		PAGE

PART I	FINANCIAL INFORMATION

Item 1.	Condensed Consolidated Financial Statements (unaudited)

	Condensed Consolidated Balance Sheets as of March 29, 2008 and December 31, 2007	3

	Condensed Consolidated Statements of Operations for the three months ended March 29, 2008 and March 31, 2007	4

	Condensed Consolidated Statements of Cash Flows for the three months ended March 29, 2008 and March 31, 2007	5

	Notes to Condensed Consolidated Financial Statements	7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	29

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	37

Item 4.	Controls and Procedures	38

PART II	OTHER INFORMATION

Item 1.	Legal Proceedings	39

Item 1A.	Risk Factors	45

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	46

Item 6.	Exhibits	46

SIGNATURES		47

	March 29,			December 31,
	2008			2007
ASSETS
Current assets:
Cash and cash equivalents	$	231,193		$	200,132
Available for sale debt and marketable equity securities		67,893			85,375
Accounts receivable, net		84,035			64,182
Inventories		65,183			84,887
Prepaid expenses and other current assets		14,023			14,294
Deferred income tax assets		56,921			56,921
Income taxes receivable		13,475			17,516
Total current assets		532,723			523,307

Property, plant and equipment, at cost less accumulated depreciation and amortization		83,316			82,650
Available for sale debt and marketable equity securities		5,959			6,690
Investment in joint venture		6,433			6,314
Other investments		2,500			2,500
Intangible assets, net		33,643			36,059
Goodwill		63,729			63,729
Deferred financing costs and other assets		2,314			2,544
Non-current deferred income tax assets, net		57,935			57,730
Total assets	$	788,552		$	781,523

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current portion of long-term debt	$	200,000		$	200,000
Accounts payable		30,513			32,200
Payables due to distribution agreement partners		45,253			36,479
Accrued salaries and employee benefits		6,713			16,596
Accrued expenses and other current liabilities		32,211			27,518
Total current liabilities		314,690			312,793

Long-term debt, less current portion		-			-
Other long-term liabilities		31,448			30,975
Commitments and contingencies		-			-

Stockholders’ equity:
Preferred Stock, par value $0.0001 per share, authorized 6,000,000 shares; none issued and outstanding		-			-
Common Stock, par value $0.01 per share, authorized 90,000,000 shares, issued 37,203,975 and 36,460,461 shares		372			364
Additional paid-in-capital		278,411			274,963
Retained earnings		232,781			230,195
Accumulated other comprehensive loss		(1,680	)		(1,362	)
Treasury stock, at cost, 2,658,335 and 2,604,977 shares		(67,470	)		(66,405	)
Total stockholders’ equity		442,414			437,755
Total liabilities and stockholders’ equity	$	788,552		$	781,523

	Three Months Ended
	March 29, 2008			March 31, 2007
Revenues:
Net product sales	$	151,237		$	222,589
Other product related revenues		3,691			11,621
Total revenues		154,928			234,210
Cost of goods sold		105,407			146,521
Gross margin		49,521			87,689
Operating expenses:
Research and development		17,158			14,039
Selling, general and administrative		31,346			32,557
Settlements, net		-			(578	)
Total operating expenses		48,504			46,018
Gain on sale of product rights and other		(1,625	)		(20,000	)
Operating income		2,642			61,671
Other expense, net		-			(19	)
Equity in loss of joint venture		(20	)		(148	)
Realized gain on sale of marketable securities		-			1,397
Interest income		3,014			2,684
Interest expense		(1,667	)		(1,718	)
Income from continuing operations before provision for income taxes		3,969			63,867
Provision for income taxes		1,443			22,353
Income from continuing operations		2,526			41,514
Discontinued operations:
Gain from discontinued operations		505			-
Provision for income taxes		445			-
Gain from discontinued operations		60			-
Net income	$	2,586		$	41,514

Basic earnings per share of common stock:
Income from continuing operations	$	0.08		$	1.20
Gain from discontinued operations		0.00			-

Net income	$	0.08		$	1.20

Diluted earnings per share of common stock:
Income from continuing operations	$	0.08		$	1.19
Gain from discontinued operations		0.00			-
Net income	$	0.08		$	1.19

Weighted average number of common shares outstanding:
Basic		33,220			34,618
Diluted		33,587			34,997

	Three Months Ended
	March 29,			March 31,
	2008			2007
Cash flows from operating activities:
Net income	$	2,586		$	41,514
Deduct: Gain from discontinued operations, net of tax		60			-
Income from continuing operations	$	2,526		$	41,514

Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		6,274			7,347
Gain on marketable securities, net		-			(1,397	)
Equity in loss of joint venture		20			148
Allowances against accounts receivable		(18,924	)		7,978
Share-based compensation expense		3,463			3,702
Loss on disposal of fixed assets		21			-
Excess tax benefits on exercise of nonqualified stock options		(194	)		(138	)
Other		(50	)		102
Changes in assets and liabilities:
Increase in accounts receivable		(929	)		(55,965	)
Decrease in inventories		19,704			18,648
Decrease in prepaid expenses and other assets		1,006			1,858
Decrease in accounts payable, accrued expenses and other liabilities		(6,947	)		(7,458	)
Increase in payables due to distribution agreement partners		8,774			50
Decrease in net income taxes receivable		3,735			20,298
Net cash provided by operating activities		18,479			36,687
Net cash related to operating activities from discontinued operations		-			-

Cash flows from investing activities:
Capital expenditures		(4,023	)		(1,719	)
Purchases of intangibles		-			(600	)
Purchases of available for sale debt securities		(17,305	)		(36,415	)
Proceeds from maturity and sale of available for sale debt and marketable equity securities		34,995			31,085
Acquisition of subsidiary, contingent payment		-			(5,000	)
Capital contributions to joint venture		(591	)		(1,244	)
Net cash provided by (used in) investing activities		13,076			(13,893	)
Net cash related to investing activities from discontinued operations		-			-

Cash flows from financing activities:
Proceeds from issuances of common stock upon exercise of stock options		301			124
Proceeds from the issuance of common stock under the Employee Stock Purchase Program		75			-
Excess tax benefits on exercise of nonqualified stock options		194			138
Purchase of treasury stock		(1,064	)		(745	)
Payments of short-term debt related to financed insurance premiums		-			(1,805	)
Principal payments under long-term and other borrowings		-			(20	)
Net cash used in financing activities		(494	)		(2,308	)
Net cash related to financing activities from discontinued operations		-			-

Net increase in cash and cash equivalents		31,061			20,486
Cash and cash equivalents at beginning of period		200,132			120,991
Cash and cash equivalents at end of period	$	231,193		$	141,477

Supplemental disclosure of cash flow information:
Cash (received) paid during the period for:
Income taxes, net	$	(2,291	)	$	2,056

Par Pharmaceutical Companies, Inc. operates primarily through its wholly owned subsidiary, Par Pharmaceutical, Inc. (collectively referred to herein as the “Company”), in two business segments, for the development, manufacture and distribution of generic pharmaceuticals and branded pharmaceuticals in the United States. In 2007, the Company began operating the brand pharmaceutical segment under the name Strativa Pharmaceuticals. The Company also wholly owns Kali Laboratories, Inc. (“Kali”), a generic pharmaceutical research and development company located in Somerset, New Jersey. Marketed products are principally in the solid oral dosage form (tablet, caplet and two-piece hard-shell capsule). The Company also distributes several oral suspension products and certain products in the semi-solid form of a cream.

In December 2007, the Financial Accounting Standards Board (“FASB”) ratified Emerging Issue Task Force Issue No. 07-1 (“EITF 07-1”), Accounting for Collaborative Arrangements. The key elements of EITF 07-1 relate to: (a) the scope of the issue; (b) the income statement presentation of transactions with third parties; (c) the income statement presentation of payments between parties to the collaborative arrangement; (d) the disclosures about collaborative arrangements that should be required in the financial statements of the parties to the collaborative arrangements; and (e) the transition method. A contractual arrangement falls within the scope of EITF 07-1 if the arrangement requires the parties to be active participants and the arrangement exposes the parties to significant risks and rewards that are tied to the commercial success of the endeavor. Costs incurred and revenue generated on sales to third parties should be reported in the statement of operations based on the guidance in EITF Issue No. 99-19, Reporting Revenue Gross as a Principal versus Net as an Agent. The equity method of accounting should not be applied to a collaborative arrangement within the scope of this issue without the creation of a separate legal entity for the arrangement. Payments between parties to the collaborative arrangement should be presented in the statement of operations based on the nature of the arrangement and each entity's business operations, the contractual terms of the arrangement as well as if existing GAAP is applicable. EITF 07-1 requires companies to disclose the nature and purpose of the arrangement, its rights and obligations under the arrangement, the accounting policy applied to the arrangement, and the amounts attributable to transactions between other participants to the collaborative arrangement and where in the statement of operations these amounts have been classified. EITF 07-1 requires that companies comply in its first fiscal year beginning after December 15, 2008 and transition to the guidance in this issue by retrospectively applying the guidance to all periods presented for all arrangements existing at the effective date, unless it is impracticable to do so. The impracticability assessment should be made on an arrangement-by-arrangement basis and certain disclosures would be required if a company utilizes the impracticability exception. The Company is currently evaluating the potential impact of adopting EITF 07-1 on its condensed consolidated financial statements, but does not expect a material impact upon adoption.

In December 2007, the FASB issued FASB Statement No. 141 (Revised 2007) (“SFAS 141R”), Business Combinations. SFAS 141R will significantly change the accounting for business combinations. Under SFAS 141R, an acquiring entity will be required to recognize all the assets acquired and liabilities assumed in a transaction at the acquisition date fair value with limited exceptions. SFAS 141R will change the accounting treatment for certain specific items, including; acquisition costs will be generally expensed as incurred, minority interests will be valued at fair value at the acquisition date, acquired contingent liabilities will be recorded at fair value at the acquisition date and subsequently measured at either the higher of such amount or the amount determined under existing guidance for non-acquired contingencies, in-process research and development will be recorded at fair value as an indefinite-lived intangible asset at the acquisition date, restructuring costs associated with a business combination will be generally expensed subsequent to the acquisition date, and changes in deferred tax asset valuation allowances and income tax uncertainties after the acquisition date generally will affect income tax expense. SFAS 141R also includes a substantial number of new disclosure requirements. SFAS 141R applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. Earlier adoption is prohibited. The Company will be required to record and disclose business combinations following existing GAAP until January 1, 2009.

In December 2007, SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements - an amendment of ARB No. 51 (“SFAS 160”), was issued. SFAS 160 requires entities to report noncontrolling (minority) interests as a component of stockholders’ equity on the balance sheet; include all earnings of a consolidated subsidiary in consolidated results of operations; and treat all transactions between an entity and noncontrolling interest as equity transactions between the parties. SFAS 160 is effective for the Company’s fiscal year beginning 2009 and adoption is prospective only; however, presentation and disclosure requirements described above must be applied retrospectively. The Company is currently evaluating the potential impact of adopting SFAS 160 on its condensed consolidated financial statements, but does not expect a material impact upon adoption.

In June 2007, the FASB ratified Emerging Issue Task Force Issue No. 07-3 (“EITF 07-3”), Accounting for Non-Refundable Advance Payments for Goods or Services to Be Used in Future Research and Development Activities, which requires nonrefundable advance payments for goods and services that will be used or rendered for future research and development activities to be deferred and capitalized. These amounts will be recognized as an expense in the period that the related goods are delivered or the related services are performed or when an entity does not expect the goods to be delivered or services to be rendered. EITF 07-3 is effective for the fiscal years beginning after December 31, 2007, including interim periods within those fiscal years. The Company’s adoption of the provisions of EITF 07-3, beginning January 1, 2008 did not have a material impact on its condensed consolidated financial statements.

In February 2007, the FASB issued SFAS No. 159 The Fair Value Option for Financial Assets and Financial Liabilities — Including an Amendment of FASB Statement No. 115 (“SFAS 159”), which becomes effective for fiscal periods beginning after November 15, 2007. Under SFAS 159, companies may elect to measure specified financial assets and liabilities at fair value that are not otherwise measured at fair value, with changes in fair value recognized in earnings each subsequent reporting period. This election, called the “fair value option,” will enable some companies to reduce volatility in reported earnings caused by measuring related assets and liabilities differently. SFAS 159 also establishes presentation and disclosure requirements designed to draw a comparison between the different measurement attributes a company elects for similar types of assets and liabilities. The Company did not elect the “fair value option” for any of its eligible financial assets or liabilities and therefore the Company’s adoption of SFAS 159 did not have a material impact on its condensed consolidated financial statements.

In September 2006, the FASB issued SFAS No. 157 Fair Value Measurements (“SFAS 157”). SFAS 157 establishes a common definition for fair value to be applied to GAAP guidance requiring use of fair value, establishes a framework for measuring fair value, and expands disclosure about such fair value measurements. SFAS 157 applies to fair value measurements that are already required or permitted by other accounting standards, except for measurements of share-based payments and measurements that are similar to, but not intended to be, fair value. The FASB has previously concluded in those accounting pronouncements that fair value is the relevant measurement attribute. Accordingly, this Statement does not require any new fair value measurements. SFAS 157 is effective for fiscal years beginning after November 15, 2007. In November 2007, FASB granted a one year deferral for the implementation of SFAS 157 for non-financial assets and liabilities. The Company’s adoption of SFAS 157 with respect to financial assets and liabilities as of January 1, 2008 did not have a material impact on its condensed consolidated financial statements. Refer to Note 20, “Fair Value Measurements.”

