UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-K

Annual Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the Fiscal Year Ended December 31, ~~2013~~2014

Commission File Number: 1-10827

PAR PHARMACEUTICAL COMPANIES, INC.

(Exact name of Registrant as specified in its charter)




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

300 Tice Boulevard, Woodcliff Lake, New Jersey		07677
One Ram Ridge Road, Chestnut Ridge, NY		10977
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (~~201~~845) ~~802~~573-~~4000~~5500

Securities registered pursuant to Section 12(b) and 12(g) of the Securities Exchange Act of 1934: None

Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act: Yes No_X_

Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act: Yes X No _

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 (the “Exchange Act”) during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days: Yes X No ___

Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulations S-T during the preceding 12 months (or for such shorter period that the Registrant was required to submit and post such files). Yes [X] No [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the Registrant’s knowledge, in a definitive proxy or information statement incorporated by reference in Part III of the Form 10-K or any amendment to the Form 10-K. [X ]

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act:




Large accelerated filer [ ]	Accelerated filer [ ]	Non-accelerated filer [ X ]	Smaller reporting company [ ]

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No X

As of March 18, 2014, there was no established public trading market for the Registrant's common stock; therefore the aggregate market value of the common equity is not determinable.

Number of shares of the Registrant’s common stock outstanding as of March 1812, ~~2014~~2015: 100.

TABLE OF CONTENTS

		PAGE
PART I
Forward-Looking Statements
Item 1	Business	3
Item 1A	Risk Factors	1314
Item 1B	Unresolved Staff Comments	3231
Item 2	Properties	3231
Item 3	Legal Proceedings	3331
Item 4	Mine Safety Disclosures	3938
PART II
Item 5	Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	3938
Item 6	Selected Financial Data	4039
Item 7	Management’s Discussion and Analysis of Financial Condition and Results of Operations	4140
Item 7A	Quantitative and Qualitative Disclosures about Market Risk	6768
Item 8	Financial Statements and Supplementary Data	6869
Item 9	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure	6869
Item 9A	Controls and Procedures	6869
Item 9B	Other Information	69
PART III
Item 10	Directors, Executive Officers and Corporate Governance	70
Item 11	Executive Compensation	7271
Item 12	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	8186
Item 13	Certain Relationships and Related Transactions, and Director Independence	8287
Item 14	Principal Accountant Fees and Services	8387
PART IV
Item 15	Exhibits, Financial Statement Schedules	8589
SIGNATURES		9094

PART I

Forward-Looking Statements

Certain statements in this Annual Report on Form 10-K constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, including those concerning management’s expectations with respect to future financial performance, trends and future events, particularly relating to sales of current products and the development, approval and introduction of new products. To the extent that any statements made in this Annual Report on Form 10-K contain information that is not historical, such statements are essentially forward-looking. These statements are often, but not always, made using words such as “estimates,” “plans,” “projects,” “anticipates,” “continuing,” “ongoing,” “expects,” “intends,” “believes,” “forecasts” or similar words and phrases. Such forward-looking statements are subject to known and unknown risks, uncertainties and contingencies, many of which are beyond our control, which could cause actual results and outcomes to differ materially from those expressed in this Annual Report on Form 10-K. Risk factors that might affect such forward-looking statements include those set forth in Item 1A (“Risk Factors”) of this Annual Report on Form 10-K and from time to time in our other filings with the Securities and Exchange Commission (the “SEC”), including Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and on general industry and economic conditions. Any forward-looking statements included in this Annual Report on Form 10-K are made as of the date of this Annual Report on Form 10-K only, and, subject to any applicable law to the contrary, we assume no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise.

MARKET AND INDUSTRY DATA

This Annual Report on Form 10-K includes market share, ranking, industry data and forecasts that we obtained from industry publications and surveys, including from IMS Health and the Generic Pharmaceutical Association, public filings and internal company sources. Industry publications, surveys and forecasts generally state that the information contained therein has been obtained from sources believed to be reliable, but there can be no assurance as to the accuracy or completeness of included information. We have not independently verified any of the data from third-party sources, nor have we ascertained the underlying economic assumptions relied upon therein. Statements as to our market position and ranking are based on market data currently available to us, management’s estimates, and assumptions we have made regarding the size of our markets within our industry. While we are not aware of any misstatements regarding our industry data presented herein, our estimates involve risks and uncertainties and are subject to change based on various factors, including those discussed under the heading “Item 1A. Risk Factors” in this Annual Report on Form 10-K. We cannot guarantee the accuracy or completeness of such information contained in this Annual Report on Form 10-K.

USE OF TRADEMARKS

We own or have rights to trademarks, service marks or trade names that we use in connection with the operation of our business. For example, our names and logos are protected. Some of the trademarks we own or have the right to use include “Par,” “Par Pharmaceutical,” “Par Pharmaceutical Companies, Inc.,” “Par Formulations,” “~~Anchen~~Nascobal,” “~~Strativa~~Megace,” ~~Pharmaceuticals~~“Vasostrict,” “~~Nascobal~~Adrenalin,” and “~~Megace~~Aplisol.” We have applied for trademarks of “Par Specialty Pharmaceuticals” and “Par Sterile Products.” We will assert, to the fullest extent under applicable law, our rights or the rights of the applicable licensors to these trademarks, service marks and trade names. Other trademarks, service marks and trade names appearing in this Annual Report on Form 10-K are the property of their respective owners.

ITEM 1. Business

Unless the context otherwise requires, the terms "we," "our company," "the Company," "us," "our" and the like refer to Par Pharmaceutical Companies, Inc. and its consolidated subsidiaries.

GENERAL and RECENT DEVELOPMENTS

We were acquired at the close of business on September 28, 2012 through a merger transaction with Sky Growth Acquisition Corporation, a wholly owned subsidiary of ~~Sky~~Par ~~Growth~~Pharmaceutical Holdings, ~~Corporation~~Inc. (“Holdings” orand ~~“Parent”~~formerly known as Sky Growth Holdings Corporation). Holdings was formed by investment funds affiliated with TPG Capital, L.P. ("TPG" and, together with certain affiliated entities, collectively, the “Sponsor”). Holdings is owned by affiliates of the Sponsor and members of management. The acquisition was accomplished through a reverse subsidiary merger of Sky Growth Acquisition Corporation with and into the Company, with the Company being the surviving entity (the ”“Acquisition”). Subsequent to the Acquisition, we became an indirect, wholly owned subsidiary of Holdings. Prior to the Acquisition, we had operated as a public company with our common stock traded on the New York Stock Exchange.

Par Pharmaceutical Companies, Inc., incorporated in 1978 as Par Pharmaceutical, Inc., is a Delaware holding company that, principally through its wholly owned operating subsidiary, Par Pharmaceutical, Inc., isspecializes in ~~the business of~~ developing, licensing, manufacturing, marketing and distributing generic ~~and branded~~ drugs in the United States. We ~~operate~~have ~~primarily~~a generics portfolio of approximately 95 products across an extensive range of dosage forms and delivery systems, including immediate and extended release oral solids (tablets, orally disintegrating tablets, capsules and powders), injectables, nasal sprays, ophthalmics and transdermal patches. Our focus is on high-barrier-to-entry products that are difficult to formulate, difficult to manufacture or face complex legal and regulatory challenges. These products often see limited competition and tend to be more profitable than commoditized generic drugs. We have an integrated team-based approach to product development that combines our formulation, regulatory, legal, manufacturing and commercial capabilities. As of December 31, 2014, we had over 200 products in our pipeline, which included 115 Abbreviated New Drug Applications (“ANDA” or "ANDAs") pending with the ~~United~~FDA, ~~States~~including 32 potential first-to-file and six potential first-to-market opportunities. We operate as two business segments: Par Pharmaceutical (or “Par”), ~~our~~which includes both generic products ~~division~~marketed under Par Pharmaceutical and sterile products marketed under Par Sterile Products, LLC (“Par Sterile Products” or “Par Sterile”); and ~~Strativa~~Par Specialty Pharmaceuticals (“~~Strativa~~Par Specialty” and formerly known as Strativa Pharmaceuticals), ~~our~~which markets two branded products ~~division~~.

