses at IPR for the most recent nine-month period were $865,000,
net of Generics  funding,  compared to expenses of $935,000  for the  comparable
period of last year. The Company, IPR and Generics have an agreement pursuant to
which Generics shares  one-half of the costs of IPR's  operating  budget up to a
maximum  payment of  $1,000,000  in any one  calendar  year in exchange  for the
exclusive  distribution  rights  outside  of the United  States to the  products
developed  by IPR  after the date of the  agreement  (see  "Notes  to  Financial
Statements-Research and Development Agreement").

       Research and  development  expenses of $3,779,000 in the third quarter of
2001  increased  $2,900,000  from the third  quarter  of 2000.  The most  recent
three-month period included increased costs for bio-studies  related to products
co-developed with Genpharm,  development  materials and personnel.  In addition,
the third  quarter of the prior year  included  lower  payments to  unaffiliated
development  companies and the  reimbursement  of certain  expenses by Genpharm.
Research  and  development  expenses  at IPR in the  most  recent  quarter  were
$289,000, net of Generics funding,  compared to expenses of $313,000 in the same
quarter of the prior year.

       The Company  currently  has three ANDAs for  potential  products  pending
with,  and  awaiting  approval  from,  the FDA as a  result  of its own  product
development  program.  In  addition,  the  Company  has in process or expects to


                                      -4-


commence  biostudies for at least four additional  products during the remainder
of 2001.  None of the  potential  products  described  above are  subject to any
profit sharing arrangements through the Company's strategic alliances.

       Under the Genpharm Distribution Agreement, Genpharm pays the research and
development   costs  associated  with  the  products  covered  by  the  Genpharm
Distribution  Agreement.  Currently,  there are 12 ANDAs for potential  products
(five of which have been tentatively  approved) that are covered by the Genpharm
Distribution  Agreement  pending with,  and awaiting  approval from, the FDA. To
date,  the Company is  marketing  14 products  under the  Genpharm  Distribution
Agreement. Flecainide acetate tablets (Tambocor(R)),  which is covered under the
Genpharm  Distribution  Agreement,  received final approval from the FDA in July
2001.  The Company  anticipates  commencing  the marketing of the product in the
first  quarter  of 2002 (see  "Notes to  Financial  Statements-Distribution  and
Supply Agreements-Genpharm, Inc.").

       Genpharm  and the  Company  share the costs of  developing  the  products
covered under the Genpharm Additional Product Agreement. Currently, there is one
ANDA  for a  potential  product  covered  by  the  Genpharm  Additional  Product
Agreement  pending with, and awaiting  approval from, the FDA. The Company began
marketing  fluoxetine  10 mg and  20 mg  tablets,  covered  under  the  Genpharm
Additional  Product   Agreement,   in  August  2001  (see  "Notes  to  Financial
Statements-Distribution and Supply Agreements-Genpharm, Inc.").

  SELLING, GENERAL AND ADMINISTRATIVE

       Although selling, general and administrative costs of $15,385,000 for the
nine months ended September 29, 2001 increased $4,180,000, or 37%, over the same
period of last year,  the cost as a  percentage  of net sales in the  respective
periods  decreased to 10% in 2001 from 18% in 2000. The higher dollar amounts in
the  current  nine-month  period  were  primarily   attributable  to  additional
marketing  programs,  shipping costs and legal fees  associated with new product
introductions,  and to a lesser extent,  increased  personnel costs. The Company
anticipates it will continue to incur a high level of legal expenses  related to
the  costs  of  litigation   connected   with  certain   potential  new  product
introductions (see "Notes to Financial Statements-Commitments, Contingencies and
Other Matters-Legal Proceedings").

       For the three-month period ended September 29, 2001, selling, general and
administrative  costs  increased  $2,948,000,  or 77%,  in  absolute  dollars to
$6,793,000  (7% of net  sales)  from  $3,845,000  (19%  of net  sales)  for  the
corresponding  three-month  period of the  prior  year  primarily  due to higher
marketing, shipping, legal and personnel expenses.