The Company adopted Statement of Financial Accounting Standards No. 123 (Revised 2004), “Share-Based Payment” (“SFAS 123R”), effective January 1, 2006. SFAS 123R requires companies to recognize compensation expense in the amount equal to the fair value of all share-based payments granted to employees. The Company elected the modified prospective transition method and, therefore, adjustments to prior periods were not required as a result of adopting SFAS 123R. Under this method, the provisions of SFAS 123R apply to all awards granted after the date of adoption and to any unrecognized expense of non-vested awards at the date of adoption based on the grant date fair value. Under SFAS 123R, the Company will recognize share-based compensation ratably over the service period applicable to the award. SFAS 123R also amends SFAS No. 95, “Statement of Cash Flows,” to require that excess tax benefits that have been reflected as operating cash flows be reflected as financing cash flows. In accordance with SFAS 123R, $194 and $138 of excess tax benefits for the three months ended March 29, 2008 and March 31, 2007, respectively, have been classified as both an operating cash outflow and financing cash inflow.

The Black-Scholes option pricing model was developed for use in estimating the fair value of traded options, which have no vesting restrictions and are fully transferable. The Company compiled historical data on an employee-by-employee basis from the grant date through the settlement date. The results of analyzing the historical data showed that there were three distinct populations of optionees, the Executive Officers Group, the Outside Directors Group, and the All Others Group. The expected life of options represents the period of time that the options are expected to be outstanding and is based generally on historical trends. However, because none of the Company’s existing options have reached their full 10-year term, and also because the majority of such options granted are out-of-the-money and the expected life of out-of-the-money options is uncertain, the Company opted to use the “simplified” method for “plain vanilla” options described in SAB 107. The “simplified method” calculation is the average of the vesting term plus the original contractual term divided by 2. The Company anticipates that most grants in the future will be four-year graded vesting; however, Outside Directors will continue to have one-year vesting. The Company will revisit this assumption at least annually or sooner if circumstances warrant. The risk-free rate is based on the yield on the Federal Reserve treasury rate with a maturity date corresponding to the expected term of the option granted. The expected volatility assumption is based on the historical volatility of the Company’s common stock over a term equal to the expected term of the option granted. SFAS 123R also requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. It is assumed that no dividends will be paid during the entire term of the options. All option valuation models require input of highly subjective assumptions. Because the Company's employee stock options have characteristics significantly different from those of traded options, and because changes in subjective input assumptions can materially affect the fair value estimate, the actual value realized at the time the options are exercised may differ from the estimated values computed above. The weighted average per share fair values of options granted in the three month periods ended March 29, 2008 and March 31, 2007 were $9.92 and $13.86, respectively.

In the first quarter of 2008, the Company issued restricted stock grants with market conditions for the first time. Restricted stock grants issued to certain employees of the Company have a three-year cliff vesting schedule and are contingent upon multiple market conditions that are factored into the fair value of the restricted stock at grant date. Vesting will occur if the applicable continued employment condition is satisfied and the Total Stockholder Return ("TSR") on the Company’s common stock exceeds a minimum TSR relative to the Company’s stock price at the beginning of the three-year vesting period, the TSR meets or exceeds the median of a defined peer group of approximately 15 companies, and/or the TSR exceeds the Standard and Poor’s 400 Mid Cap Index ("S&P 400") over the three-year measurement period beginning on January 1 in the year of grant and ending after three years on December 31. A maximum number of 720 shares of common stock could be issued after the three-year vesting period depending on the achievement of the TSR goals. No shares of common stock will be issued if the Company’s TSR is below 6% annualized return over the three-year vesting period. Any shares earned will be distributed after the end of the three-year period. In all circumstances, restricted stock granted does not entitle the holder the right, or obligate the Company, to settle the restricted stock in cash.

The effect of the market conditions on the restricted stock issued to certain employees of the Company is reflected in the fair value on the grant date for the quarter ended March 29, 2008. The restricted stock grants with market conditions were valued using a Monte Carlo simulation. The Monte Carlo simulation estimates the fair value based on the expected term of the award, risk-free interest rate, expected dividends, and the expected volatility for the Company, its peer group, and the S&P 400. The expected term was estimated based on the vesting period of the awards (3 years), the risk-free interest was based on the yield on the Federal Reserve treasury rate with a maturity matching the vesting period (2.6%). The expected dividends were assumed to be zero for the Company. Volatility was based on historical volatility over the expected term (40%). Restricted stock that included multiple market conditions granted during the quarter ended March 29, 2008 had a grant date fair value per restricted share of $24.78.

The Company maintains an Employee Stock Purchase Program (the “Program”). The Program is designed to qualify as an employee stock purchase plan under Section 423 of the Internal Revenue Code of 1986, as amended. It enables eligible employees to purchase shares of the Company’s common stock at a 5% discount to the fair market value. An aggregate of 1,000 shares of common stock has been reserved for sale to employees under the Program. Employees purchased 4 shares during the three-month period ended March 29, 2008. There was no Program activity during the three months ended March 31, 2007 as the Program was suspended by the Company from July 2006 to December 2007.

Of the $3.0 million of unrealized loss as of March 29, 2008, $1.7 million has been in an unrealized loss position for greater than one year. The Company believes that these losses are not other-than-temporary in accordance with FASB Staff Position Nos. FAS 115-1 / 124-1, “The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments,” due to its assessment that all amounts due according to the contractual terms of the related debt security will be collected and its ability and intent to hold the related debt security for a reasonable period of time sufficient for a recovery of fair value up to (or beyond) the cost of the investment. The Company has classified a certain other debt security that matures in 2015 as a noncurrent asset on its condensed consolidated balance sheet as of March 29, 2008 due to its intent to hold the investment for a period of time greater than 12 months.

The Company recorded an unrealized loss of $0.1 million for the quarter ended March 29, 2008, which was included in other comprehensive income to reflect the change in estimated fair value of its investment in Hana Biosciences, Inc. (“Hana”). The Company evaluated the near-term prospects of Hana in relation to the severity and duration of the period that the investment has been in an unrealized loss position. The investment has been in an unrealized loss position for less than 6 months as of March 29, 2008. Based on that evaluation and the Company's ability and intent to hold those investments for a reasonable period of time sufficient for a forecasted recovery of fair value, the Company does not consider the investment to be other-than-temporarily impaired at March 29, 2008. The Company has classified its investment in Hana as a noncurrent asset on its condensed consolidated balance sheet as of March 29, 2008 due to its intent to hold the investment for a period of time greater than 12 months.

Auction rate securities were classified as short-term available for sale debt securities as of December 31, 2007. Auction rate securities are variable rate bonds and preferred stock tied to short-term interest rates with maturities on the face of the securities in excess of 90 days. Auction rate securities have interest rate resets through a modified Dutch auction, at predetermined short-term intervals, usually every 7, 28 or 35 days. Interest paid during a given period is based upon the interest rate determined during the prior auction. Although these securities are issued and rated as long-term securities, they are priced and traded as short-term instruments because of the historical liquidity provided through the interest rate reset. All of the Company’s auction rate securities were tax-exempt or tax-advantaged as of December 31, 2007. All of the Company’s auction rate securities were tied to debt securities issued by various state and local municipalities and agencies and the auction rate securities are insured by insurance companies as of December 31, 2007. Given the negative liquidity conditions in the global credit markets, there were failed auctions and related impairments relating to auction rate securities in late 2007 and in January and February 2008, including those auction rate securities tied to various municipalities. The Company’s auction rate securities did not experience any failed auctions and the Company sold its remaining auction rate securities during the three months ended March 29, 2008.

In August 2007, the Company announced that it entered into a stock purchase agreement to acquire an equity interest in IntelliPharmaCeutics Ltd. (“IPC Ltd.”), a privately held Delaware company. The terms of the agreement included a $5.0 million private placement investment that represents a 4.2 percent equity interest in IntelliPharmaCeutics Corp. (“IPC Corp.”), the operating subsidiary of IPC Ltd. The Company recorded its investment in IPC Corp. at $2.5 million based on the Company’s assessment of the fair value of its investment and charged $2.5 million, which represents a non-refundable upfront license payment, to research and development expense in the third quarter of 2007. Because IPC Ltd. is privately-held and accounted for under the cost method, the Company monitors the investment on a periodic basis to evaluate whether any declines in value become other-than-temporary.

	For the three months ended March 29, 2008
Accounts receivable reserves	Beginning balance			Provision recorded for current period sales			(Provision) reversal recorded for prior period sales			Credits processed		Ending balance
Chargebacks	$	(46,006	)	$	(107,639	)	$	(539	)⁽¹⁾	$	110,197	$	(43,987	)
Rebates and incentive programs		(42,859	)		(24,207	)		(1,571	)		35,678		(32,959	)
Returns		(47,102	)		(4,904	)		4,293			7,220		(40,493	)
Cash discounts and other		(16,158	)		(12,274	)		349			12,321		(15,762	)
Total	$	(152,125	)	$	(149,024	)	$	2,532		$	165,416	$	(133,201	)

Accrued liabilities (2)	$	(17,684	)	$	(7,361	)	$	805		$	536	$	(23,704	)

	For the three months ended March 31, 2007
Accounts receivable reserves	Beginning balance			Provision recorded for current period sales			(Provision) reversal recorded for prior period sales			Credits processed		Ending balance
Chargebacks	$	(51,891	)	$	(88,364	)	$	--	⁽¹⁾	$	92,531	$	(47,724	)
Rebates and incentive programs		(85,888	)		(55,192	)		2,699			50,889		(87,492	)
Returns		(42,905	)		(10,770	)		(794	)		6,099		(48,370	)
Cash discounts and other		(18,038	)		(14,382	)		211			6,652		(25,557	)
Total	$	(198,722	)	$	(168,708	)	$	2,116		$	156,171	$	(209,143	)

Accrued liabilities (2)	$	(10,583	)	$	(4,644	)	$	-		$	547	$	(14,680	)

The Company sells its products directly to wholesalers, retail drug store chains, drug distributors, mail order pharmacies and other direct purchasers and customers that purchase its products indirectly through the wholesalers, including independent pharmacies, non-warehousing retail drug store chains, managed health care providers and other indirect purchasers. The Company has entered into agreements at negotiated contract prices with those health care providers that purchase products through the Company’s wholesale customers at those contract prices. Chargeback credits are issued to wholesalers for the difference between the Company’s invoice price to the wholesaler and the contract price through which the product is resold to health care providers. Approximately 72% and 55% of the Company’s net product sales were derived from the wholesale distribution channel for the three months ended March 29, 2008 and March 31, 2007, respectively. The information that the Company considers when establishing its chargeback reserves includes contract and non-contract sales trends, average historical contract pricing, actual price changes, processing time lags and customer inventory information from its three largest wholesale customers. The Company’s chargeback provision and related reserve vary with changes in product mix, changes in customer pricing and changes to estimated wholesaler inventory.

Customer rebates and incentive programs are generally provided to customers as an incentive for the customers to continue to carry the Company’s products or replace competing products in their distribution channels with those products sold by the Company. Rebate programs are based on a customer’s dollar purchases made during an applicable monthly, quarterly or annual period. The Company also provides indirect rebates, which are rebates paid to indirect customers that have purchased the Company’s products from a wholesaler under a contract with the Company. The incentive programs include stocking or trade show promotions where additional discounts may be given on a new product or certain existing products as an added incentive to stock the Company’s products. The Company may, from time to time, also provide price and/or volume incentives on new products that have multiple competitors and/or on existing products that confront new competition in order to attempt to secure or maintain a certain market share. The information that the Company considers when establishing its rebate and incentive program reserves are rebate agreements with and purchases by each customer, tracking and analysis of promotional offers, projected annual sales for customers with annual incentive programs, actual rebates and incentive payments made, processing time lags, and for indirect rebates, the level of inventory in the distribution channel that will be subject to indirect rebates. The Company does not provide incentives designed to increase shipments to its customers that it believes would result in out-of-the ordinary course of business inventory for them. The Company regularly reviews and monitors estimated or actual customer inventory information at its three largest wholesale customers for its key products to ascertain whether customer inventories are in excess of ordinary course of business levels.

Pursuant to a drug rebate agreement with the Centers for Medicare and Medicaid Services, TriCare and similar supplemental agreements with various states, the Company provides such states with a rebate on drugs dispensed under government programs. The Company determines its estimate of Medicaid rebate accrual primarily based on historical experience of claims submitted by the various states and any new information regarding changes in the Medicaid program that might impact the Company’s provision for Medicaid rebates. In determining the appropriate accrual amount the Company considers historical payment rates; processing lag for outstanding claims and payments; and levels of inventory in the distribution channel. The Company reviews the accrual and assumptions on a quarterly basis against actual claims data to help ensure that the estimates made are reliable.

The Company accepts returns of product according to the following criteria: (i) the product returns must be approved by authorized personnel in writing or by telephone with the lot number and expiration date accompanying any request and (ii) the Company generally will accept returns of products from any customer and will provide the customer with a credit memo for such returns if such products are returned within six months prior to, and until 12 months following, such products’ expiration date. The Company records a provision for product returns based on historical experience, including actual rate of expired and damaged returns, average remaining shelf-lives of products sold, which generally range from 12 to 36 months, and estimated return dates. Additionally the Company considers other factors when estimating its current period return provision, including levels of inventory in the distribution channel, significant market changes that may impact future expected returns, and actual product returns, and may record additional provisions for specific returns that it believes are not covered by the historical rates.

As detailed above, the Company has the experience and access to relevant information that it believes are necessary to reasonably estimate the amounts of such deductions from gross revenues. Some of the assumptions used by the Company for certain of its estimates are based on information received from third parties, such as wholesale customer inventories and market data, or other market factors beyond the Company’s control. The estimates that are most critical to the establishment of these reserves, and therefore, would have the largest impact if these estimates were not accurate, are estimates related to contract sales volumes, average contract pricing, customer inventories and return volumes. The Company regularly reviews the information related to these estimates and adjusts its reserves accordingly, if and when actual experience differs from previous estimates. With the exception of the product returns allowance, the ending balances of accounts receivable reserves and allowances generally are processed during a two-month to four-month period.