Our principal executive offices are located at One Ram Ridge Road, Chestnut Ridge, NY 10977, and our telephone number is (845) 573-5500. Additional information concerning our company can be found on our website at www.parpharm.com, including our Code of Conduct. Our Code of Conduct applies to all of our directors, officers, employees and representatives. Amendments to our

~~Prescription~~Code ~~pharmaceutical~~of ~~products~~Conduct ~~are sold as either generic products or branded products. Since our inception, we have manufactured, licensed~~ and ~~distributed~~any ~~generic~~grant ~~pharmaceutical~~of ~~products. We~~a ~~aim~~waiver tofrom ~~develop~~a orprovision ~~license~~of ~~and commercialize generic drugs with limited competition, significant barriers to entry and longer life cycles as well as niche, innovative proprietary pharmaceuticals. We operate primarily in~~ the ~~United~~Code ~~States,~~requiring ~~the~~disclosure ~~largest~~under ~~generics~~applicable ~~market~~SEC inrules ~~the~~will ~~world,~~be ~~where~~disclosed weon ~~ranked~~our ~~fifth in revenues among all generic drug companies according to several sources, including IMS Health data~~website. Any ~~The majority~~ of ~~our~~these ~~generic~~materials ~~products~~may ~~are~~also ~~distributed~~be ~~under~~requested anin ~~associated~~print ~~Abbreviated New Drug Application (“ANDA”) owned or licensed~~ by uswriting ~~and~~to ~~approved~~Par byPharmaceutical ~~the Food and Drug Administration (the “FDA”)~~Companies, ~~and some of our products are distributed under an FDA-approved New Drug Application (“NDA”) owned by us or licensed from the NDA holder~~Inc. ~~As of the fourth quarter of 2013~~, weAttention: orBarry ~~our~~J. ~~strategic partners had approximately 73 ANDAs pending with the FDA~~Gilman, ~~which~~Deputy ~~included~~General 27Counsel ~~first-to-file opportunities~~ and ~~four potential first-to-market product opportunities. Many of these products have been developed internally~~Secretary, ~~which~~at ~~generally~~One ~~contribute~~Ram ~~higher~~Ridge ~~gross margins than products that we sell under supply and distribution agreements. In addition to our generics business~~Road, weChestnut ~~also market two branded prescription products~~Ridge, ~~Megace®~~NY ~~ES and Nascobal® Nasal Spray~~10977.

Our principal executive offices are located at 300 Tice Boulevard, Woodcliff Lake, NJ 07677, and our telephone number is (201) 802-4000. Additional information concerning our company can be found on our website at www.parpharm.com, including our Code of Conduct. Our Code of Conduct applies to all of our directors, officers, employees and representatives. Amendments to our Code of Conduct and any grant of a waiver from a provision of the Code requiring disclosure under applicable SEC rules will be disclosed on our website. Any of these materials may also be requested in print by writing to Par Pharmaceutical Companies, Inc., Attention: Barry J. Gilman, Deputy General Counsel and Secretary, at 300 Tice Boulevard, Woodcliff Lake, NJ 07677.

Our fiscal year ends on December 31 of each year presented. Our fiscal quarters end on each calendar quarter end (March 31st, June 30th, and September 30th). Our electronic filings with the SEC, including Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and any amendments to these reports, are available on our website, free of charge, as soon as reasonably practicable after we electronically file or furnish them to the SEC. Information on our website is not, and should not be construed to be, part of this Annual Report on Form 10-K. The public may read and copy any materials that we file with the SEC at the SEC's Public Reference Room at 100 F Street, NE, Washington, DC 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. Also, the SEC maintains an Internet website that contains reports and other information regarding issuers, including the Company, that file electronically with the SEC. The public can obtain any documents that we file with the SEC at http://www.sec.gov.

~~Recent~~Par ~~Acquisitions~~Pharmaceutical

OnPar ~~November~~Pharmaceutical ~~17,~~includes ~~2011,~~generic weproducts ~~completed~~marketed ~~our~~under ~~acquisition~~Par ofPharmaceutical ~~Anchen Incorporated~~ and ~~its~~sterile ~~subsidiary~~products ~~Anchen~~marketed ~~Pharmaceuticals,~~under ~~Inc~~Par Sterile. The ~~(collectively~~focus of Par Pharmaceutical is to develop, ~~“Anchen”)~~license, amanufacture, ~~privately~~market ~~held~~and distribute generic ~~pharmaceutical~~prescription ~~company~~drugs in an extensive range of dosage forms and delivery systems, ~~for~~including ~~$413~~immediate-release ~~million. The~~oral ~~Anchen~~solids ~~assets~~and ~~acquired~~alternate ~~included~~dosage ~~five~~forms ~~marketed~~such ~~generic~~as ~~products~~extended-release oral solids, ainjectables, ~~number~~topicals, ofnasal ~~in-process~~sprays, ~~research~~ophthalmics, films and ~~development~~transdermal patches. We sell our products, ~~which~~primarily ~~included~~in athe ~~pipeline~~United States. As the percentage of 29branded ~~filed~~pharmaceuticals ~~ANDAs,~~that ~~including~~are ~~five~~expected ~~confirmed~~to ~~first~~lose patent protection increasingly shifts towards alternate dosage forms (dosage forms other than immediate-~~to-file~~release oral solid dose), ~~and~~we ~~leased~~have ~~facilities~~made ~~with~~investments ~~manufacturing~~in our development capabilities and ~~research~~technologies ~~and~~which ~~development~~better ~~capabilities~~position ~~located~~us into ~~California~~take advantage of this change. ~~Anchen~~ ~~enhanced~~On February 20, 2014, we completed our ~~modified~~acquisition ~~release~~of ~~and~~Par ~~research~~Sterile, which expanded our capability and ~~development~~presence ~~capabilities.~~into ~~Equally~~the ~~important~~rapidly growing sterile drug market, ~~Anchen~~including ~~also~~injectable ~~has~~products ~~provided~~and usophthalmics. ~~manufacturing~~Par ~~flexibility~~Pharmaceutical’s ~~through~~products ~~its~~are ~~established~~primarily ~~commercial~~sold ~~infrastructure. In~~through ~~2013~~wholesalers, weretailers ~~successfully~~and ~~introduced~~mail ~~three~~order ofpharmacies. ~~these~~Par Sterile’s products are primarily sold through wholesalers, ~~including~~often ~~the~~via ~~generic~~an ~~versions~~arrangement ofwith ~~Luvox~~a ~~CR®~~group purchasing organization, ~~Trilipix®~~prior ~~and~~to ~~Kapvay®~~being dispensed at hospitals or directly administered by physicians.