OTHER INCOME

       Other income of $431,000 and $67,000 for the nine-month  and  three-month
periods ended  September  29, 2001,  respectively,  decreased  from $504,000 and
$112,000 in the corresponding  periods of 2000.  Included in the nine-month 2001
total was a payment  from 3M to the Company  releasing  the parties from a prior
product  agreement  recorded in the first  quarter of 2001 while the  nine-month
period of 2000  included  payments  from  strategic  partners to  reimburse  the
Company for research costs incurred in prior periods.

INCOME TAXES

       The Company  recorded income tax provisions of $7,230,000 and $4,070,000,
net of tax  benefits  of  $8,370,000  related  to  previously  unrecognized  NOL
carryforwards,  for  the  nine  and  three-month  periods,  respectively,  ended
September  29, 2001. A gross  deferred tax asset of $6.0 million  related to NOL
carryforwards  remained  unutilized at September 29, 2001. The Company evaluated
the  relevant  information  related to the  realization  of the  unutilized  NOL
carryforwards,  including an assessment of the Company's  ability to utilize the
NOL  carryforwards,  in light of potential  limitations under Section 382 of the
Internal  Revenue  Code  related to changes in the  ownership  of the  Company's
common stock,  and ongoing  assessments  of the NOL  carryforwards  generated in
earlier  years.  Based on these  factors,  a full  valuation  allowance  of $6.0
million against the unutilized NOL carryforwards  was recorded.  The Company did
not  recognize a benefit  for its  operating  losses for the nine  months  ended
September 29, 2000 (see "Notes to Financial Statements-Income Taxes").



                                      -5-


FINANCIAL CONDITION

LIQUIDITY AND CAPITAL RESOURCES

       The Company's  cash and cash  equivalents  of $2,509,000 at September 29,
2001  increased  from  $222,000 at December 31, 2000.  Proceeds from issuance of
Common Stock from the exercise of options and warrants and net cash  provided by
operations were used to pay down the Company's credit line with GECC and to fund
capital  projects.  Working  capital,  which includes cash and cash  equivalents
increased to $80,947,000 at September 29, 2001 from  $18,512,000 at December 31,
2000,  primarily due to increased  accounts  receivable and deferred  income tax
assets.  The  working  capital  ratio  improved to 2.13x at  September  29, 2001
compared to 1.65x at December 31, 2000.

       The Company, from time to time, enters into agreements with third parties
with respect to the development of new products and  technologies.  To date, the
Company has entered into agreements and advanced funds to several non-affiliated
companies  for  products in various  stages of  development.  The  payments  are
expensed as incurred  and  included in research and  development  costs.  Annual
research  and  development   expenses,   including  payments  to  non-affiliated
companies, are expected to total approximately $10,000,000 for the entire fiscal
year 2001.

       As of September 29, 2001 the Company's accounts payable balance increased
to $48,621,000 due primarily to a total of approximately  $35,600,000 payable to
strategic  partners  related to profit sharing  agreements for  fluoxetine.  The
Company expects to pay these amounts from its working capital by November 2001.

       On March 30, 2001,  the Company  reached an agreement with 3M pursuant to
which 3M paid the Company  $750,000 in April 2001,  releasing the parties from a
prior  product  agreement  (see  "Notes  to  Financial   Statements-Commitments,
Contingencies and Other Matters-Legal Proceedings").

       In June  2000,  the  Company  agreed to sell its  remaining  distribution
rights back to Elan for a  non-prescription  transdermal  nicotine  patch and to
terminate Par's right to royalty payments under a prior  agreement.  Pursuant to
this agreement, the Company received a $500,000 payment in July 2001 (see "Notes
to Financial Statements-Distribution and Supply Agreements-Elan Corporation").