The Company believes that its reserves, allowances and accruals for items that are deducted from gross revenues are reasonable and appropriate based on current facts and circumstances. It is possible, however, that other parties applying reasonable judgment to the same facts and circumstances could develop different allowance and accrual amounts for items that are deducted from gross revenues. Additionally, changes in actual experience or changes in other qualitative factors could cause the Company’s allowances and accruals to fluctuate, particularly with newly launched or acquired products. The Company reviews the rates and amounts in its allowance and accrual estimates on a quarterly basis. If future rates and amounts are significantly greater than those reflected in its recorded reserves, the resulting adjustments to those reserves would decrease the Company’s reported net revenues; conversely, if actual product returns, rebates and chargebacks are significantly less than those reflected in its recorded reserves, then the resulting adjustments to those reserves would increase its reported net revenues. If the Company were to change its assumptions and estimates, its reserves would change, which would impact the net revenues that the Company reports. The Company regularly reviews the information related to these estimates and adjusts its reserves accordingly, if and when actual experience differs from previous estimates.

Inventory write-offs were $3.1 million and $4.6 million for the quarters ended March 29, 2008 and March 31, 2007, respectively. The Company capitalizes inventory costs associated with certain products prior to regulatory approval and product launch, based on management's judgment of reasonably certain future commercial use and net realizable value. The Company could be required to permanently write down previously capitalized costs related to pre-launch inventories upon a change in such judgment, or due to a denial or delay of approval by regulatory bodies, or a delay in commercialization, or other potential factors. As of March 29, 2008, the Company had inventories related to products that were not available to be marketed of $9.2 million, comprised of pre-launch inventories of $7.0 million (of which $5.6 million is for a specific partnered product anticipated to launch in the second quarter of 2008) and research and development inventories of $2.2 million. Should the launch anticipated for the second quarter of 2008 be delayed, inventory write-offs may occur to the extent the Company is unable to recover the full value of its inventory investment.

	March 29,		December 31,
	2008		2007
Trademark licensed from Bristol-Myers Squibb Company, net of accumulated amortization of $2,489 and $2,155	$	7,512	$	7,846
Teva Pharmaceutical Industries, Inc. Asset Purchase Agreement, net of accumulated amortization of $3,480 and $3,193		5,007		5,294
Ivax License Agreement, net of accumulated amortization of $5,630 and $5,068		2,370		2,932
Paddock Licensing Agreement, net of accumulated amortization of $1,500 and $1,250		4,500		4,750
Spectrum Development and Marketing Agreement, net of accumulated amortization of $0 and $0		5,000		5,000
Genpharm, Inc. Distribution Agreement, net of accumulated amortization of $7,041 and $6,860		3,792		3,973
Bristol-Myers Squibb Company Asset Purchase Agreement, net of accumulated amortization of $10,167 and $9,749		1,532		1,950
FSC Laboratories Agreement, net of accumulated amortization of $3,939 and $3,814		1,883		2,008
Intellectual property, net of accumulated amortization of $1,009 and $940		1,682		1,751
Other intangible assets, net of accumulated amortization of $4,883 and $4,693		365		555
	$	33,643	$	36,059

The Company recorded amortization expense related to intangible assets of $2,416 and $3,806, respectively, for the three month periods ended March 29, 2008 and March 31, 2007, and such expense is included in cost of goods sold. During the three-month period ended March 31, 2007, the Company made a $600 milestone payment to Nortec Development, Inc. related to the commercialization of propranolol HCl ER that was recorded in “other intangible assets.” Amortization expense related to the intangible assets currently being amortized is expected to total approximately $9,934 for the remainder of 2008, $7,771 in 2009, $6,648 in 2010, $5,214 in 2011, $3,325 in 2012 and $751 thereafter.

(a)

Senior subordinated convertible notes in the aggregate principal amount of $200,000. The notes bear interest at an annual rate of 2.875%, payable semi-annually on March 30 and September 30 of each year. The notes are convertible into common stock at an initial conversion price of $88.76 per share, upon the occurrence of certain events. Upon conversion, the Company has agreed to satisfy the conversion obligation in cash in amount equal to the principal amount of the notes converted. The notes mature on September 30, 2010, unless earlier converted, accelerated or repurchased. The Company may not redeem the notes prior to their maturity date. On March 29, 2008, the senior subordinated convertible notes had a quoted market value of $176,750. See “Legal Proceedings” in Note 14, “Commitments, Contingencies and Other Matters” for discussion involving notices of default and acceleration the Company received from the Trustee of the Company’s 2.875% Senior Subordinated Convertible Notes due 2010 and the related litigation. Until the matter is resolved, the Company is recording the payment obligations as a current liability as of March 29, 2008 because the Court in the matter could (i) rule against the Company’s position and (ii) determine that the appropriate remedy would be the accelerated payment of the Notes. Accordingly, the Company cannot consider the possibility of accelerated payment to be remote.

									Accumulated
						Additional			Other
	Common Stock					Paid-In			Comprehensive
	Shares			Amount		Capital			Loss
Balance, December 31, 2007		36,461		$	364	$	274,963		$	(1,362	)
Unrealized loss on available for sale securities, net of tax		-			-		-			(318	)
Exercise of stock options		42			-		301			-
Tax benefit from exercise of stock options		-			-		194			-
Tax deficiency related to vesting of restricted stock		-			-		(529	)		-
Issuance of common stock under the Employee Stock Purchase Program		-			-		75			-
Forfeitures of restricted stock		(8	)		-		-			-
Issuances of restricted stock		709			8		(8	)		-
Compensatory arrangements		-			-		3,463			-
Other		-			-		(48	)		-
Balance, March 29, 2008		37,204		$	372	$	278,411		$	(1,680	)

In April 2004, the Board authorized the repurchase of up to $50.0 million of the Company’s common stock. Repurchases are made, subject to compliance with applicable securities laws, from time to time in the open market or in privately negotiated transactions, whenever it appears prudent to do so. Shares of common stock acquired through the repurchase program are available for reissuance for general corporate purposes. In 2007, the Company announced that its Board approved an expansion of its share repurchase program allowing for the repurchase of up to $75 million of the Company’s common stock, inclusive of the $17.8 million remaining from the April 2004 authorization. The authorized amount remaining for stock repurchases under the repurchase program was $43.6 million, as of March 29, 2008. The repurchase program has no expiration date.

	Three months ended
	March 29, 2008		March 31, 2007

Income from continuing operations	$	2,526	$	41,514

Gain from discontinued operations		505		-
Provision for income taxes		445		-
Gain from discontinued operations		60		-
Net income	$	2,586	$	41,514

Basic:
Weighted average number of common shares outstanding		33,220		34,618

Income from continuing operations	$	0.08	$	1.20
Gain from discontinued operations		0.00		-
Net income per share of common stock	$	0.08	$	1.20

Assuming dilution:
Weighted average number of common shares outstanding		33,220		34,618
Effect of dilutive securities		367		379
Weighted average number of common and common equivalent shares outstanding		33,587		34,997

Income from continuing operations	$	0.08	$	1.19
Gain from discontinued operations		0.00		-
Net income per share of common stock	$	0.08	$	1.19

Outstanding options of 3,968 and 4,788 as of March 29, 2008 and March 31, 2007, respectively, were not included in the computation of diluted earnings per share because their exercise prices were greater than the average market price of the common stock during the respective periods and their inclusion would, therefore, have been anti-dilutive. In addition, outstanding warrants sold concurrently with the sale of the subordinated convertible notes in September 2003 and issued in conjunction with the acquisition of Kali in June 2004 were not included in the computation of diluted earnings per share as of March 29, 2008 and March 31, 2007. The warrants related to the notes are exercisable for an aggregate of 2,253 shares of common stock at an exercise price of $105.20 per share and the warrants related to the Kali acquisition are exercisable for an aggregate of 150 shares of common stock at an exercise price of $47.00 per share.

On May 3, 2004, Pentech Pharmaceuticals, Inc. (“Pentech”) filed an action against the Company in the United States District Court for the Northern District of Illinois. This action alleges that the Company breached its contract with Pentech relating to the supply and marketing of paroxetine (PaxilÒ) and that the Company breached fiduciary duties allegedly owed to Pentech. The Company and Pentech are in dispute over the amount of gross profit share due to them. Discovery in this case has concluded. The Court denied cross motions for summary judgment relating to the construction of the contract, and denied Pentech’s motion for summary judgment against the Company’s fraudulent inducement counterclaim. The Company also filed a motion for summary judgment against Pentech’s breach of fiduciary duty claim, and that motion was granted. A trial date has not yet been set. The Company intends to defend vigorously this action.

The Company and certain of its executive officers have been named as defendants in several purported stockholder class action lawsuits filed on behalf of purchasers of common stock of the Company between April 29, 2004 and July 5, 2006. The lawsuits followed the Company’s July 5, 2006 announcement regarding the restatement of certain of its financial statements and allege that the Company and certain members of its management engaged in violations of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), by issuing false and misleading statements concerning the Company’s financial condition and results. The class actions have been consolidated and are pending in the United States District Court, District of New Jersey. The Court has appointed co-lead plaintiffs and co-lead counsel. Co-lead plaintiffs filed a Consolidated Amended Complaint on April 30, 2007, purporting to represent purchasers of common stock of the Company between July 23, 2001 and July 5, 2006. Defendants filed a motion to dismiss the Amended Complaint on June 29, 2007. The Company intends, and the members of management named as defendants have stated their intentions, to vigorously defend the lawsuits and any additional lawsuits that may hereafter be filed with respect to the restatement.

On August 14, 2006, individuals claiming to be stockholders of the Company filed a derivative action in the U.S. District Court for the Southern District of New York, purportedly on behalf of the Company, against the current and certain former directors and certain current and former officers of the Company and the Company as a nominal defendant. The plaintiffs in this action allege that, among other things, the named defendants breached their fiduciary duties to the Company based on substantially the same factual allegations as the class action lawsuits referenced above. The plaintiffs also alleged that certain of the defendants have been unjustly enriched based on their receipt of allegedly backdated options to purchase shares of common stock of the Company, and seek to require those defendants to disgorge any profits made in connection with their exercise of such options and additional attendant damages relating to allegedly backdated options during the period from January 1, 1996 to the present. The action has been transferred to the United States District Court, District of New Jersey. On June 29, 2007, the plaintiffs filed their amended complaint and in connection therewith, dropped their claims related to the alleged stock option backdating. Defendants have made a motion to dismiss the complaint, which motion has been fully briefed. The Company intends and each of the individuals named as defendants have stated their intentions to vigorously defend against the remaining allegations.

On September 1, 2006, the Company received a notice of default from the American Stock Transfer & Trust Company, as trustee (the “Trustee”) of the Company’s 2.875% Senior Subordinated Convertible Notes due 2010 (the “Notes”). The Trustee claims, in essence, that the Company’s failure to include financial statements in its Quarterly Report on Form 10-Q for the second quarter of 2006 constituted a default under Section 6.2 of the Indenture, dated as of September 30, 2003 (the “Indenture”), between the Company, as issuer, and the Trustee, relating to the Notes. The notice of default asserted that if the purported default continued unremedied for 30 days after the receipt of the notice, an “event of default” would occur under the Indenture. Under the Indenture, the occurrence of an event of default would give the Trustee or certain holders of the Notes the right to declare all unpaid principal and accrued interest on the Notes immediately due and payable. On October 2, 2006, the Company received a notice of acceleration from the Trustee purporting to accelerate payment of the Notes.

The Company believes that it has complied with its obligations under the Indenture relating to the Notes. Therefore, the Company believes that the above-mentioned notice of default and notice of acceleration are invalid and without merit. Under the Indenture, the Company is required only to provide the Trustee with copies of its annual and other reports (or copies of such portions of such reports as the SEC may by rules and regulations prescribe) that it is required to file with the SEC pursuant to Section 13 or 15(d) of the Exchange Act within 15 calendar days after it files such annual and other reports with the SEC. Moreover, the Company’s Indenture specifically contemplates providing the Trustee with portions of reports. On August 24, 2006 (within 15 days of filing with the SEC), the Company provided to the Trustee a copy of its Quarterly Report on Form 10-Q for the second quarter of 2006. The Company’s Form 10-Q did not include the Company’s financial statements for the second quarter of 2006 and related Management’s Discussion and Analysis due to the Company’s work to restate certain of its past financial statements, and, therefore, in accordance with SEC rules, the Company filed a Form 12b-25 Notification of Late Filing disclosing the omissions. The Company’s Form 12b-25 also was provided to the Trustee on August 24, 2006. Accordingly, the Company believes that it complied with the Indenture provision in question.

After the Company communicated its position to the Trustee, the Trustee filed a lawsuit, on October 19, 2006, on behalf of the holders of the Notes in the Supreme Court of the State of New York, County of New York, alleging a breach of the Indenture and of an alleged covenant of good faith and fair dealing. The lawsuit demands, among other things, that the Company pay the holders of the Notes either the principal, any accrued and unpaid interest and additional interest (as such term is defined in the Indenture), if any, or the difference between the fair market value of the Notes on October 2, 2006 and par, whichever the Trustee elects, or in the alternative, damages to be determined at trial, alleged by the Trustee to exceed $30.0 million. The Company filed a Notice of Removal to remove the lawsuit to the U.S. District Court for the Southern District of New York and has filed its answer to the complaint in that Court. On January 19, 2007, the Trustee filed a motion for summary judgment along with supporting documentation. On February 16, 2007, the Company filed its response to the Trustee’s motion for summary judgment and cross-moved for summary judgment in its favor. The Court has not yet ruled on the motions. Until the matter is resolved, the Company is recording the payment obligations as a current liability on the condensed consolidated balance sheets because the Court in the matter could (i) rule against the Company’s position and (ii) determine that the appropriate remedy would be the accelerated payment of the convertible notes.