OnOur ~~February~~approach ~~17,~~to ~~2012,~~product wedevelopment ~~completed~~is ~~our~~to ~~acquisition~~target ofhigh-barrier-to-entry, ~~Edict~~first-to-file ~~Pharmaceuticals~~or ~~Private~~first-to-market ~~Limited~~generic (product opportunities. A “~~Edict~~first-to-file”), product refers to an ANDA that is the first ANDA filed containing a ~~Chennai,~~Paragraph ~~India-based~~IV ~~developer~~patent ~~and~~challenge ~~manufacturer~~to ofthe ~~generic~~corresponding ~~pharmaceuticals~~branded product, which ~~has~~offers ~~since~~the ~~been~~opportunity ~~renamed~~for ~~Par~~180 ~~Formulations~~days ~~Private~~of ~~Limited,~~generic ~~for~~marketing ~~approximately~~exclusivity ~~$37~~if ~~million. The~~approved ~~acquired~~by ~~assets~~the ~~included~~FDA ~~numerous~~and if we are successful in~~-process~~ ~~research~~litigating ~~and~~the ~~development~~patent ~~products,~~challenge. A “first-to-market” product refers to a ~~pipeline~~product that is the first marketed generic equivalent of 11a ~~filed~~branded ~~ANDAs~~product for reasons apart from statutory marketing exclusivity, ~~including~~such ~~one~~as ~~confirmed~~the generic equivalent of a branded product that is difficult to formulate or manufacture. Our potential first-to-file, and afirst-to-market ~~facility~~opportunities ~~with~~account ~~manufacturing~~for ~~capabilities~~approximately ~~and~~33% ~~research~~of ~~and~~our ~~development~~pipeline ~~capabilities~~of ~~located~~115 ~~in India~~ANDAs. ~~The~~ In addition, ofwe ~~Par~~plan ~~Formulations~~to ~~Private~~continue acquiring ~~Limited~~assets ~~broadens~~from ~~our research~~ and/or ~~development~~entering ~~capabilities~~into ~~and~~partnership ~~provides~~arrangements us with acompanies ~~lower~~that ~~cost~~can ~~manufacturing~~deliver ~~alternative~~similar product opportunities.

OnOver ~~November~~the 1,past ~~2013,~~two ~~our wholly owned subsidiary~~years, ~~Par~~we ~~Formulations~~introduced ~~Private~~generic ~~Limited,~~versions ~~entered~~of ~~into~~several amajor ~~definitive~~pharmaceutical ~~agreement~~products, toincluding ~~purchase~~Exforge®, ~~Nuray Chemicals Private Limited~~Lovaza®, ~~a privately held Chennai~~Precedex®, ~~India-based~~Lamictal® ~~API developer and manufacturer (“Nuray”)~~XR, ~~for~~Luvox upCR® ~~to $19 million in cash~~ and ~~contingent~~Focalin ~~payments~~XR®. The closing of the acquisition is subject to the receipt of applicable regulatory approvals and other customary closing terms and conditions. The operating results of Nuray will be included in our consolidated financial results from the date of the closing of the acquisition as part of the Par Pharmaceutical segment. We will fund the purchase from cash on hand.

OnWithin ~~February 20, 2014, we completed~~ our ~~acquisition~~generic ofproducts ~~JHP Group Holdings~~division, ~~Inc.,~~we ~~the~~also ~~parent~~market ~~company~~“authorized ~~of JHP Pharmaceuticals~~generics, ~~LLC (“JHP~~”), awhich ~~leading~~are ~~specialty pharmaceutical company that develops, manufactures and markets branded and~~ generic ~~sterile~~versions ~~injectable~~of ~~products,~~brand ~~for~~drugs ~~$490~~licensed ~~million, subject~~ to ~~certain~~us ~~customary~~by ~~post-closing~~brand ~~adjustments~~drug companies. WeAuthorized ~~subsequently~~generics ~~changed~~do ~~JHP’s~~not ~~name~~face toany ~~Par~~regulatory ~~Sterile~~barriers ~~Products,~~to ~~LLC~~introduction ~~(“Par~~and ~~Sterile~~may ~~Products”). Par~~be ~~Sterile~~sold ~~Products~~during ~~focuses~~(and onafter) the ~~U.S.~~statutory ~~sterile~~exclusivity ~~injectable~~period ~~drug~~granted ~~market,~~to ~~manufactures~~the ~~and~~first-to-file ~~sells branded and~~ generic ~~aseptic~~equivalent ~~injectable~~to ~~pharmaceuticals~~the inbrand ~~hospital~~product. In ~~and clinical settings~~2014, ~~and~~we ~~provides~~introduced ~~contract~~three ~~manufacturing~~authorized ~~services~~generics; entecavir ~~for~~(Baraclude®) ~~global~~licensed ~~pharmaceutical~~from ~~companies. Par~~Bristol-Myers ~~Sterile~~Squibb ~~Products~~Company, ~~currently~~budesonide ~~markets~~nasal aspray ~~portfolio~~(Rhinocort ofAqua®) 14licensed ~~specialty~~from ~~injectable~~AstraZeneca ~~products,~~ and ~~has~~digoxin ~~developed~~(Lanoxin®) alicensed ~~pipeline~~from ofCovis 34Pharma ~~products, 17 of which have been submitted for approval to the U.~~S. ~~Food and Drug Administration~~à. ~~Par~~r.l. As ~~Sterile~~of ~~Products’~~December ~~sterile~~31, ~~manufacturing facility in Rochester~~2014, ~~Michigan~~we ~~has~~also ~~the~~marketed ~~capability~~authorized togeneric ~~manufacture~~versions ~~small-scale~~of ~~clinical~~budesonide ~~through~~capsules ~~large-scale~~(Entocort ~~commercial products. We funded this transaction and associated expenses with debt financing~~EC®), ~~which~~metoprolol issuccinate ~~subject~~ER to(Toprol-XL®) ~~customary conditions,~~ and ancandesartan ~~equity~~cilexetil ~~commitment~~(Atacand®) licensed from ~~certain investment funds associated with TPG Capital~~AstraZeneca.

Par Specialty Pharmaceuticals

Par Specialty Pharmaceuticals is focused on the marketing and distribution of two branded prescription products, Nascobal® (cyanocobalamin, USP) Nasal Spray (“Nascobal”), and Megace® ES. Nascobal® is a prescription vitamin B12 treatment indicated for maintenance of remission in certain pernicious anemia patients in a once-weekly intranasal administration, which may be preferable to periodic subcutaneous or intramuscular injections. Megace® ES is indicated for the treatment of anorexia, cachexia or any unexplained significant weight loss in patients with a diagnosis of AIDS.

Branded products usually benefit from patent protection, which can reduce competition and provide market exclusivity for the products. This exclusivity generally allows a branded product to remain profitable for a relatively longer period of time as compared to generic products. Par Specialty’s products are marketed in the United States by our brand sales force, which communicates the therapeutic and health benefits of our products to healthcare providers and managed care organizations. In the near term we plan to continue to invest in the marketing and sales of Nascobal® Nasal Spray. In addition, we plan to continue to consider new strategic licenses and product acquisitions to expand our branded product portfolio for the longer term.

~~Par~~Nascobal® ~~Pharmaceutical—Generic~~has ~~Products~~one ~~Division~~Orange Book patent running through March 2024 and two running through June 2024. Since January 31, 2013, our brand field sales force of approximately 60 people began focusing the majority of their detailing efforts on Nascobal® Nasal Spray, as explained below.