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

       The Company,  IPR and Generics  entered into the  Development  Agreement,
dated August 11, 1998, pursuant to which Generics agreed to fund one-half of the
costs of IPR's  operating  budget in  exchange  for the  exclusive  distribution
rights  outside of the United States to the products  developed by IPR after the
date of the  agreement.  In  addition,  Generics  agreed to pay IPR a  perpetual
royalty for all sales of the products by Generics or its affiliates  outside the
United States. To date, no such products have been brought to market by Generics
and no royalty  has been paid to IPR.  Pursuant  to the  Development  Agreement,
Generics  paid the Company  $800,000  for fiscal year 2000 and  $587,000 for the
first  nine  months  of 2001,  fulfilling  their  funding  requirements  through
September 29, 2001.  Generics is not required to fund more than  $1,000,000  for
any  one  calendar  year  (see  "Notes  to  Financial   Statements-Research  and
Development Agreement").

       The  Company  expects  to fund its  operations,  including  research  and
development  activities and its obligations under the existing  distribution and
development  arrangements  discussed herein,  out of its working capital and, if
necessary,  with available  borrowings against its line of credit, if and to the
extent available (see "-Financing").



                                      -6-


FINANCING

       At September 29, 2001, the Company's  total  outstanding  long-term debt,
including  the current  portion,  amounted to  $1,355,000.  The amount  consists
primarily of an  outstanding  mortgage  loan with a bank and capital  leases for
computer  equipment.  In June 2001,  the  Company and the bank  entered  into an
agreement  that  extended the terms of the mortgage  loan of which the remaining
balance was  originally  due in May 2001.  The mortgage loan  extension,  in the
principal amount of $877,000, is to be paid in equal monthly installments over a
term of 13 years  maturing May 1, 2014.  The mortgage loan has a fixed  interest
rate of 8.5% per annum,  with rate resets  after the fifth and tenth years based
upon a per annum rate of 3.25% over the  five-year  Federal Home Loan Bank of NY
rate.

       Par entered into the Loan Agreement with GECC in December 1996,  which as
amended,  provides Par with a 78-month  revolving  line of credit  expiring June
2003.  Pursuant  to the Loan  Agreement,  Par is  permitted  to borrow up to the
lesser of (i) the borrowing  base  established  under the Loan Agreement or (ii)
$20,000,000.  The  borrowing  base  is  limited  to  85%  of  eligible  accounts
receivable  plus 50% of eligible  inventory of Par, each as determined from time
to time by GECC. The interest rate charged on the line of credit is based upon a
per annum rate of 2.25% above the 30-day  commercial  paper rate for  high-grade
unsecured notes adjusted monthly. The line of credit with GECC is secured by the
assets of Par and PRI other than real  property  and is  guaranteed  by PRI.  In
connection with such facility,  Par, PRI and their affiliates have established a
cash management system pursuant to which all cash and cash equivalents  received
by any of such  entities  would be deposited  into a lockbox  account over which
GECC would have sole operating  control if there were amounts  outstanding under
the line of credit.  The  deposits  would  then be  applied on a daily  basis to
reduce the amounts  outstanding  under the line of credit.  The revolving credit
facility is subject to covenants based on various  financial  benchmarks.  As of
September 29, 2001, the borrowing base was approximately  $19,287,000.  To date,
no debt is outstanding under the loan agreement.




                                      -7-


                                    SIGNATURE




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

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




January 24 , 2002        /s/ Kenneth I. Sawyer
                         ----------------------------------------
                         Kenneth I. Sawyer
                         CHIEF EXECUTIVE OFFICER AND CHAIRMAN OF
                         THE BOARD OF DIRECTORS
                         (Principal Executive Officer)




January 24, 2002         /s/ Dennis J. O'Connor
                         ----------------------------------------
                         Dennis J. O'Connor
                         VICE PRESIDENT - CHIEF FINANCIAL OFFICER AND SECRETARY
                         (Principal Accounting and Financial Officer)

















                                      -8-