On July 15, 2003, the Company filed a lawsuit against Roxane Laboratories, Inc. (“Roxane”) in the United States District Court for the District of New Jersey. The Company alleged that Roxane had infringed the Company’s U.S. Patents numbered 6,593,318 and 6,593,320 and that the infringement was willful. Roxane has denied these allegations and has counterclaimed for declaratory judgments of non-infringement and invalidity of both patents. On September 8, 2006, the Court issued a claim construction ruling on certain claim terms in dispute between the parties. Based on that construction, the Court ruled in favor of the Company and dismissed Roxane’s motion for summary judgment of non-infringement. On November 8, 2006, the Court ruled that the claims at issue in these patents were invalid as non-enabled on summary judgment. On December 8, 2006, the Company appealed the ruling to the Federal Circuit Court of Appeals, highlighting the district court’s failure to apply its own claim construction and to consider the testimony of the Company’s experts before awarding summary judgment to Roxane. On October 26, 2007, the U.S. Circuit Court of Appeals for the Federal Circuit affirmed the New Jersey District Court's ruling of invalidity for non-enablement. In January 2008, the District Court conducted a hearing on Roxane’s application for attorneys’ fees under 35 U.S.C. section 285. Briefs in opposition for both sides were filed on March 10, 2008 and a motion hearing was set for April 7, 2008. On April 10, 2008, the District Court rejected Roxane’s request for attorneys’ fees.

On March 10, 2006, Apotex Inc. and Apotex Corp. (“Apotex”) filed a lawsuit against the Company in the United States District Court for New Jersey, seeking a declaratory judgment that four of the Company’s patents relating to megestrol acetate oral suspension are invalid, unenforceable and not infringed by an Apotex product that was launched in the third quarter of 2006. The Company has moved for a preliminary injunction against Apotex pending resolution of the litigation and has asserted counterclaims that the Apotex product infringes at least one claim of U.S. Patent 6,593,318. The Company was granted a stay and the action was terminated without prejudice on April 9, 2007 pending final resolution of the Roxane appeal. On February 6, 2008, a joint stipulation of dismissal and order with prejudice was signed by the Judge in the case with each party only liable for its own costs and attorneys’ fees.

On April 28, 2006, CIMA Labs, Inc. (“CIMA”) and Schwarz Pharma, Inc. (“Schwarz Pharma”) filed separate lawsuits against the Company in the United States District Court for the District of New Jersey (CIMA Labs, Inc. et al. v. Par Pharmaceutical Companies, Inc. et al., (Civil Action Nos. 06-CV-1970, 1999 (DRD)(ES)). CIMA and Schwarz Pharma each have alleged that the Company infringed U.S. Patent Nos. 6,024,981 (the “’981 patent”) and 6,221,392 (the “’392 patent”) by submitting a Paragraph IV certification to the FDA for approval of alprazolam orally disintegrating tablets. CIMA owns the ’981 and ’392 patents and Schwarz Pharma is CIMA’s exclusive licensee. The two lawsuits were consolidated on January 29, 2007. In response to the lawsuit, the Company has answered and counterclaimed denying CIMA’s and Schwarz Pharma’s infringement allegations, asserting that the ’981 and ’392 patents are not infringed and are invalid and/or unenforceable. The parties have exchanged written discovery. All 40 claims in the ’981 patent were rejected in a non-final office action in a reexamination proceeding at the United States Patent and Trademark Office (“PTO”) on February 24, 2006. The PTO again rejected all 40 claims in a second non-final office action dated February 24, 2007. The ‘392 patent is also the subject of a reexamination proceeding. The Company will continue to monitor these ongoing reexamination proceedings. CIMA has moved to stay this lawsuit pending the outcome of the reexamination proceedings and to consolidate this lawsuit with another lawsuit in the same district involving the same patents (CIMA Labs, Inc. et al. v. Actavis Group hf et al., (Civil Action No. 07-CV-0893 (DRD) (ES)). A hearing on these motions was held on May 30, 2007. The Company intends to vigorously defend this lawsuit and pursue its counterclaims.

The Company entered into a licensing agreement with developer Paddock Laboratories, Inc. (“Paddock”) to market testosterone 1% gel, a generic version of Unimed Pharmaceuticals, Inc.’s (“Unimed”) product Androgel®. Pursuant to this agreement, the Company is responsible for management of any litigation and payment of all legal fees associated with this product. The product, if successfully brought to market, would be manufactured by Paddock and marketed by the Company. Paddock has filed an ANDA (that is pending with the FDA) for the testosterone 1% gel product. As a result of the filing of the ANDA, Unimed and Laboratories Besins Iscovesco (“Besins”), co-assignees of the patent-in-suit, filed a lawsuit against Paddock in the United States District Court for the Northern District of Georgia, alleging patent infringement on August 22, 2003. The Company has an economic interest in the outcome of this litigation by virtue of its licensing agreement with Paddock. Unimed and Besins sought an injunction to prevent Paddock from manufacturing the generic product. On November 18, 2003, Paddock answered the complaint and filed a counterclaim, seeking a declaration that the patent-in-suit is invalid and/or not infringed by Paddock’s product. On September 13, 2006, the Company acquired from Paddock all rights to the ANDA for testosterone 1% gel, a generic version of Unimed’s product Androgel® for $6 million. The lawsuit was resolved by settlement. The settlement and license agreement terminates all on-going litigation. The settlement and license agreement also permits the Company to launch the generic version of the product no earlier than August 31, 2015 and no later than February 28, 2016, assuring the Company’s ability to market a generic version of Androgel® well before the expiration of the patents at issue. On March 7, 2007, the Company was issued a Civil Investigative Demand seeking information and documents in connection with the court-approved settlement in 2006 of the patent infringement case, Unimed v. Paddock, in the U.S. District Court for Northern District of Georgia. The Bureau of Competition for the Federal Trade Commission (“FTC”) is investigating whether the settlement of the litigation constituted unfair methods of competition in a potential violation of Section 5 of the FTC Act. The Company believes it has complied with all applicable laws in connection with the court-approved settlement and it intends to co-operate with the FTC in this matter.

On October 4, 2006, Novartis Corporation, Novartis Pharmaceuticals Corporation, and Novartis International AG (collectively “Novartis”) filed a lawsuit against the Company in the United States District Court for the District of New Jersey. Novartis alleged that the Company and Kali infringed U.S. Patent No. 6,162,802 (the “’802 patent”) by submitting a Paragraph IV certification to the FDA for approval of amlodipine and benazepril hydrochloride combination capsules. The Company and its subsidiaries denied Novartis’ allegation, asserting that the ’802 patent is not infringed and is invalid. The parties are currently engaged in discovery regarding the claims with expert discovery due to the Court by June 13, 2008. The Company intends to defend vigorously this action and pursue its counterclaims against Novartis.

On December 19, 2006, Reliant Pharmaceuticals, Inc. (“Reliant”) filed a lawsuit against the Company in the United States District Court for the District of Delaware (Reliant Pharmaceuticals, Inc. v. Par Pharmaceutical Inc., (Civil Action Nos. 06-CV-774-JJF)). Reliant alleged, in its Complaint, that the Company infringed U.S. Patent No. 5,681,588 (the “’588 patent”) by submitting a Paragraph IV certification to the FDA for approval to market generic 325 mg Propafenone HCl SR capsules. On January 26, 2007, Reliant amended its complaint to add the additional allegation that the Company infringed the ‘588 patent by submitting a Paragraph IV certification to the FDA for approval to market generic 225 mg and 425 mg—in addition to the 325 mg—Propafenone HCl SR capsules. The Company has answered and counterclaimed denying Reliant’s infringement allegations, and asserting that the ’588 patent is invalid and unenforceable. A scheduling order has been entered under which a claim construction hearing was held on April 2, 2008 and under which all fact and expert discovery will be completed by May 30, 2008. The parties have begun discovery and Reliant has filed a motion to disqualify the Company’s counsel, a motion that was denied in September 2007 with ongoing written discovery on the issue. The Company intends to vigorously defend this lawsuit and pursue its counterclaims.

On May 9, 2007, Purdue Pharma Products L.P. (“Purdue”), Napp Pharmaceutical Group Ltd. (“Napp”), Biovail Laboratories International SRL (“Biovail”), and Ortho-McNeil, Inc. (“Ortho-McNeil”) filed a lawsuit against the Company in the United States District Court for the District of Delaware. The complaint alleges infringement of U.S. Patent No. 6,254,887 (the “’887 patent”) because the Company submitted a Paragraph IV certification to the FDA for approval of 200mg extended release tablets containing tramadol hydrochloride. On May 30, 2007, the Company filed its answer and counterclaim to the complaint seeking a declaration of noninfringement and invalidity of the '887 patent. A subsequent complaint was served on July 2, 2007 in the same District Court. The new complaint alleges that the Company's 100mg and 200mg extended release tablets containing tramadol hydrochloride infringe the ‘887 patent. The Company filed its answer and counterclaim on July 23, 2007 and will assert all available defenses in addition to seeking a declaration of noninfringement and invalidity of the '887 patent. On October 24, 2007, plaintiffs filed an amended complaint in the Delaware District Court in view of the Company's amendment of its ANDA to include the 300 mg strength of extended release tramadol. A scheduling order has been entered in the case requiring that fact discovery be completed by May 15, 2008; expert discovery completed by August 15, 2008; a Markman hearing be held July 2008; and a trial date set for November 10, 2008. The Company intends to defend this action vigorously and pursue its counterclaims against Purdue, Napp, Biovail and Ortho-McNeil.

On July 6, 2007, Sanofi-Aventis and Debiopharm, S.A. filed a lawsuit against the Company and its development partner, MN Pharmaceuticals ("MN"), in the United States District Court for the District of New Jersey. The complaint alleges infringement of U.S. Patent Nos. 5,338,874 and 5,716,988 because the Company and MN submitted a Paragraph IV certification to the FDA for approval of 50 mg/10 ml, 100 mg/20 ml, and 200 mg/40 ml oxaliplatin by injection. The Company and MN filed their answer and counterclaims on October 10, 2007. On January 14, 2008, following MN's amendment of its ANDA to include oxaliplatin injectable 5 mg/ml, 40 ml vial, Sanofi-Aventis filed a complaint asserting infringement of the '874 and the '998 patents. The Company and MN filed their answer and counterclaim on February 20, 2008. The Company and MN intend to defend these actions vigorously and pursue their counterclaims against Sanofi and Debiopharm.

On September 21, 2007, Sanofi-Aventis and Sanofi-Aventis U.S., LLC (“Sanofi-Aventis”) filed a lawsuit against the Company and its development partner, Actavis South Atlantic LLC ("Actavis"), in the United States District Court for the District of Delaware. The complaint alleges infringement of U.S. Patent Nos. 4,661,491 and 6,149,940 because the Company and Actavis submitted a Paragraph IV certification to the FDA for approval of 10 mg alfuzosin hydrochloride extended release tablets. The Company filed its answer and counterclaims on October 24, 2007. The Company filed its amended answer and counterclaims on November 19, 2007. On April 3, 2008, the Judge in Delaware ordered all actions in the case stayed pending the plaintiff’s motion for transfer and consolidation under the rules governing multi-district litigation. The Company intends to defend this action vigorously and pursue its counterclaims against Sanofi-Aventis.

On October 1, 2007, Elan Corporation, PLC (“Elan”) filed a lawsuit against the Company and its development partner, IntelliPharmaCeutics Corp., and IntelliPharmaCeutics Ltd. ("IPC") in the United States District Court for the District of Delaware. On October 5, 2007, Celgene Corporation (“Celgene”) and Novartis filed a lawsuit against IPC in the United States District Court for the District of New Jersey. The complaint in the Delaware case alleged infringement of U.S. Patent Nos. 6,228,398 and 6,730,325 because the Company submitted a Paragraph IV certification to the FDA for approval of 5, 10, 15, and 20 mg dexmethylphenidate hydrochloride extended release capsules. Elan filed an amended Complaint on October 15, 2007. The original complaint in the New Jersey case alleged infringement of U.S. Patent Nos. 6,228,398; 6,730,325; 5,908,850; 6,355,656; 6,528,530; 5,837,284; and 6,635,284 because the Company and IPC submitted a Paragraph IV certification to the FDA for approval of 5, 10, 15, and 20 mg dexmethylphenidate extended release capsules. The Company and IPC filed their answer and counterclaims in the Delaware case on November 19, 2007. Celgene and Novartis filed an amended complaint on October 15, 2007 and the Company and IPC filed their answer and counterclaims in the New Jersey case on November 20, 2007. The Company and IPC filed an amended answer in Delaware December 12, 2007, and Elan filed their answer and motion to consolidate the cases on January 2, 2008. On February 20, 2008, the judge in the Delaware litigation consolidated all 4 related cases pending in Delaware and entered a scheduling order providing for April 15, 2009 as the deadline for all discovery and August 17, 2009 as the date for a bench trial. A Rule 16 conference was held for the New Jersey litigation on March 4, 2008 setting a deadline of December 12, 2008 for all discovery. The Company intends to defend these actions vigorously and pursue its counterclaims against Elan, Celgene and Novartis.

On September 13, 2007, Santarus, Inc. (“Santarus”), and The Curators of the University of Missouri (“Missouri”) filed a lawsuit against the Company in the United States District Court for the District of Delaware. The complaint alleges infringement of U.S. Patent Nos. 6,699,885; 6,489,346; and 6,645,988 because the Company submitted a Paragraph IV certification to the FDA for approval of 20 mg and 40 mg omeprazole/sodium bicarbonate capsules. The Company filed its answer and counterclaims on October 17, 2007. A scheduling conference was held February 11, 2008, setting September 8, 2008 as the date for the claim construction hearing and July 13, 2009 as the first day of the bench trial. On March 4, 2008, the cases pertaining to the Company’s ANDAs for omeprazole capsules and omeprazole oral suspension (see below) were consolidated for all purposes. The Company intends to defend this action vigorously and pursue its counterclaims against Santarus and Missouri.