~~Products~~Megace® ~~sold~~ES byhistorically ~~our~~provided ~~generic~~us ~~products~~with ~~division~~a ~~span~~relatively anconsistent ~~extensive~~revenue ~~range~~stream, ofwhich ~~dosage~~has ~~forms~~declined and, ~~delivery~~we ~~systems~~expect, ~~including~~will ~~oral~~further ~~solids~~decline ~~(tablet,~~over ~~caplet~~time due to the effects of our reduced product detailing and ~~two-piece~~an ~~hard~~increasingly ~~shell~~difficult ~~capsule)~~reimbursement climate. Further, ~~oral~~in ~~suspension~~2011 ~~products,~~we ~~gels,~~sued ~~nasal~~a ~~spray~~generic ~~products~~pharmaceutical manufacturer that filed an ANDA with a Paragraph IV certification seeking FDA approval of a generic version of Megace® ES on grounds of patent infringement, and ~~products~~we ~~delivered~~sued bya ~~injections~~second Paragraph IV filer in 2013. WeOn ~~manufacture~~February ~~some~~21, 2014, the District Court issued a decision in favor of ~~our~~the ~~own~~first ~~products~~generic filer, finding all asserted patent claims invalid for obviousness, and we ~~have~~appealed ~~strategic~~to ~~alliances~~the ~~and~~U.S. ~~relationships~~Court ~~with~~of ~~several~~Appeals ~~pharmaceutical~~for the Federal Circuit. The first generic filer has received final FDA approval of its ANDA and ~~chemical~~announced ~~companies~~its ~~that~~intent ~~provide~~to uslaunch ~~with~~its ~~products~~generic product. On August 12, 2014, the District Court granted our motion for ~~sale~~preliminary ~~under~~injunction ~~various~~enjoining ~~distribution~~the first filer’s launch of its generic product pending disposition of the case on appeal, ~~manufacturing~~requiring us to post a $10.0 million bond. On December 3, ~~development~~2014, ~~and~~the ~~licensing~~Federal ~~agreements~~Circuit reversed the District Court’s decision, remanding for further findings of fact. WeOn ~~are~~March ~~committed~~9, to2015, ~~high~~the District Court granted our motion for preliminary injunction enjoining the first filer’s launch of its generic product ~~quality~~pending ~~standards~~disposition ~~and~~of ~~allocate~~the ~~significant~~case ~~capital~~on ~~and~~remand, ~~resources~~requiring us to ~~quality~~post ~~assurance~~a $6.0 million bond. Any such launch of a generic version of Megace® ES would have a material adverse impact on our brand sales of the product. For more information, ~~quality~~please ~~control~~see Note 19 - Commitments, Contingencies and ~~manufacturing~~Other ~~excellence~~Matters: Legal Proceedings.

AIn ~~key~~January ~~focus~~2013, ~~for~~we ~~our~~initiated ~~generic~~a ~~products~~restructuring ~~division~~of isPar ~~intelligent~~Specialty ~~product~~in ~~selection~~anticipation of entering into a settlement agreement and ~~entrepreneurial~~corporate ~~business~~integrity ~~development~~agreement that terminated the investigation by the U.S. Department of Justice ("DOJ") into Par Specialty’s marketing of Megace® ES. ~~Our~~We ~~internal~~reduced ~~research~~our ~~and~~Par ~~development~~Specialty isworkforce ~~intended~~by toapproximately ~~target~~70 ~~high-value~~people, ~~first-to-file~~with orthe ~~first-to~~majority ~~market~~of ~~generic~~the ~~product~~reductions ~~opportunities~~in the sales force. On March 5, 2013, we entered into the settlement agreement with the DOJ. AThe ~~“first-to-file”~~settlement ~~product~~agreement ~~opportunity~~provided ~~refers~~for toa payment by the Company of an ~~ANDA~~aggregate ~~that~~amount isof ~~the~~approximately ~~first~~$45 ~~ANDA~~million ~~filed~~(plus ~~containing~~interest and fees) and included a ~~Paragraph~~plea IVagreement ~~patent~~with ~~challenge~~the toNew Jersey Criminal Division of the ~~corresponding~~DOJ ~~brand~~in ~~product~~which the Company admitted to a single count of misdemeanor misbranding, ~~which~~a ~~offers~~civil settlement with the ~~opportunity~~DOJ, ~~for~~a ~~180~~state ~~days~~settlement ofencompassing ~~generic~~49 ~~marketing~~states ~~exclusivity~~(one ifstate ~~approved~~declined byto participate due to the ~~FDA~~small amount of its potential recovery), and ifa werelease ~~are~~from ~~successful~~each of these entities in ~~litigating~~favor of the ~~patent~~Company ~~challenge. A~~related ~~“first-~~to~~-market”~~ ~~product~~the ~~opportunity~~practices ~~refers~~at toissue in the terminated investigation. Additionally, we entered into a ~~product~~corporate ~~that~~integrity isagreement (“CIA”) with the ~~first~~Office ~~marketed~~of ~~generic~~Inspector ~~equivalent~~General of athe ~~brand~~U.S. ~~product~~Department of Health and Human Services (“OIG”). In exchange for ~~reasons~~agreeing ~~apart~~to ~~from~~enter ~~statutory~~into ~~marketing~~the ~~exclusivity~~CIA, ~~such~~we asreceived assurance that the ~~generic~~OIG ~~equivalent~~will ofnot aexercise ~~brand~~its ~~product~~ability ~~that~~to ispermissively ~~difficult~~exclude tothe ~~formulate~~Company orfrom ~~manufacture~~doing business with the federal government. The ~~Externally~~CIA includes such requirements as enhanced training time, weenhanced ~~plan~~monitoring toof ~~continue~~certain functions, and annual reports to ~~concentrate~~the onOIG ~~acquiring~~through ~~assets~~an ~~and/or~~independent ~~partnership~~review ~~arrangements~~organization. Although ~~with~~our ~~technology~~compliance ~~based~~activities ~~companies~~increased ~~that~~under ~~can~~the ~~deliver~~CIA, ~~similar~~we ~~product~~believe ~~opportunities~~the terms to be reasonable and not unduly burdensome.

InRecent ~~recent years, we introduced generic versions of several major pharmaceutical products, including Lamictal XR®, Luvox CR®, Focalin XR®, Rythmol®SR and Provigil®.~~Acquisitions

~~Within~~On ~~our~~February ~~generic~~20, ~~products division~~2014, we ~~also~~completed ~~market~~our ~~“authorized~~acquisition ~~generics,”~~of ~~which~~JHP ~~are~~Group ~~generic~~Holdings, ~~versions~~Inc. ofand ~~brand~~its ~~drugs~~subsidiaries, ~~licensed~~including toJHP usPharmaceuticals, byLLC ~~brand~~(now ~~drug~~known ~~companies. Authorized~~as ~~generics~~Par doSterile ~~not~~Products, ~~face~~LLC), ~~any~~a ~~regulatory~~leading ~~barriers~~specialty topharmaceutical ~~introduction~~company ~~and~~that ~~may~~develops, bemanufactures ~~sold~~and ~~during~~markets ~~(and~~sterile ~~after)~~injectable ~~the~~products, ~~statutory~~for ~~exclusivity~~$490 ~~period~~million, ~~granted~~subject to ~~the~~certain ~~developer~~customary ofpost-closing aadjustments. Par ~~generic~~Sterile ~~equivalent~~Products tofocuses on the ~~brand product~~U. InS. ~~the~~sterile ~~past~~injectable drug market, wemanufactures ~~have~~and ~~marketed~~sells ~~authorized~~branded ~~generics,~~and ~~including~~generic ~~metformin~~aseptic ERinjectable ~~(Glucophage~~pharmaceuticals ~~XR®)~~in hospital and ~~glyburide~~clinical &settings, ~~metformin~~and ~~HCl~~provides ~~(Glucovance®)~~contract ~~licensed~~manufacturing ~~from~~services ~~Bristol-Myers~~for ~~Squibb~~global ~~Company~~pharmaceutical companies. Par Sterile Products’ sterile manufacturing facility in Rochester, ~~and~~Michigan ~~fluticasone~~has ~~(Flonase®)~~the ~~and~~capability ~~ranitidine~~to ~~HCl~~manufacture ~~syrup~~small-scale ~~(Zantac®)~~clinical ~~licensed~~through ~~from~~large-scale ~~GlaxoSmithKline~~commercial ~~plc~~products. AsWe offunded ~~December~~this ~~31,~~transaction ~~2013,~~and weassociated ~~marketed~~expenses ~~authorized~~with ~~generic~~debt ~~versions~~financing, ofwhich ~~metoprolol~~is ~~succinate~~subject ERto ~~(Toprol~~customary ~~XL®)~~conditions, and ~~budesonide~~an ~~(Entocort®)~~equity ~~licensed~~commitment from ~~AstraZeneca~~certain ~~and~~investment ~~rizatriptan~~funds ~~(Maxalt®)~~associated ~~licensed~~with ~~from~~TPG ~~Merck~~Capital.