On December 11, 2007, AstraZeneca Pharmaceuticals, LP, AstraZeneca UK Ltd., IPR Pharmaceuticals, Inc. and Shionogi Seiyaku Kabushiki Kaisha filed a lawsuit against the Company in the United States District Court for the District of Delaware. The complaint alleges patent infringement because the Company submitted a Paragraph IV certification to the FDA for approval of 5 mg, 10 mg, 20 mg and 40 mg rosuvastatin calcium tablets. The Company filed its answer and counterclaims on January 31, 2008. The Company intends to defend these actions vigorously and pursue its counterclaims against AstraZeneca Pharmaceuticals, LP, AstraZeneca UK Ltd., IPR Pharmaceuticals, Inc. and Shionogi Seiyaku Kabushiki Kaisha.

On December 20, 2007, Santarus, Inc. (“Santarus”), and The Curators of the University of Missouri (“Missouri”) filed a lawsuit against the Company in the United States District Court for the District of Delaware. The complaint alleges infringement of U.S. Patent Nos. 6,699,885; 6,489,346; 6,780,882; and 6,645,988 because the Company submitted a Paragraph IV certification to the FDA for approval of 20 mg and 40 mg omeprazole/sodium bicarbonate powders for oral suspension. The Company filed its answer on January 10, 2008 and filed its amended answer and counterclaims on January 30, 2008. On March 4, 2008, the cases pertaining to the Company’s ANDAs for omeprazole capsules (see above) and omeprazole oral suspension were consolidated for all purposes. The Company intends to defend this action vigorously against Santarus and Missouri.

On September 10, 2003, the Company and a number of other generic and brand pharmaceutical companies were sued by Rockland County in New York State (the suit has since been joined by additional New York counties) that has alleged violations of laws (including the Racketeer Influenced and Corrupt Organizations Act, common law fraud and obtaining funds by false statements) related to participation in the Medicaid program. The complaint seeks declaratory relief; actual, statutory and treble damages, with interest; punitive damages; an accounting and disgorgement of any illegal profits; a constructive trust and restitution; and attorneys’ and experts’ fees and costs. On August 4, 2004, the Company and a number of other generic and brand pharmaceutical companies were also sued by the City of New York, which has alleged violations of laws (including common law fraud and obtaining funds by false statements) related to participation in its Medicaid program. On June 15, 2005, a consolidated complaint was filed on behalf of a number of the New York counties and the City of New York. This case was transferred to the United States District Court for the District of Massachusetts for coordinated and consolidated pre-trial proceedings. The complaint filed by Erie County in New York was not included in the consolidated complaint and has been removed to federal district court. In addition, on September 25, 2003, the Office of the Attorney General of the Commonwealth of Massachusetts filed a complaint in the District of Massachusetts against the Company and 12 other leading generic pharmaceutical companies, alleging principally that the Company and such other companies violated, through their marketing and sales practices, state and federal laws, including allegations of common law fraud and violations of Massachusetts false statements statutes, by inflating generic pharmaceutical product prices paid for by the Massachusetts Medicaid program. The complaint seeks injunctive relief, treble damages, disgorgement of excessive profits, civil penalties, reimbursement of investigative and litigation costs (including experts’ fees) and attorneys’ fees. On January 29, 2004, the Company and the other defendants involved in the litigation brought by the Office of the Attorney General of the Commonwealth of Massachusetts filed a motion to dismiss, which was denied on August 15, 2005. The Commonwealth of Massachusetts subsequently filed an amended complaint, and the defendants, including the Company, have filed a motion to dismiss the amended complaint. In addition to Massachusetts, the Commonwealth of Kentucky, the State of Illinois and the State of Alabama have filed similar suits in their respective jurisdictions, all of which have been removed to federal district court. The lawsuit brought by the State of Alabama was remanded to the Alabama state court on August 11, 2005. Following the remand, on October 13, 2005, the Court denied the defendants’ motion to dismiss, but granted in part the defendants’ motion for a more definite statement, and further ruled that the State may amend its complaint within 90 days. On October 20, 2005, the State of Mississippi filed in the Chancery Court for Hinds County, Mississippi a complaint naming the Company (among other companies) as a defendant. The Company intends to defend vigorously these actions.

On April 27, 2006, the State of Hawaii filed a complaint naming the Company as a defendant that has alleged violations of laws related to participation in the Medicaid program. The Hawaii complaint pleads causes of action for (i) false claims; (ii) unfair or deceptive acts or practices; (iii) unfair competition; (iv) violation of the Deceptive Trade Practices Act; (v) non-disclosure; and (vi) unjust enrichment. The complaint seeks general and special damages; treble damages, or in the alternative, punitive damages; costs, pre-judgment and post-judgment interest, and attorneys’ fees; injunctive relief; and such other and further relief or equitable relief as the Court deems just and proper. The Company intends to defend this action vigorously.

The County of Nassau, New York filed a Second Amended Complaint in its action against a number of other generic and brand pharmaceutical companies, naming the Company as a defendant on January 30, 2006. The case has been consolidated, for purposes of discovery and briefing, with the action filed by a number of other New York counties and the City of New York. The matters are presently in the United States District Court for the District of Massachusetts for coordinated and consolidated pre-trial proceedings. On March 3, 2006, the Company and the other defendants filed motions to dismiss the Second Amended Complaint filed by Nassau County and the consolidated complaint brought by the other counties and the City of New York. These motions were granted in part and denied in part on April 2, 2007. On June 8, 2007, the City of New York and various other New York counties, this time including Nassau County, filed a First Amended Consolidated Complaint. On June 22, 2007, the defendants filed a joint motion to dismiss the First Amended Consolidated Complaint. The Court granted the defendants' motion in part and denied it in part on July 30, 2007. On October 5, 2007, the City of New York and various other New York counties filed a Revised First Amended Consolidated Complaint, which the Company answered on October 26, 2007.

With respect to the Oswego and Schenectady matters, the cases have been transferred to the United States District Court for the District of Massachusetts for coordinated and consolidated pre-trial proceedings. On September 17, 2007, the United States District Court for the District of Massachusetts granted the motions filed by Erie, Oswego, and Schenectady Counties to remand their respective cases to New York state court. Each of these three matters was subsequently remanded to the New York Supreme Courts for the Counties of Erie, Oswego, and Schenectady, respectively. On November 28, 2007, the defendants filed a joint motion, with the State of New York Litigation Coordinating Panel, to coordinate the three actions. This motion is currently pending.

With respect to the Alabama action, the Company filed an answer to the Second Amended Complaint on January 30, 2006. On October 11, 2006, the defendants for the second time removed the case to the United States District Court for the Middle District of Alabama. On November 2, 2006, the matter was again remanded to State court. Certain defendants, including the Company, filed motions in September 2006 to sever or for separate trials. The trial court denied these motions. On June 1, 2007, upon the petitions of certain defendants, including the Company, the Supreme Court of Alabama granted a writ of mandamus and ordered the trial court to sever the claims against all defendants.

With respect to the Mississippi action, the Special Masters assigned to the case recommended the denial of the defendants' motion to dismiss on September 22, 2006. On October 2, 2006, the defendants objected to the Special Masters' recommendation. The Court had not ruled on this objection at the time the case was removed to federal district court. Also, after removal, the matter was transferred to the United States District Court for the District of Massachusetts for coordinated and consolidated pre-trial proceedings, where the State's motion to remand is pending. The case was remanded to the Chancery Court of Hinds County, Mississippi. On December 13, 2007, the Court denied the defendants’ pending motion to dismiss. The defendants appealed the trial court's decision to the Supreme Court of Mississippi on January 3, 2008. This appeal is currently pending.

The State of Alaska filed an Amended Complaint on October 17, 2006, naming the Company and other pharmaceutical companies as defendants. The Alaska complaint pleads causes of action for (i) violation of the Alaska Unfair Trade Practices and Consumer Protection Act and (ii) unjust enrichment. The complaint seeks monetary damages; declarative relief; injunctive relief; compensatory, restitution, and/or disgorgement damages; civil penalties; punitive damages; costs, attorneys' fees, and prejudgment interest; and other relief deemed just and equitable by the Court. The defendants filed a joint motion to dismiss the State's Amended Complaint on January 5, 2007. This motion was denied on May 7, 2007. The Company intends to defend this action vigorously.

The State of South Carolina filed two related actions against the Company and other pharmaceutical companies on December 1, 2006. One of these Complaints seeks relief on behalf of the South Carolina Medicaid Agency and the other seeks relief on behalf of the South Carolina State Health Plan. Both South Carolina Complaints plead causes of action for (i) violation of the South Carolina Unfair Trade Practices Act; (ii) unjust enrichment; and (iii) injunctive relief. Both Complaints seek monetary damages and prejudgment interest; treble damages, attorneys' fees, and costs; civil penalties; disgorgement; injunctive relief; and other relief deemed just and equitable by the Court. On January 26, 2007, the Company moved to dismiss each Complaint or, in the alternative, for a more definite statement with respect to each Complaint. These motions are currently pending.

The State of Idaho filed a Complaint against the Company and various other pharmaceutical companies on January 26, 2007. The Idaho Complaint pleads causes of action for (i) violation of the Idaho Consumer Protection Act; and (ii) unjust enrichment. The State seeks declaratory and injunctive relief; monetary damages; civil penalties; disgorgement; attorneys' fees and costs; and other relief deemed just and equitable by the Court. On March 30, 2007, the defendants filed a joint motion to dismiss the State's Complaint. On August 31, 2007, the Court granted in part the defendants' joint motion to dismiss and denied it in part. On October 1, 2007, the Company answered the State's Complaint.

On April 5, 2007, the County of Orange, New York, filed a Complaint against the Company and various other pharmaceutical companies. The Orange County Complaint pleads causes of action for (i) violations of the Racketeer Influenced and Corrupt Practices Act; (ii) violation of various federal and state Medicaid laws; (iii) unfair trade practices; and (iv) common law claims for breach of contract, unjust enrichment, fraud, and fraudulent concealment. The County seeks actual, statutory, and treble damages, including interest; declaratory relief; disgorgement; restitution; attorneys' fees, experts' fees, and costs; and other relief deemed just and equitable by the Court. The Orange County action was transferred to the United States District Court for the District of Massachusetts for coordinated and consolidated pretrial proceedings. On September 6, 2007, that Court entered an order adding Orange County to the First Amended Consolidated Complaint filed by the City of New York and various other New York counties.

On September 21, 2007, the State of Utah filed a Complaint against the Company and various other pharmaceutical companies. The Utah Complaint pleads causes of action for (i) violations of the Utah False Claims Act and (ii) common law fraudulent misrepresentation. The State seeks actual, statutory, and treble damages, including prejudgment interest; restitution; attorneys' fees, experts' fees, and costs; and other relief deemed just and equitable by the Court. On November 20, 2007, the Judicial Panel on Multidistrict Litigation issued an order conditionally transferring the case to the United States District Court for the District of Massachusetts for coordinated and consolidated pretrial proceedings. The State then filed a motion to remand the case to state court, on December 7, 2007, and a motion to vacate the conditional transfer order, on December 12, 2007. These motions are currently pending.

On October 9, 2007, the State of Iowa filed a Complaint against the Company and various other pharmaceutical companies. The Iowa Complaint pleads causes of action for (i) violations of the Iowa Consumer Fraud Act, (ii) common law fraudulent misrepresentation, (iii) common law unjust enrichment and (iv) reporting of false best price information in violation of 42 USC Sec 1396R-8. The State seeks (i) a declaration that the Company committed the alleged violations, (ii) injunctive relief against the continuation of the alleged violations, (iii) actual, statutory damages, including prejudgment interest for the claim of unjust enrichment, (iv) actual, statutory damages, including prejudgment interest for the claim of fraudulent misrepresentation, (v) actual and punitive damages for alleged fraud, and (vi) an accounting of alleged illegal profits and a disgorgement of same, restitution, attorneys' fees, experts' fees, and costs and other relief deemed just and equitable by the Court. The Iowa action has been transferred to the United States District Court for the District of Massachusetts for coordinated and consolidated pretrial proceedings.

On April 15, 2002, Rhodes Technology (“Rhodes”) and the Company created a joint venture, SVC Pharma (“SVC”), to research, develop, commercialize and market pharmaceutical preparations for human therapy. The parties agreed to capitalize the joint venture with equal contributions and all profits or losses are to be shared equally between Rhodes and the Company. The Company accounts for this investment under the equity method of accounting in accordance with APB No. 18, the Equity Method of Accounting for Investments in Common Stock. As of March 29, 2008, the Company’s net investment in SVC totaled approximately $6,433. The investment in SVC is reviewed for impairment each reporting period. Any impairment deemed to be “other-than temporary” will be recognized in the appropriate period and the basis will be adjusted. As of March 29, 2008, the Company believes its investment in SVC was not impaired. Should the anticipated launch of the product being developed by SVC be affected due to a denial or delay of approval by regulatory bodies, a delay in commercialization, or other potential risk factors, investment impairment charges may occur to the extent the Company is unable to recover the full value of its investment.

In January 2006, the Company announced the divestiture of FineTech, effective December 31, 2005. The Company transferred the business for no proceeds to Dr. Arie Gutman, president and chief executive officer of FineTech. Dr. Gutman also resigned from the Company’s Board of Directors. The results of FineTech operations have been classified as discontinued for all periods presented because the Company had no continuing involvement in FineTech. In January 2008, Dr. Gutman sold FineTech to a third party. Under the terms of the divestiture, the Company recorded a receivable of $505 on the condensed consolidated balance sheet as of March 29, 2008 to reflect the Company’s share of the net proceeds of the sale transaction. The $505 has been classified as discontinued operations on the condensed consolidated statement of operations for the three months ended March 29, 2008.

Starting in the third quarter of 2005, the Company operates in two reportable business segments: generic pharmaceuticals and branded pharmaceuticals. In 2007, the Company began operating the brand pharmaceutical segment under the name Strativa Pharmaceuticals. Strativa products are marketed under brand names through marketing programs that are designed to generate physician and consumer loyalty. These branded products generally are patent protected, which provides a period of market exclusivity during which they are sold with little or no competition. Generic pharmaceutical products are the chemical and therapeutic equivalents of reference brand drugs. The Drug Price Competition and Patent Term Restoration Act of 1984 provides that generic drugs may enter the market upon the approval of an ANDA and the expiration, invalidation or circumvention of any patents on corresponding brand drugs, or the expiration of any other market exclusivity periods related to the brand drugs.

The business segments of the Company were determined based on management’s reporting and decision-making requirements in accordance with SFAS No. 131, “Disclosures about Segments of an Enterprise and Related Information.” The Company believes that its generic products represent a single operating segment because the demand for these products is mainly driven by consumers seeking a lower cost alternative to brand name drugs. The Company’s generic drugs are developed using similar methodologies, for the same purpose (e.g., seeking bioequivalence with a brand name drug nearing the end of its market exclusivity period for any reason discussed above). The Company’s generic products are produced using similar processes and standards mandated by the FDA, and the Company’s generic products are sold to similar customers. Based on the economic characteristics, production processes and customers of the Company’s generic products, the Company has determined that its generic pharmaceuticals are a single reportable business segment. The Company’s chief operating decision maker does not review the generic segment in any more granularity, such as at the therapeutic or other classes or categories. Certain of the Company’s expenses, such as the direct sales force and other sales and marketing expenses and specific research and development expenses, are charged directly to either of the two segments. Other expenses, such as general and administrative expenses and non-specific research and development expenses are allocated between the two segments based on assumptions determined by the Company’s management.

	Three months ended
	March 29,			March 31,
	2008			2007
Revenues:
Generic	$	129,884		$	214,736
Strativa		25,044			19,474
Total revenues	$	154,928		$	234,210

Gross margin:
Generic	$	30,132		$	73,483
Strativa		19,389			14,206
Total gross margin	$	49,521		$	87,689

Operating income:
Generic	$	1,679		$	43,850
Strativa		963			17,821
Total operating income	$	2,642		$	61,671
Other expense, net		-			(19	)
Equity in loss of joint venture		(20	)		(148	)
Realized gain on sale of marketable securities		-			1,397
Interest income		3,014			2,684
Interest expense		(1,667	)		(1,718	)
Provision for income taxes		1,443			22,353
Income from continuing operations	$	2,526		$	41,514

Product	For the three months ended March 29, 2008			For the three months ended March 31, 2007
Generic
Metoprolol succinate ER (Toprol-XL®)	$	43,298		$	12,342
Fluticasone (Flonase®)		17,762			49,930
Cabergoline (Dostinex®)		7,982			11,395
Meclizine Hydrochloride (Anitvert®)		6,513			1,855
Various amoxicillin products (Amoxil®)		5,588			19,711
Propranolol HCl ER (Inderal LA®)		5,455			31,252
Ibuprofen Rx (Advil®, Nuprin®, Motrin®)		3,279			4,288
Methimazole (Tapazole®)		3,019			2,810
Hydralazine Hydrochloride (Apresoline®)		2,586			2,646
Megestrol oral suspension (Megace®)		2,065			806
Ranitidine HCl Syrup (Zantac®)		1,863			4,151
Lovastatin (Mevacor®)		1,340			3,774
Glyburide & Metformin HCl (Glucovance®)		(31	)		4,449
Tramadol HCl and acetaminophen tablets (Ultracet®)		(92	)		5,687
Polyethylene glycol (Miralax®)		(189	)		4,293
Other product related revenues (2)		1,048			9,121
Other (1)		28,398			46,226
Total Generic Revenues	$	129,884		$	214,736

Strativa
Megace® ES	$	22,401		$	16,974
Other product related revenues (2)		2,643			2,500
Total Strativa Revenues	$	25,044		$	19,474

In January 2008, the Company entered into an exclusive license agreement with Alfacell Corporation (“Alfacell”). Under the agreement, the Company received the exclusive U.S. commercialization rights to Alfacell’s ONCONASE^® (ranpirnase). In exchange for the U.S. commercialization rights, the Company made an initial payment to Alfacell of $5 million and will make a subsequent payment of up to $30 million upon (and subject to) Alfacell’s receipt of FDA approval for the product. If ONCONASE^®receives FDA approval, the Company will commercialize the product in the United States and pay Alfacell royalties on net sales of the product, and Alfacell will be eligible to receive additional milestone payments if net sales reach certain threshold amounts in any given calendar year. In addition, Alfacell may be eligible to receive milestone payments upon the achievement of certain development and regulatory milestones with respect to future indications for ONCONASE^®. Under a separate supply agreement between Alfacell and the Company, Alfacell will supply commercial quantities of ONCONASE^® to the Company.

On April 21, 2008, Strativa announced that its development partner, BioAlliance, reported preliminary, top-line results for a Phase III study of Loramyc®(miconazole Lauriad®) mucoadhesive buccal tablets, in the treatment of oropharyngeal candidiasis (OPC). Top line data show that Loramyc®achieved its primary endpoint of noninferiority to Mycelex®Troche (clotrimazole) in the complete resolution of signs and symptoms of OPC (complete clinical cure). The randomized, double-blind, double-dummy study was conducted in 577 HIV-positive patients in 40 sites in the United States, Canada, and South Africa. All secondary endpoints were also met. Loramyc®, which is approved in Europe and currently being marketed in France, is an antifungal delivered in a mucoadhesive buccal tablet designed to enable local once-daily dosing of the active ingredient at the site of infection.

Note 20 - Fair Value Measurements

As described in Note 2 “Recent Accounting Pronouncements,” the Company adopted SFAS 157 with respect to financial assets and liabilities as of January 1, 2008. SFAS 157 defines fair value as the price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. SFAS 157 requires that assets and liabilities carried at fair value be classified and disclosed in one of the following three categories:

Level 1:

quoted market prices in active markets for identical assets and liabilities. Active market means a market in which transactions for assets or liabilities occur with “sufficient frequency” and volume to provide pricing information on an ongoing unadjusted basis. The Company’s Level 1 assets include a short-term investment in a time deposit and the Company’s investment in Hana Biosciences, Inc that is traded in an active exchange market.

Level 2:

observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. The Company’s Level 2 assets primarily include debt securities including governmental agency and municipal securities, and corporate bonds with quoted prices that are traded less frequently than exchange-traded instruments, whose value is determined using a pricing model with inputs that are observable in the market or can be derived principally from or corroborated by observable market data.

Level 3:

unobservable inputs that are not corroborated by market data.

The fair value of the Company’s financial assets and liabilities measured at fair value on a recurring basis were as follows:

	Estimated Fair Value at March 29, 2008		Level 1		Level 2		Level 3
Securities issued by government agencies (Note 4)	$	26,262	$	-	$	26,262	$	-
Debt securities issued by various state and local municipalities and agencies (Note 4)		36,611		-		36,611		-
Other debt securities (Note 4)		8,429		5,020		3,409		-
Marketable equity securities available for sale Hana Biosciences, Inc. (Note 4)		2,550		2,550		-		-
Total investments in debt and marketable equity securities	$	73,852	$	7,570	$	66,282	$	-

The Company’s Level 2 assets are valued at the quoted market price from broker or dealer quotations.

Certain statements in this Report constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, including those concerning management’s expectations with respect to future financial performance, trends and future events, particularly relating to sales of current products and the 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. These statements are often, but not always, made using words such as “estimates,” “plans,” “projects,” “anticipates,” “continuing,” “ongoing,” “expects,” “intends,” “believes,” “forecasts” or similar words and phrases. Factors that might affect such forward-looking statements set forth in this Report include: (i) increased competition from new and existing competitors, and pricing practices from such competitors (particularly 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 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, delays involved in and outcome of any threatened or pending litigations, including patent and infringement claims, (viii) unanticipated costs, delays and liabilities in integrating acquisitions, (ix) obtaining or losing 180-day marketing exclusivity periods on products, and future new product launches, and (x) general industry and economic conditions. To the extent that any statements made in this Report contain information that is not historical, such statements are essentially forward-looking and are subject to certain risks and uncertainties, including the risks described above as well as the risks and uncertainties discussed from time to time in other of the Company's filings with the SEC, including its Annual Reports on Form 10-K and Current Reports on Form 8-K. Any forward-looking statements included in this Quarterly Report on Form 10-Q are made as of the date hereof only, based on information available to the Company as of the date hereof, and, subject to any applicable law to the contrary, the Company assumes no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise.

Critical to the growth of the Company is its introduction of new manufactured and distributed products at selling prices that generate adequate gross margins. The Company, through its internal generic development program and various strategic alliances and relationships, seeks to introduce new products that have less competition and to broaden its product list. The Company plans to continue to invest in its generic internal research and development efforts, brand marketing strategy and its strategic alliances and relationships throughout 2008 and beyond. Also, the Company will continue seeking additional products for sale through new and existing distribution agreements or acquisitions of complementary products and businesses, additional first-to-file opportunities and unique dosage forms to differentiate its products in the marketplace. The Company pays a percentage of the gross profits or sales to its strategic partners on sales of products covered by its distribution agreements. Generally, products that the Company develops internally, and to which it is not required to split any profits with strategic partners, contribute higher gross margins than products covered by distribution agreements.

In November 2008, the Company expects to launch authorized generic versions of Imitrex^® (sumatriptan) injection 4mg and 6mg starter kits and 4mg and 6mg prefilled syringe cartridges pursuant to a supply and distribution agreement with GlaxoSmithKline plc (“GSK”). On May 7, 2008 the Company announced an amendment to its agreement with Spectrum Pharmaceuticals and paid $20 million pursuant to which the Company will increase its share of the profits from 38% to 95% for the commercialization of the authorized generic versions of GSK's Imitrex^® Injection. New product launches in 2007 included propranolol HCl extended release (“ER”) capsules, a product resulting from the Company’s strategic partnership with Nortec Development Associates, Inc., ranitidine HCl syrup, pursuant to a supply and distribution agreement with GSK and the launch of metoprolol succinate ER 25 mg in the fourth quarter of 2006 and additional strengths (50mg, 100mg, and 200mg) in the third quarter 2007, pursuant to a supply and distribution agreement with AstraZeneca (“AZ”).

In addition, the Company’s investment in its generic first-to-file development strategy is expected to yield approximately eleven new product launches during 2009 and 2010 based on one or more of the following: expiry of the 30-month stay period; patent expiry date; expiry of regulatory exclusivity; and date certain due to settlement agreement. However, such dates may change due to several circumstances, extended litigation, outstanding citizens petitions, other regulatory requirements set forth by the FDA, and stays of litigation. These launches will be significant mileposts for the Company as many of these products are first-to-file opportunities with significant gross margins. In addition, the Company has a growing pipeline and a strong track record of first-to-file drugs. Looking ahead, the Company will strive to average six to ten first-to-file applications per year with a goal of more than half of its products coming from internal development.

In August 2007, the Company also acquired the North American commercial rights to Zensana^TM (ondansetron HCl) Oral Spray from Hana Biosciences, Inc. (“Hana”). Ondansetron is used to prevent nausea and vomiting after chemotherapy, radiation and surgery, and following successful development and approval, Zensana^TM could be among the first in its class of 5-HT3 antagonist anti-emetic therapies to be available in an oral spray form. The Company also announced that it has entered into an agreement with NovaDel, to collaborate in the reformulation of Zensana^TM. Following completion of reformulation efforts already under way, the Company will reconfirm the product's pharmacokinetic profile and resubmit the NDA to the FDA.

In addition to the substantial costs of product development, the Company may incur significant legal costs in bringing certain products to market. Litigation concerning patents and proprietary rights is often protracted and expensive. Pharmaceutical companies with patented brand products are increasingly suing companies that produce generic forms of their patented brand name products for alleged patent infringement or other violations of intellectual property rights, which could delay or prevent the entry of such generic products into the market. Generally, a generic drug may not be marketed until the applicable patent(s) on the brand name drug expires. When an ANDA is filed with the FDA for approval of a generic drug, the filing person may certify either that the patent listed by the FDA as covering the branded product is about to expire, in which case the ANDA will not become effective until the expiration of such patent, or that the patent listed as covering the branded drug is invalid or will not be infringed by the manufacture, sale or use of the new drug for which the ANDA is filed. In either case, there is a risk that a branded pharmaceutical company may sue the filing person for alleged patent infringement or other violations of intellectual property rights. Because a substantial portion of the Company’s current business involves the marketing and development of generic versions of brand products, the threat of litigation, the outcome of which is inherently uncertain, is always present. Such litigation is often costly and time-consuming, and could result in a substantial delay in, or prevent, the introduction and/or marketing of products, which could have a material adverse effect on the Company’s business, financial condition, prospects and results of operations.