WeOn ~~market~~November ~~our~~1, ~~generic~~2013, ~~products~~Par ~~primarily~~Formulations toentered ~~wholesalers~~into a definitive agreement (the “Nuray I Purchase Agreement”) with Nuray Chemicals Private Limited, ~~drug~~a ~~store~~privately-held ~~chains~~company based in Chennai, ~~supermarket~~Tamil ~~chains~~Nadu, ~~mass~~India ~~merchandisers~~(“Nuray”), ~~distributors~~to purchase Nuray’s API development and manufacturing business located in Chengalput MGR District, ~~mail~~Tamil ~~order~~Nadu, ~~accounts~~India (“Nuray I ”) for up to $19 million in cash and contingent payments. In August 2014, prior to closing the Nuray I Purchase Agreement, Par Formulations began to evaluate the acquisition of Nuray’s API development and ~~government~~manufacturing business located in Alathur Karchipuram District, ~~principally~~Tamil ~~through~~Nadu, ~~our~~India ~~internal~~(“Nuray ~~staff~~II”). WeOn ~~also~~December ~~promote~~23, 2014, Par Formulations entered into a definitive agreement (the ~~sales~~“Nuray ~~efforts~~II ofPurchase ~~wholesalers~~Agreement”) with Nuray to purchase Nuray II for up to $20 million in cash and ~~drug~~contingent ~~distributors~~payments. The ~~that~~Nuray ~~sell~~I ~~our~~Purchase ~~products~~Agreement terminated upon the execution of the Nuray II Purchase Agreement. The closing of the Nuray II acquisition is subject to ~~clinics,~~the ~~governmental~~receipt ~~agencies~~of applicable regulatory approvals and other ~~managed~~customary ~~health~~closing ~~care~~terms ~~organizations~~and conditions. The operating results of Nuray II will be included in our consolidated financial results from the date of the closing of the acquisition as part of the Par Pharmaceutical segment. We will fund the purchase from cash on hand.

~~Strativa~~On February 17, 2012, we completed our acquisition of Par Formulations Private Limited (“Par Formulations” and formerly Edict Pharmaceuticals –Private ~~Branded~~Limited), ~~Products~~a ~~Division~~Chennai, India-based developer and manufacturer of generic pharmaceuticals, for approximately $37 million. The acquired assets included numerous in-process research and development products, a pipeline of 11 pending ANDAs, including one confirmed first-to-file, and a facility with manufacturing capabilities and research and development capabilities located in India. The addition of Par Formulations broadens our research and development capabilities.

~~Branded~~On ~~products~~November ~~usually~~17, ~~benefit~~2011, ~~from~~we ~~patent~~completed ~~protection,~~our ~~which~~acquisition ~~greatly~~of ~~reduces~~Anchen ~~competition~~Incorporated and ~~provides~~its asubsidiary ~~significant~~Anchen ~~amount~~Pharmaceuticals, ~~of market exclusivity for the products~~Inc. ~~This~~ ~~exclusivity~~(collectively, ~~generally~~“Anchen”), ~~allows~~ a ~~branded~~privately ~~product~~held togeneric ~~remain~~pharmaceutical ~~profitable~~company, for a$413 ~~relatively~~million. The ~~longer~~Anchen ~~period~~assets ofacquired ~~time~~included asfive ~~compared~~marketed to generic products~~. Strativa’s products are marketed by its sales force~~, ~~which~~a ~~communicates~~number ~~the therapeutic, health and economic benefits~~ of ~~our products to healthcare providers and managed care organizations. In the near term we plan to continue to invest~~ in-process ~~the~~research ~~marketing~~ and ~~sales~~development ~~of our existing~~ products ~~(Nascobal® Nasal Spray and Megace® ES). In addition~~, inwhich ~~the~~included ~~longer~~a ~~term,~~pipeline weof ~~plan~~29 ~~to continue to consider new strategic licenses and acquisitions to expand Strativa’s presence in supportive care and adjacent commercial areas.~~

On March 31, 2009, we acquired the worldwide rights to Nascobal® (cyanocobalamin, USP) Nasal Spray, which is a prescription vitamin B12 treatment indicated for maintenance of remission in certain pernicious anemia patients, as well as a supplement for a variety of B12 deficiencies. This product presents customers with a distinct benefit over competing products in that it is a once-weekly intranasal administration, which may be much more preferable to periodic subcutaneous or intramuscular injections. Nascobal® has one Orange Book patent running through March 2024 and two running through June 2024. Since January 31, 2013, as detailed below, our brand field sales force of approximately 60 people began focusing the majority of their detailing efforts on Nascobal® Nasal Spray.

Megace® ES is indicated for the treatment of anorexia, cachexia or any unexplained significant weight loss in patients with a diagnosis of AIDS. This product has historically provided us with a relatively consistent revenue stream, which has declined and, we expect, will further decline over time as marketing efforts are decreased for this product as outlined below. Further, in July 2011, we received a notice letter from a generic pharmaceutical manufacturer, advising that it has filed an ANDA with the FDA containing a Paragraph IV certification referencing Megace® ES, and we have subsequently received similar notice letters from two other generic manufacturers. We sued the first generic filer on its challenge to the last-to-expire patent listed in the Orange Book for Megace® ES. On February 21, 2014, the U.S. District Court for the District of Maryland issued an opinion invalidating on obviousness grounds the single patent we asserted in the litigation against the first generic filer. We are evaluating the Court’s decision and intend, in cooperation with our partner, to appeal that decision. The first generic filer has disclosed its intent to launch its ANDA product should it receive final FDA approval. Any such launch of a generic version of Megace® ES would have a material adverse impact on our brand sales of Megace® ES.

In January 2013, we initiated a restructuring of Strativa in anticipation of entering into a settlement agreement and corporate integrity agreement that terminated the investigation by the U.S. Department of Justice ("DOJ") into Strativa’s marketing of Megace® ES. We reduced our Strativa workforce by approximately 70 people, with the majority of the reductions in the sales force. On March 5, 2013, we entered into the settlement agreement with the DOJ. The settlement agreement provided for a payment by the Company

ofpending anANDAs, ~~aggregate~~including ~~amount~~five ofconfirmed ~~approximately $45 million (plus interest and fees) and included a plea agreement with the New Jersey Criminal Division of the DOJ in which the Company admitted~~ first-to ~~a single count of misdemeanor misbranding~~-file, aand ~~civil~~leased ~~settlement~~facilities with ~~the~~manufacturing ~~DOJ,~~capabilities aand ~~state~~research ~~settlement encompassing 49 states (one state declined to participate due to the small amount of its potential recovery),~~ and adevelopment ~~release~~capabilities ~~from~~located ~~each of these entities~~ in ~~favor of the Company related to the practices at issue in the terminated investigation~~California. ~~Additionally,~~Anchen weenhanced ~~entered~~our ~~into~~modified arelease ~~corporate~~and ~~integrity~~research ~~agreement (“CIA”) with the Office of Inspector General of the U.S. Department of Health~~ and ~~Human~~development ~~Services (“OIG”)~~capabilities. In ~~exchange~~Equally ~~for agreeing to enter into the CIA~~important, weAnchen ~~received~~also ~~assurance~~has ~~that~~provided ~~the~~us ~~OIG~~manufacturing ~~will~~flexibility ~~not~~through ~~exercise~~ its ~~ability~~established tocommercial ~~permissively exclude the Company from doing business with the federal government~~infrastructure. ~~The~~In ~~CIA~~2013, ~~includes~~we ~~such~~successfully ~~requirements~~introduced asthree ~~enhanced training time, enhanced monitoring~~ of ~~certain~~these ~~functions~~products, ~~and~~including ~~annual reports to~~ the ~~OIG~~generic ~~through~~versions anof ~~independent~~Luvox ~~review organization. Although our compliance activities increased under the CIA~~CR®, weTrilipix® ~~believe the terms to be reasonable~~ and ~~not unduly burdensome~~Kapvay®.