Sales and gross margins of the Company’s products depend principally on the: (i) introduction of other generic drug manufacturers’ products in direct competition with the Company’s significant products; (ii) ability of generic competitors to quickly enter the market after patent or exclusivity period expirations, or during exclusivity periods with authorized generic products, diminishing the amount and duration of significant profits to the Company from any one product; (iii) pricing practices of competitors and the removal of competing products from the market; (iv) continuation of existing distribution agreements; (v) introduction of new distributed products; (vi) consolidation among distribution outlets through mergers, acquisitions and the formation of buying groups; (vii) willingness of generic drug customers, including wholesale and retail customers, to switch among generic pharmaceutical manufacturers; (viii) approval of ANDAs, introduction of new manufactured products, and future new product launches, (ix) granting of potential marketing exclusivity periods; (x) extent of market penetration for the existing product line; (xi) level, quality and amount of customer service; and (xii) market acceptance of the Company’s recently introduced branded product and the successful development to commercialization of the Company's in-licensed branded product pipeline.

Net sales and gross margins derived from generic pharmaceutical products often follow a pattern based on regulatory and competitive factors that are believed by the Company’s management to be unique to the generic pharmaceutical industry. As the patent(s) for a brand name product and the related exclusivity period(s) expire, the first generic manufacturer to receive regulatory approval from the FDA for a generic equivalent of the product is often able to capture a substantial share of the market. At that time, however, the branded company may license an authorized generic product to a competing generic company. As additional generic manufacturers receive regulatory approvals for competing products, the market share and the price of that product have typically declined, often significantly, depending on several factors, including the number of competitors, the price of the brand product and the pricing strategy of the new competitors.

Total revenues for the three months ended March 29, 2008 were $154,928, decreasing $79,282, or 33.9%, from total revenues of $234,210 for the three months ended March 31, 2007. Revenues for generic products for the three months ended March 29, 2008 were $129,884, decreasing $84,852, or 39.5%, from generic revenues of $214,736 for the three months ended March 31, 2007. Lower generic revenues in 2008 were primarily due to competitive pressure, including for fluticasone, which decreased $32,168, propranolol, which decreased $25,797, various amoxicillin products, which decreased $14,123, tramadol HCl and acetaminophen tablets, which decreased $5,779, glyburide/metformin, which decreased $4,480, cabergoline, which decreased $3,413, ranitidine HCl syrup, which decreased $2,288, and lower royalties driven by ondansetron tablets which launched during the fourth quarter of 2006. Partially offsetting these decreases were increased sales of metoprolol resulting from the launch of additional strengths in the third quarter of 2007 (increase of $30,956). Net sales of distributed products were approximately $87,040 or 56% of the Company’s total product revenues in the first quarter of 2008, and $118,830, or 51% of the Company’s total revenues in the first quarter of 2007. The Company is substantially dependent upon distributed products for its overall sales and any inability by its suppliers to meet demand could adversely affect the Company’s future sales.

Generic drug pricing at the wholesale level can create significant differences between the invoice price and the Company’s net selling price. Wholesale customers purchase product from the Company at invoice price, then resell the product to specific healthcare providers on the basis of prices negotiated between the Company and the providers, and the wholesaler submits a chargeback credit to the Company for the difference. The Company records estimates for these chargebacks, sales returns, rebates and incentive programs, and other sales allowances, for all its customers at the time of sale, as reductions to gross revenues, with corresponding adjustments to its accounts receivable reserves and allowances.

The Company’s gross revenues before deductions for chargebacks, rebates and incentive programs (including rebates paid under federal and state government Medicaid drug reimbursement programs), sales returns and other sales allowances were $307,976 for the three months ended March 29, 2008 compared to $405,446 for the three months ended March 31, 2007. Deductions from gross revenues were $153,048 for the three months ended March 29, 2008 compared to $171,236 for the three months ended March 31, 2007. These deductions are discussed in the Notes to condensed consolidated financial statements – Note 6 – “Accounts Receivable.” The total gross-to-net sales adjustments as a percentage of gross sales increased to 49.7% for the three months ended March 29, 2008 compared to 42.2% for the three months ended March 31, 2007, primarily due to increased pricing pressure for key products and lower royalty income in 2008, tempered by improved returns experience and a trend toward customer net pricing programs. Among the top selling products that did not have sales in the corresponding prior year three month period were metoprolol succinate ER 50 mg, 100 mg, and 200 mg.

As detailed above, the Company has the experience and the access to relevant information that it believes are necessary to reasonably estimate the amounts of such deductions from gross revenues. Some of the assumptions used by the Company for certain of its estimates are based on information received from third parties, such as wholesale customer inventory data and market data, or other market factors beyond the Company’s control. The estimates that are most critical to the establishment of these reserves, and therefore would have the largest impact if these estimates were not accurate, are estimates related to expected contract sales volumes, average contract pricing, customer inventories and return levels. The Company regularly reviews the information related to these estimates and adjusts its reserves accordingly, if and when actual experience differs from previous estimates. With the exception of the product returns allowance, the ending balances of account receivable reserves and allowances generally are eliminated during a two- to four-month period, on average.

	For the three months ended March 29, 2008
	Beginning balance			Provision recorded for current period sales			(Provision) reversal recorded for prior period sales			Credits processed		Ending balance
Accounts receivable reserves
Chargebacks	$	(46,006	)	$	(107,639	)	$	(539	)(1)	$	110,197	$	(43,987	)
Rebates and incentive programs		(42,859	)		(24,207	)		(1,571	)		35,678		(32,959	)
Returns		(47,102	)		(4,904	)		4,293			7,220		(40,493	)
Cash discounts and other		(16,158	)		(12,274	)		349			12,321		(15,762	)
Total	$	(152,125	)	$	(149,024	)	$	2,532		$	165,416	$	(133,201	)

Accrued liabilities (2)	$	(17,684	)	$	(7,361	)	$	805		$	536	$	(23,704	)

	For the three months ended March 31, 2007
	Beginning Balance			Provision recorded for current period sales			(Provision) reversal recorded for prior period sales			Credits Processed		Ending balance
Accounts receivable reserves
Chargebacks	$	(51,891	)	$	(88,364	)	$	-	(1)	$	92,531	$	(47,724	)
Rebates and incentive programs		(85,888	)		(55,192	)		2,699			50,889		(87,492	)
Returns		(42,905	)		(10,770	)		(794	)		6,099		(48,370	)
Cash discounts and other		(18,038	)		(14,382	)		211			6,652		(25,557	)
Total	$	(198,722	)	$	(168,708	)	$	2,116		$	156,171	$	(209,143	)

Accrued liabilities (2)	$	(10,583	)	$	(4,644	)	$	-		$	547	$	(14,680	)

The Company believes that its reserves, allowances and accruals for items that are deducted from gross revenues are reasonable and appropriate based on current facts and circumstances. It is possible, however, that other parties applying reasonable judgment to the same facts and circumstances could develop different allowance and accrual amounts for items that are deducted from gross revenues. Additionally, changes in actual experience or changes in other qualitative factors could cause the Company’s allowances and accruals to fluctuate, particularly with newly launched or acquired products. The Company reviews the rates and amounts in its allowance and accrual estimates on a quarterly basis. If future estimated rates and amounts are significantly greater than those reflected in its recorded reserves, the resulting adjustments to those reserves would decrease the Company’s reported net revenues; conversely, if actual product returns, rebates and chargebacks are significantly less than those reflected in its recorded reserves, the resulting adjustments to those reserves would increase its reported net revenues. If the Company were to change its assumptions and estimates, its reserves would change, which would impact the net revenues that the Company reports. The Company regularly reviews the information related to these estimates and adjusts its reserves accordingly, if and when actual experience differs from previous estimates.

The Company’s gross margin of $49,521 (32.0% of total revenues) for the three months ended March 29, 2008 decreased $38,168 from $87,689 (37.4% of total revenues) for the three months ended March 31, 2007. This decrease in gross margin is attributed to the decreased sales of existing products resulting from competitive pressure and lower royalty income. The generic products gross margin of $30,132 (23.2% of generic revenues) for the three months ended March 29, 2008 decreased $43,351 from $73,483 (34.2% of generic revenues) for the three months ended March 31, 2007 primarily due to lower sales of fluticasone, propranolol, various amoxicillin products, tramadol HCl and acetaminophen tablets, glyburide/metformin, cabergoline and ranitidine syrup and lower royalties primarily from ondansetron tablets. Partially offsetting these decreases were increased sales of metoprolol resulting from the launch of additional strengths during the third quarter of 2007. Strativa gross margin of $19,389 (77.4% of Strativa revenues) for the three months ended March 29, 2008 increased by $5,183 from $14,206 (72.9% of Strativa revenues) for the three months ended March 31, 2007 due to higher net sales of Megace^® ES. The Company’s gross margin percentage decreased from 37.4% to 32.0% driven primarily by the increased sales of lower margin metoprolol, lower royalty income and lower sales of higher margin products such as propranolol which launched in February of 2007, tempered by increased net sales of Megace^® ES.

In January 2006, the Company announced the divestiture of FineTech, effective December 31, 2005. The Company transferred the business for no proceeds to Dr. Arie Gutman, president and chief executive officer of FineTech. Dr. Gutman also resigned from the Company’s Board of Directors. The results of FineTech operations have been classified as discontinued for all periods presented because the Company had no continuing involvement in FineTech. In January 2008, Dr. Gutman sold FineTech to a third party. Under the terms of the divestiture, the Company recorded a receivable of $505 on the condensed consolidated balance sheet as of March 29, 2008 to reflect the Company’s share of the net proceeds of the sale transaction and classified the $505 as discontinued operations on the condensed consolidated statement of operations for the three months ended March 29, 2008.

Cash and cash equivalents of $231,193 at March 29, 2008 increased $31,061 from $200,132 at December 31, 2007. Cash provided by operations was $18,479 for the three months ended March 29, 2008 driven by net income from continuing operations of $2,526 and adjusted primarily for depreciation and amortization of $6,274 and share-based compensation of $3,463. Net accounts receivable increased by $19,853 driven primarily by timing of customer collections while inventories declined $19,704 driven by lower demand for certain products due to increased competitive pressures and seasonality, which the Company had planned for and due to timing of receipts of certain purchased finished goods. Payables due to distribution agreement partners increased $8,774 due mainly to higher sales of partnered products. Cash flows provided by investing activities of $13,076 were driven by net proceeds of $17,690 from the conversion of available for sale securities to shorter term investments that are classified as cash equivalents in response to market conditions that made investments in available for sale securities riskier than in prior periods, tempered by capital expenditures of $4,023. Cash used in financing activities of $494 was primarily due to the purchase of treasury stock related to shares surrendered to the Company to satisfy tax withholding obligations in connection with the vesting of restricted stock issued to employees.

In 2004, the Board authorized the repurchase of up to $50,000 of the Company’s common stock. Repurchases are made, subject to compliance with applicable securities laws, from time to time in the open market or in privately negotiated transactions. Shares of common stock acquired through the repurchase program are available for general corporate purposes. In 2007, the Company announced that its Board approved an expansion of its share repurchase program allowing for the repurchase of up to $75,000 of the Company’s common stock, inclusive of the $17,800 remaining from the April 2004 authorization. The Company repurchased 1,643 shares of its common stock for approximately $31,400 pursuant to the expanded program in the fourth quarter of 2007. The authorized amount remaining for stock repurchases under the repurchase program was approximately $43,600, as of March 29, 2008.

As of March 29, 2008, the Company had payables due to distribution agreement partners of $45,253 related primarily to amounts due under profit sharing agreements, particularly including an amount owed to Pentech with respect to paroxetine. The Company is expected to pay substantially all of these amounts, with the exception of the payable due to Pentech, which is being disputed in current litigation with Pentech, out of its working capital during the first two months of the second quarter of 2008. In 2004, Pentech filed a legal action against the Company alleging that the Company breached its contract with Pentech. The Company and Pentech are in dispute over the amount of gross profit share.

In addition to its internal research and development costs, the Company, from time to time, enters into agreements with third parties for the development of new products and technologies. To date, the Company has entered into agreements and advanced funds and has commitments or contingent liabilities with several non-affiliated companies for products in various stages of development. These contingent payments or commitments are generally dependent on the third party achieving certain milestones or the timing of third-party research and development or legal expenses. Due to the uncertainty of the timing and/or realization of such contingent commitments, these obligations were not included in the contractual obligations table presented as of December 31, 2007 in the Company’s Form 10-K. Payments made pursuant to these agreements are either capitalized or expensed in accordance with the Company’s accounting policies. The total amount that ultimately could be due under agreements with contingencies is approximately $64,000 as of March 29, 2008.

At March 29, 2008, the Company’s total outstanding short and long-term debt, including the current portion, was $200,000. The amount consisted of senior subordinated convertible notes that the Company sold in 2003 pursuant to Rule 144A under the Securities Act of 1933, as amended. The notes bear interest at an annual rate of 2.875%, payable semi-annually on March 30 and September 30 of each year. The notes are convertible into shares of common stock of the Company at an initial conversion price of $88.76 per share, only upon the occurrence of certain events. Upon redemption, the Company has agreed to satisfy the conversion obligation in cash in an amount equal to the principal amount of the notes converted. The notes mature on September 30, 2010, unless earlier converted, accelerated or repurchased. The Company may not redeem the notes prior to the maturity date. The Trustee under the Indenture governing the Notes has alleged that the Company has defaulted in the performance of its obligations under the Indenture and has instituted a lawsuit in connection therewith. Accordingly, until the matter is resolved, the Company is recording the payment obligations under the Notes as a current liability on the Company’s condensed consolidated balance sheet as of March 29, 2008. Refer to Notes to condensed consolidated financial statements – Note 14 – “Commitments, Contingencies and Other Matters.”

The Company capitalizes costs associated with certain products prior to regulatory approval and product launch (“pre-launch inventories”) when it is reasonably certain that the pre-launch inventories will be saleable, based on management’s judgment of future commercial use and net realizable value. The Company could be required to expense previously capitalized costs related to pre-launch inventories upon a change in such judgment, due to a denial or delay of approval by regulatory bodies, a delay in commercialization, or other potential risk factors. If these risks were to materialize and the launch of such product were significantly delayed, the Company may have to write-off all or a portion of such pre-launch inventories and such amounts could be material. As of March 29, 2008, the Company had inventories related to products that were not available to be marketed of $9.2 million, comprised of research and development inventories of $2.2 million, and pre-launch inventories of $7.0 million, of which $5.6 million is for a specific partnered product anticipated to launch in the second quarter of 2008. Should the launch be delayed inventory write-offs may occur to the extent the Company is unable to recover the full value of its inventory investment.