OUR INDUSTRY

Prescription pharmaceutical products in the U.S. market are sold either as branded or generic products. Generic drugs are the pharmaceutical and therapeutic equivalents of branded products and are usually marketed under their generic (chemical) names rather than by brand names. Typically, a generic drug may not be marketed until the expiration of applicable patent(s) on the corresponding branded product, unless a resolution of patent litigation results in an earlier opportunity to enter the market. Generic drugs are the same as branded products in dosage form, safety, efficacy, route of administration, quality, performance characteristics and intended use, but they are sold generally at prices below those of the corresponding branded products. Generic drugs provide a cost-effective alternative for consumers, while maintaining the same high quality, efficacy, safety profile, purity and stability of the branded product. An ANDA is required to be filed and approved by the FDA in order to manufacture a generic drug for sale in the United States. The time required to obtain FDA approval of ANDAs is on average approximately 42 months after initial filing. The aggregate number of ANDAs submitted to the FDA in 2014 was 1,221. There have been recent changes in FDA submission requirements and we believe that those companies that are able to prepare high quality submissions are comparatively advantaged.

According to IMS Health, generic pharmaceuticals account for approximately 86% of all prescriptions dispensed as of January 2014. According to EvaluatePharma, the worldwide generics market was estimated to be worth $74 billion in sales in 2014 and is expected to grow an average rate of approximately 6.3% per year over the next six years.

PRODUCT INFORMATION

We distribute numerous drugs ofacross ~~various~~an ~~dosage~~extensive ~~strengths,~~range ~~some~~ of ~~which~~dosage ~~are~~forms ~~manufactured~~and bydelivery ussystems, including immediate and ~~some~~extended ofrelease ~~which~~oral ~~are~~solids ~~manufactured~~(tablets, ~~for~~orally usdisintegrating bytablets, ~~other~~capsules ~~companies. We~~and ~~hold~~powders), ~~the~~injectables, ~~ANDAs~~nasal sprays, ophthalmics, and ~~NDAs~~transdermal ~~for~~patches. ~~the~~We ~~drugs~~have ~~that~~a wegenerics ~~manufacture,~~portfolio ~~including~~of ~~the~~approximately ~~brand~~95 products ~~Megace®~~across ESan extensive range of dosage forms and ~~Nascobal®~~delivery systems. WeIn ~~seek~~addition to ~~introduce~~our ~~new~~current products, ~~through~~ our ~~research~~pipeline ~~and~~consists ~~development~~of ~~program,~~new ~~and~~products ~~through~~that ~~distribution~~will further expand and ~~other~~diversify ~~agreements,~~our ~~including~~portfolio. ~~licensing~~We believe our broad suite of ~~generic,~~products ~~branded,~~has ~~and~~allowed ~~authorized~~us ~~generic~~to ~~products,~~increase ~~with~~our ~~pharmaceutical~~market ~~companies~~presence ~~located~~and indevelop ~~various~~long ~~parts~~term ofrelationships ~~the~~with ~~world~~customers. As ~~such~~In recent years, we ~~have~~introduced ~~pursued~~products ~~and~~across ~~continue~~dosage toforms ~~pursue~~such ~~arrangements~~as ~~and~~generic ~~relationships~~versions ~~that~~of ~~share~~Actiq® ~~development~~(transmucosal ~~costs~~lozenge), ~~generate~~Entocort® ~~profits~~EC ~~from~~(capsule), ~~jointly-developed~~Precedex® ~~products~~(injectable), and ~~expand~~Maxalt-MLT® ~~distribution~~(ODT), ~~channels~~as ~~for~~well ~~new~~as ~~and~~Adrenalin® ~~existing~~(injectable), ~~products~~which is marketed by Par Sterile as a branded pharmaceutical product.

AsWe ofhold ~~December~~the ~~31,~~ANDAs ~~2013, we manufactured~~ and~~/or~~ ~~distributed~~New aDrug ~~total~~Applications of("NDA" 69or ~~products,~~"NDAs") ~~representing~~for ~~171~~the ~~dosage~~drugs ~~strengths. Of~~that ~~these,~~ we ~~manufactured~~manufacture, ~~and~~including ~~distributed~~our 45branded products, ~~representing~~Megace® ~~104~~ES ~~dosage~~and ~~strengths,~~Nascobal®. We ~~and~~seek weto ~~distributed~~introduce 24new products ~~that~~through ~~were~~our ~~manufactured~~research byand ~~others~~development program, ~~representing~~and 67through ~~dosage~~distribution ~~strengths. We~~and ~~detail~~other ~~our~~agreements, ~~more~~including ~~significant~~licensing ~~revenue~~of ~~producing~~generic, ~~products~~branded, inand ~~Item~~authorized 7generic products, ~~Management's~~with ~~Discussion~~pharmaceutical ~~and~~companies ~~Analysis~~located ofin ~~Financial~~various ~~Condition~~parts ~~and~~of ~~Results~~the ofworld. As ~~Operations~~such, ~~and~~we inhave ~~our~~pursued ~~Notes~~and continue to ~~Consolidated~~pursue ~~Financial~~arrangements ~~Statements~~and ~~elsewhere~~relationships inthat ~~this~~share ~~Annual~~development ~~Report~~costs onand generate ~~Form~~profits 10from jointly-Kdeveloped products.

~~Our generic products cover a wide range of therapeutic categories.~~ We dodetail ~~not specialize in or concentrate on any therapeutic categories; instead,~~ our ~~strategy~~more ~~focuses~~significant onrevenue ~~high-value,~~producing ~~first-to-file~~products ~~or first-to-market opportunities, regardless of therapeutic category. By specializing~~ in ~~niche,~~Item ~~high barrier-to-entry products that are either difficult to manufacture or require complex legal challenges~~7, weManagement's ~~endeavor~~Discussion ~~to market more profitable~~ and ~~long-lived~~Analysis ~~products~~of ~~relative~~Financial toCondition ~~our~~and ~~competitors. We~~Results ~~benefit from our focus on harder to manufacture products by finding opportunities where we can maintain market exclusivity or a low number~~ of ~~competitors (e.g.~~Operations, ~~two~~and orin ~~less)~~our ~~for~~Notes ~~extended periods. In recent years, we introduced generic versions of several major pharmaceuticals with high barriers~~ to ~~entry~~Consolidated ~~such~~Financial asStatements ~~Tussionex®~~elsewhere ~~(controlled~~in ~~substance),~~this ~~Duragesic®~~Annual ~~(unique~~Report ~~dosage~~on ~~form),~~Form ~~and Lamictal XR® (controlled~~10-~~release product)~~K.

WeOur ~~have~~generic ~~introduced~~products ~~almost~~cover 50a ~~new~~wide ~~generic~~range ~~products~~of ~~since~~therapeutic ~~2009~~categories. InWe ~~addition,~~do wenot ~~have~~specialize ain ~~successful~~or ~~track~~concentrate ~~record~~on ofany ~~partnership~~therapeutic ~~with~~categories; ~~several~~instead, ~~large~~our ~~brand~~strategy ~~pharmaceutical~~focuses ~~companies~~on ashigh-barrier-to-entry, anfirst-to-file ~~authorized~~or ~~generics~~first-to-market ~~partner,~~opportunities. By ~~which~~specializing wein ~~believe~~high isbarrier-to-entry aproducts ~~result~~that ofare ~~our~~either ~~broad~~difficult ~~distribution~~to ~~network,~~manufacture ~~strong~~or ~~trade~~require ~~presence~~complex ~~and~~legal ~~litigation/settlement~~challenges, ~~track~~we ~~record. We~~seek ~~believe~~to market products that have limited competition where we ~~are~~can amaintain ~~preferred~~market ~~partner~~exclusivity ~~for~~or ~~several~~two ~~large~~or ~~brand~~fewer ~~drug~~competitors ~~companies~~for ~~and~~extended ~~large~~periods. As ~~generic~~a ~~companies~~result, ~~who~~more ~~are~~than ~~often~~half ~~reticent~~of toour ~~partner~~generic ~~with~~adjusted ~~larger~~gross ~~companies~~profit ~~due~~in to2014 ~~the~~was ~~competitive~~garnered ~~dynamics~~from ofproducts ~~the~~that ~~industry. Recent~~are ~~examples~~either ofexclusive ~~our~~or ~~success~~have ~~include~~two ~~our~~or ~~partnership~~fewer ~~with~~competitors, ~~Glenmark~~which ~~Pharmaceuticals~~we ~~Ltd.~~believe ~~for~~leads ~~generic~~to ~~Zetia®~~more ~~rights~~sustainable market share and profitability for our product portfolio. In recent ~~acquisition~~years, ofwe ~~rights~~have tointroduced generic versions of ~~Actiq®~~several ~~and~~major ~~Provigil®~~pharmaceuticals ~~from~~with ~~Teva~~high ~~Pharmaceutical~~barriers ~~Industries~~to ~~and~~entry ~~the~~such ~~rights~~as toLovaza® ~~products~~(complex ~~acquired~~and indifficult-to-source ~~November~~API), ~~2012~~Precedex® ~~from~~(unique ~~Watson~~dosage ~~Pharmaceuticals~~form), ~~Inc.~~Luvox ~~and~~CR® ~~Actavis~~(controlled-release ~~Group~~product) inand ~~connection~~Focalin ~~with~~XR® ~~their~~(controlled ~~merger~~substance).

~~Our~~In ~~portfolio~~addition, ~~spans~~we have a track record of partnership with several large brand pharmaceutical companies as an ~~extensive~~authorized ~~range~~generics partner, which we believe is a result of ~~dosage~~our ~~forms~~broad distribution network and ~~delivery~~strong ~~systems,~~trade ~~including~~presence. We ~~oral~~also ~~solids,~~believe ~~oral~~we ~~suspension~~are ~~products~~a partner of choice to large generic companies for product divestitures that arise as a result of industry consolidation, ~~transmucosal~~and ~~lozenges~~for smaller development organizations looking for a partner that has deep experience with product development, ~~nasal~~patent ~~spray~~litigation ~~products~~strategy and ~~products~~a ~~delivered~~strong bymarket ~~injection~~presence. WeRecent ~~expect~~examples toinclude ~~diversify~~our introduction of authorized generic versions as noted above, our ~~portfolio~~November ~~further~~2012 ~~with~~acquisition ~~several~~of ~~new~~a mix of marketed products, ANDAs awaiting FDA approval and one late-stage development product ~~launches~~in connection with Watson Pharmaceuticals’ acquisition of Actavis Group, and aour ~~continued~~partnership ~~focus~~with onGlenmark ~~acquisitions~~Pharmaceuticals Ltd. for the right to distribute generic Zetia®.

We believe our track record of developing products with limited competition, significant barriers to entry and longer life cycles has enabled us to maintain strong market shares among our key existing products as much as one year after launch or longer. As a result, a large portion of our generics revenue comes from products where we are either the exclusive generic distributor or have few competitors. Among our top ten generic drugs, six maintained market shares in excess of 40% as of December 31, 2013.

RESEARCH AND DEVELOPMENT

Par Pharmaceutical - Generic Products Division

Our research and development activities for generic products consist principally of (i) identifying and conducting patent and market research on brand name drugs for which patent protection has expired or is expected to expire in the near future, (ii) identifying and conducting patent and market research on brand name drugs for which we believe the patents are invalid or for which we believe we can develop a non-infringing formulation, (iii) researching and developing new product formulations based upon such drugs and (iv) introducing technology to improve production efficiency and enhance product quality. The scientific process of developing new products and obtaining FDA approval is complex, costly and time-consuming; there can be no assurance that any products will be developed regardless of the amount of time and money spent on research and development. The development of products may be curtailed at any stage of development due to the introduction of competing generic products or other reasons.

~~The~~RESEARCH ~~research~~AND and development of our generic pharmaceutical products, including pre-formulation research, process and formulation development, required studies and FDA review and approval, has historically taken approximately two to three years to complete. In addition, ANDAs containing a Paragraph IV patent challenge are subject to a 30-month “stay” of regulatory approval during the resolution of related patent litigation. Accordingly, we typically select products for development that we intend to market several years in the future. However, the length of time necessary to bring a product to market can vary significantly and depends on, among other things, the availability of funding, problems relating to formulation, safety or efficacy, and patent issues associated with the product.DEVELOPMENT

WePar ~~contract~~Pharmaceutical with outside laboratories to conduct bio-studies, which, in the case of oral solids, generally are required in order to obtain FDA approval. These bio-studies are used to demonstrate that the rate and extent of absorption of a generic drug are not significantly different from the corresponding branded name drug. Each biostudy can cost from approximately $0.2 million to $2.0 million. In some instances, we may also be required to perform clinical studies, in patients, which could cost up to $7.0 million.

~~From~~We ~~time~~have toinvested ~~time,~~significant weresources ~~enter~~and ~~into~~focus ~~product~~on ~~development~~our ~~and~~Par ~~license~~Pharmaceutical ~~agreements~~division ~~with~~to ~~various~~expand ~~third~~our ~~parties~~technology ~~with~~capabilities ~~respect~~ to ~~the~~develop ~~development~~a orrange ~~marketing~~ of ~~new~~ products ~~and~~in-house, ~~technologies. Pursuant~~including toimmediate-release ~~these~~oral ~~agreements,~~solids weand ~~have~~alternate ~~advanced~~dosage ~~funds~~forms tosuch ~~several~~as ~~unaffiliated~~extended-release ~~companies~~oral ~~for~~solids, ~~products~~injectables, intopicals, ~~various~~nasal ~~stages~~sprays, ofophthalmics, ~~development. As~~films aand ~~result~~transdermal patches. As of ~~our~~December ~~product~~31, ~~development program~~2014, ~~we or~~ our ~~strategic~~pipeline ~~partners~~included ~~currently~~over ~~had~~200 ~~approximately~~products, 85115 ~~ANDAs~~of inwhich ~~development,~~are ~~73 ANDAs~~ pending ~~with~~at the FDA, including 2732 ~~confirmed~~potential first-to-file ~~products~~ and ~~four~~six potential first-to-market opportunities, asand ofapproximately ~~the~~100 ~~fourth~~more ~~quarter~~products ofin ~~2013~~development.