In June 2007, the FASB ratified Emerging Issue Task Force Issue No. 07-3 (“EITF 07-3”), Accounting for Non-Refundable Advance Payments for Goods or Services to Be Used in Future Research and Development Activities, which requires nonrefundable advance payments for goods and services that will be used or rendered for future research and development activities to be deferred and capitalized. These amounts will be recognized as expense in the period that the related goods are delivered or the related services are performed or when an entity does not expect the goods to be delivered or services to be rendered. EITF 07-3 is effective for the fiscal years beginning after December 31, 2007, including interim periods within those fiscal years. The Company’s adoption of the provisions of EITF 07-3, beginning January 1, 2008 did not have a material impact on its condensed consolidated financial statements.

In February 2007, the FASB issued SFAS No. 159 The Fair Value Option for Financial Assets and Financial Liabilities — Including an Amendment of FASB Statement No. 115 (“SFAS 159”), which becomes effective for fiscal periods beginning after November 15, 2007. Under SFAS 159, companies may elect to measure specified financial assets and liabilities at fair value that are not otherwise measured at fair value, with changes in fair value recognized in earnings each subsequent reporting period. This election, called the “fair value option”, will enable some companies to reduce volatility in reported earnings caused by measuring related assets and liabilities differently. SFAS 159 also establishes presentation and disclosure requirements designed to draw a comparison between the different measurement attributes a company elects for similar types of assets and liabilities. The Company did not elect the “fair value option” for any of its eligible financial assets or liabilities and therefore the Company’s adoption of SFAS 159 did not have a material impact on its condensed consolidated financial statements.

In September 2006, the FASB issued SFAS No. 157 Fair Value Measurements (“SFAS 157”). SFAS 157 establishes a common definition for fair value to be applied to GAAP guidance requiring use of fair value, establishes a framework for measuring fair value, and expands disclosure about such fair value measurements. SFAS 157 applies to fair value measurements that are already required or permitted by other accounting standards, except for measurements of share-based payments and measurements that are similar to, but not intended to be, fair value. The FASB has previously concluded in those accounting pronouncements that fair value is the relevant measurement attribute. Accordingly, this Statement does not require any new fair value measurements. SFAS 157 is effective for fiscal years beginning after November 15, 2007. In November 2007, FASB granted a one year deferral for the implementation of SFAS 157 for non-financial assets and liabilities. The Company’s adoption of SFAS 157 with respect to financial assets and liabilities did not have a material impact on its condensed consolidated financial statements.

The primary objectives for the Company’s investment portfolio are liquidity and safety of principal. Investments are made with the intention to achieve the best available rate of return on traditionally low risk investments. The Company’s investment policy limits investments to certain types of instruments issued by institutions with investment-grade credit ratings, the U.S. government and U.S. governmental agencies. The Company is subject to market risk primarily from changes in the fair values of its investments in debt securities including governmental agency and municipal securities, and corporate bonds. These instruments are classified as available for sale securities for financial reporting purposes. A ten percent increase in interest rates would cause the fair value of the Company’s investments in available for sale debt securities to decline by approximately $0.3 million. Additional investments are made in overnight deposits and money market funds. These instruments are classified as cash and cash equivalents for financial reporting purposes, generally also have lower interest rate risk relative to its investments in debt securities and changes in interest rates generally have little or no impact on their fair values. For cash, cash equivalents and available for sale debt securities, a ten percent decrease in interest rates would decrease interest income by approximately $1.0 million. The Company does not have any financial obligations exposed to variability in interest rates.

In addition to the investments described above, the Company is also subject to market risk in respect to its investment in Hana. In August 2007, the Company made an equity investment in Hana for $5.0 million at a contractually agreed premium to the prevailing market price. Of this amount, $1.2 million was charged to research and development expense in the third quarter of 2007. The Company has classified its investment in Hana as a noncurrent asset on its consolidated balance sheet as of March 29, 2008 due to its contractual obligations with Hana and its ability and intent to hold the investment for a reasonable period of time (not anticipated to be less than 12 months) sufficient for a recovery of fair value up to (or beyond) the cost of the investment. The Company recorded an unrealized loss of $1.3 million as of March 29, 2008, which is included in other comprehensive income to reflect the estimated fair value of its investment in Hana. A 10% adverse change in the market price of Hana common stock would impact the fair value of the investment by approximately $0.3 million.

The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the Company’s filings with the SEC is recorded, processed, summarized and reported within the time period specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management, including the Company’s Chief Executive Officer (CEO) and Chief Financial Officer (CFO), as appropriate, to allow timely decisions regarding required disclosure based on the definition of “disclosure controls and procedures” as defined in Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). In designing and evaluating disclosure controls and procedures, the Company has recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply judgment in evaluating its controls and procedures. An evaluation was performed under the supervision and with the participation of Company management, including the CEO and the CFO, to assess the effectiveness of the design and operation of its disclosure controls and procedures (as defined under the Exchange Act) as of March 29, 2008. Based on that evaluation, the Company’s management, including its CEO and the CFO, concluded that the Company’s disclosure controls and procedures were not effective as of March 29, 2008 because it has not yet been concluded that the material weakness in the Company’s internal control over financial reporting related to the recording of proper income tax benefits from discontinued operations reported as of December 31, 2007 in the Company’s Form 10-K has been remediated.

(1)

In April 2004, the Board authorized the repurchase of up to $50.0 million of the Company’s common stock. Repurchases are made, subject to compliance with applicable securities laws, from time to time in the open market or in privately negotiated transactions, whenever it appears prudent to do so. Shares of common stock acquired through the repurchase program are available for reissuance for general corporate purposes. On September 28, 2007, the Company announced that its Board approved an expansion of its share repurchase program allowing for the repurchase of up to $75 million of the Company’s common stock, inclusive of the $17.8 million remaining from the April 2004 authorization. The authorized amount remaining for stock repurchases under the repurchase program was $43.6 million, as of March 29, 2008. The repurchase program has no expiration date.

10.1	Employment Agreement, dated as of March 4, 2008, by and between the Company, Par Pharmaceutical, Inc. and Patrick G. LePore (filed herewith).

10.2	Employment Agreement, dated as of March 4, 2008, by and between the Company, Par Pharmaceutical, Inc. and Gerard A. Martino (filed herewith).

10.3	Employment Agreement, dated as of March 4, 2008, by and between the Company, Par Pharmaceutical, Inc. and Thomas J. Haughey (filed herewith).

10.4	Employment Agreement, dated as of March 3, 2008, by and between the Company, Par Pharmaceutical, Inc. and Veronica Lubatkin (filed herewith).

10.5	Employment Agreement, dated as of March 5, 2008, by and between the Company, Par Pharmaceutical, Inc. and Paul V. Campanelli (filed herewith).

10.6	Employment Agreement, dated as of March 6, 2008, by and between the Company, Par Pharmaceutical, Inc. and John MacPhee (filed herewith).

31.1	Certification of the Principal Executive Officer (filed herewith).

31.2	Certification of the Principal Financial Officer (filed herewith).

32.1	Certification by the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (attached hereto).

32.2	Certification by the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (attached hereto).

Exhibit Number		Description

10.1		Employment Agreement, dated as of March 4, 2008, by and between the Company, Par Pharmaceutical, Inc. and Patrick G. LePore (filed herewith).

10.2		Employment Agreement, dated as of March 4, 2008, by and between the Company, Par Pharmaceutical, Inc. and Gerard A. Martino (filed herewith).

10.3		Employment Agreement, dated as of March 4, 2008, by and between the Company, Par Pharmaceutical, Inc. and Thomas J. Haughey (filed herewith).

10.4		Employment Agreement, dated as of March 3, 2008, by and between the Company, Par Pharmaceutical, Inc. and Veronica Lubatkin (filed herewith).

10.5		Employment Agreement, dated as of March 5, 2008, by and between the Company, Par Pharmaceutical, Inc. and Paul V. Campanelli (filed herewith).

10.6		Employment Agreement, dated as of March 6, 2008, by and between the Company, Par Pharmaceutical, Inc. and John MacPhee (filed herewith).

31.1		Certification of the Principal Executive Officer (filed herewith).

31.2		Certification of the Principal Financial Officer (filed herewith).

32.1		Certification by the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (attached hereto).

32.2		Certification by the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (attached hereto).

Delaware		22-3122182
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)

	Three Months Ended
	March 29,			March 31,
	2008			2007
Interest	$	2,875		$	2,926

Non-cash transactions:
(Decrease) increase in fair value of available for sale debt and marketable equity securities	$	(523	)	$	6,022
Capital expenditures incurred but not yet paid	$	1,916		$	112
Capital contribution to joint venture not yet paid	$	138		$	148

	For the three			For the three
	months ended			months ended
	March 29,			March 31,
	2008			2007
Risk-free interest rate		3.0	%		4.6	%
Expected life (in years)		6.3			6.2
Expected Volatility		48.5	%		53.8	%
Dividend		0	%		0	%

	For the three months ended
	March 29,			March 31,
	2008			2007

Cost of sales	$	62		$	168
Research and development		156			422
Selling, general and administrative		560			1,518
Total, pre-tax	$	778		$	2,108
Tax benefit of share-based compensation		(296	)		(822	)
Total, net of tax	$	482		$	1,286

				Weighted		Weighted		Aggregate
				Average		Average		Intrinsic
	Shares			Exercise Price		Remaining Life		Value

Balance at December 31, 2007		4,526		$	34.76
Granted		2			19.56
Exercised		(42	)		7.11
Forfeited		(85	)		30.86
Balance at March 29, 2008		4,401		$	35.09		5.6	$	1,596
Exercisable at March 29, 2008		3,584		$	37.70		4.9	$	1,434
Vested and expected to vest at March 29, 2008		4,282		$	35.43		5.3	$	1,566

				Weighted Average
				Grant Date		Aggregate
				Fair Value		Intrinsic
	Shares			Per Share		Value
Non-vested balance at December 31, 2007		-		$	-
Granted		384			24.78
Vested		-			-
Forfeited		(1	)		24.78
Non-vested balance at March 29, 2008		383		$	24.78	$	6,630

								Estimated
			Unrealized					Fair
	Cost		Gain		(Loss)			Value
Securities issued by government agencies	$	26,237	$	25	$	-		$	26,262
Debt securities issued by various state and local municipalities and agencies		36,427		184		-			36,611
Other debt securities		10,069		16		(1,656	)		8,429
Available for sale debt securities		72,733		225		(1,656	)		71,302

Marketable equity securities available for sale Hana Biosciences, Inc.		3,850		-		(1,300	)		2,550

Total	$	76,583	$	225	$	(2,956	)	$	73,852

	March 29, 2008
			Estimated Fair
	Cost		Value
Less than one year	$	22,515	$	22,548
Due between 1-2 years		32,309		32,494
Due between 2-5 years		12,844		12,851
Due after 5 years		5,065		3,409
Total	$	72,733	$	71,302

Balance at March 29, 2008	Carrying Value
IntelliPharmaCeutics Ltd.	$	2,500
Total other investments	$	2,500


Balance at December 31, 2007	Carrying Value
IntelliPharmaCeutics Ltd.	$	2,500
Total other investments	$	2,500

Allowance for doubtful accounts
	For the three-month period ended
	March 29, 2008			March 31, 2007
Balance at beginning of period	$	(20	)	$	(2,465	)
Additions – charge to expense		-			-
Adjustments and/or deductions		-			2,443
Balance at end of period	$	(20	)	$	(22	)

	March 29, 2008		December 31, 2007
Securities issued by government agencies	$	26,262	$	46,201
Debt securities issued by various state and local municipalities and agencies		36,611		24,223
Other debt securities		8,429		13,991
Marketable equity securities available for sale		2,550		2,650
Auction rate securities		-		5,000
Total	$	73,852	$	92,065

Quarter Ending March 29, 2008 Period	Total Number of Shares of Common Stock Purchased ⁽²⁾		Average Price Paid per Share of Common Stock		Total Number of Shares of Common Stock Purchased as Part of Publicly Announced Plans or Programs		Maximum Number of Shares of Common Stock that May Yet Be Purchased Under the Plans or Programs ⁽³⁾
January 1, 2008 through January 26, 2008		23,546		N/A		-		-
January 27, 2008 through February 23, 2008		401		N/A		-		-
February 24, 2008 through March 29, 2008		29,411		N/A		-		2,517,860
Total		53,358		N/A		-

	PAR PHARMACEUTICAL COMPANIES, INC.
	(Registrant)

Date: May 8, 2008	/s/ Patrick G. LePore
	Patrick G. LePore
	Chairman, President and Chief Executive Officer

Date: May 8, 2008	/s/ Veronica A. Lubatkin
	Veronica A. Lubatkin
	Executive Vice President and Chief Financial Officer

	March 29,		December 31,
	2008		2007
Raw materials and supplies	$	19,246	$	22,815
Work-in-process		4,253		2,630
Finished goods		41,684		59,442
	$	65,183	$	84,887

	March 29,		December 31,
	2008		2007
Land	$	1,882	$	1,882
Buildings		25,977		25,947
Machinery and equipment		50,039		49,302
Office equipment, furniture and fixtures		5,476		5,476
Computer software and hardware		30,104		28,989
Leasehold improvements		14,861		14,865
Construction in progress		10,590		8,205
		138,929		134,666
Less accumulated depreciation and amortization		55,613		52,016
	$	83,316	$	82,650