~~Strativa~~Our ~~Pharmaceuticals~~research –and ~~Branded~~development ~~Products~~activities ~~Division~~for generic products consist principally of (i) identifying and conducting patent and market research on branded drugs for which patent protection has expired or is expected to expire in the near future, (ii) identifying and conducting patent and market research on branded drugs for which we believe the patents are invalid or for which we believe we can develop a non-infringing formulation, (iii) researching and developing new product formulations based upon such drugs and (iv) introducing technology to improve production efficiency and enhance product quality. The scientific process of developing new products and obtaining FDA approval is complex, costly and time-consuming; there can be no assurance that any products will be developed, regardless of the amount of time and money spent on research and development. The development of products may be curtailed at any stage of development due to the introduction of competing generic products or other reasons.

The ~~first~~research ~~step~~and indevelopment ~~obtaining~~of ~~FDA~~our ~~approval~~generic ~~for~~pharmaceutical aproducts, ~~drug~~including ~~that has not been previously approved is~~ pre-~~clinical~~formulation ~~testing.~~research, ~~Pre-clinical~~process ~~tests~~and ~~are~~formulation ~~intended~~development, torequired ~~provide~~studies aand ~~laboratory~~FDA ~~evaluation~~review ofand ~~the product to determine its chemistry~~approval, ~~formulation~~has ~~and~~historically ~~stability.~~taken ~~Toxicology~~approximately ~~studies~~two ~~are~~to ~~also~~three ~~performed~~years to ~~assess~~complete. ~~the~~In ~~potential~~addition, ~~safety~~ANDAs ~~and~~containing ~~efficacy~~a ofParagraph ~~the~~IV ~~product.~~patent ~~The~~challenge ~~results of these studies~~ are ~~submitted~~subject to ~~the~~a ~~FDA~~30-month ~~as part of an Investigational New Drug Application (~~“~~IND~~stay”). ~~The~~of ~~toxicology~~regulatory ~~studies~~approval ~~are~~during ~~analyzed~~the toresolution ~~ensure~~of ~~that~~related ~~clinical~~patent ~~trials can safely proceed~~litigation. ~~There~~Accordingly, iswe atypically ~~30-day~~select ~~period~~products infor ~~which~~development ~~the~~that ~~FDA~~we ~~can~~intend ~~raise~~to ~~concerns~~market ~~regarding~~several ~~the~~years ~~trials proposed~~ in anthe ~~IND~~future. ~~If the FDA raises any concerns~~However, the ~~developer~~length ~~must~~of ~~address~~time ~~those~~necessary ~~concerns~~to ~~before~~bring ~~the~~a ~~clinical~~product ~~trials~~to market can ~~begin.~~vary Ansignificantly ~~IND~~and ~~becomes~~depends ~~effective~~on, ~~after~~among ~~such~~other 30things, ~~day period if~~ the ~~FDA~~availability ~~does~~of ~~not~~funding, ~~raise~~challenges ~~any~~relating ~~concerns. Prior~~ to ~~the~~formulation ~~start~~or ofestablishing ~~any clinical study~~bioequivalence, anand ~~independent~~patent ~~institutional~~challenges ~~review~~associated ~~board~~with ~~must~~the ~~review and approve such study~~product.

~~There~~We contract with outside laboratories to conduct bioequivalence studies, which, in the case of oral solids, generally are ~~three~~required ~~main~~in ~~stages~~order to obtain FDA approval. These studies are used to establish that there is an absence of a significant difference in the rate and extent for absorption of the generic product and the corresponding branded drug. Each bioequivalence study can cost up to approximately $4 million. In some instances, we may also be required to perform clinical ~~trial~~studies ~~development:~~in patients, which could cost up to approximately $9 million. In January 2015, we acquired bioequivalence and clinical end point study capabilities through our acquisition of Par Biosciences Private Limited (formerly known as Ethics Bio Lab Private Limited), which will decrease our dependence on third parties for such services in the future.

•From Intime ~~Phase~~to Itime, we enter into product development and license agreements with various third parties with respect to the ~~drug~~development isor ~~tested~~marketing ~~for~~of ~~safety,~~new ~~absorption~~products. Pursuant to these agreements, ~~tolerance~~we ~~and~~have ~~metabolism~~advanced infunds ato ~~small~~several ~~number~~unaffiliated companies for products in various stages of ~~subjects~~development.

•Par InSpecialty ~~Phase~~Pharmaceuticals ~~II, after successful Phase I evaluations, the drug is tested for efficacy in a limited number of patients. The drug is further tested for safety, absorption, tolerance and metabolism.~~

•Our Incurrent ~~Phase~~strategy ~~III,~~for ~~after~~developing ~~successful~~the ~~Phase~~Par IISpecialty ~~evaluations,~~branded ~~further~~products ~~tests~~portfolio ~~are~~is ~~done~~ to ~~determine~~bypass ~~safety~~the ~~and~~substantial ~~efficacy~~investments inassociated awith ~~larger~~the ~~number~~development of ~~patients~~branded ~~who~~drugs, ~~are~~and instead to ~~represent~~focus on the ~~population~~profitability of Nascobal® Nasal Spray. In addition, we will consider opportunities to add to our portfolio of branded drugs through in-licensing ~~which~~and the ~~drug~~acquisition ~~will~~of ~~eventually~~late-stage bedevelopment ~~used~~products or currently marketed products.

The developer then submits an NDA containing the results from the pre-clinical and clinical trials. The NDA drug development and approval process takes from approximately three to ten years or more. Our current strategy for developing the Strativa portfolio is to bypass the substantial investments associated with the development of drugs through this process, and instead to focus on the profitability of our existing brand products (Megace® ES and Nascobal®). In addition, we will consider opportunities to add to our portfolio of branded, single-source prescription drug products through in-licensing and the acquisition of late-stage development products or currently marketed products.

MARKETING AND CUSTOMERS

We market our generic products principally to wholesalers, drug store chains, supermarket chains, mass merchandisers, distributors, mail order accounts, hospitals and the government,. ~~principally~~Par ~~through~~Specialty ~~our~~Pharmaceuticals ~~internal staff. Strativa’s~~ products are marketed by its sales force of approximately 60 people, which communicates the therapeutic, ~~health~~ and ~~economic~~health benefits of our branded products to healthcare providers and managed care organizations. Some of our wholesalers and distributors purchase products and warehouse those products for certain retail drug store chains, independent pharmacies and managed health care organizations. Customers in the managed health care market include health maintenance organizations, nursing homes, hospitals, clinics, pharmacy benefit management companies and mail order customers.

We have approximately 60120 customers, some of which are part of ~~larger~~large buying groups. In the year ended December 31, ~~2013~~2014, our four largest customers in terms of net sales ~~dollars~~ accounted for approximately 70% of our total ~~revenues~~net revenue. We do not have written agreements that guarantee future business with any of these major customers, and the loss of any one or more of these customers or the substantial reduction in orders from any of such customers could have a material adverse effect on our operating results, prospects and financial condition.

~~Compliant~~ Manufacturing ~~Capacity~~

We are committed to high product quality standards and allocate significant ~~capital~~resources and ~~resources~~focus to quality assurance, quality control and manufacturing excellence. As aWe ~~result~~operate offive ~~our~~FDA ~~recent~~approved ~~acquisitions, we now have four state-of-the art~~ manufacturing facilities, ~~three~~four of which are located in the United States ~~and~~(Chestnut ~~one in India. In addition~~Ridge, ~~all~~New ofYork; ~~our facilities have passed all recent FDA inspections (~~Rochester, MIMichigan; ~~in February 2014,~~ Irvine, CACalifornia; inand ~~December~~as ~~2013,~~of ~~Spring~~January ~~Valley~~9, NY2015, inStratford, ~~February~~Connecticut) ~~2013~~ and ~~Chennai,~~one ~~India~~

in ~~October~~India ~~2013~~(Chennai), with ample capacity and room for expansion. ~~Since~~ ~~2007~~These facilities handle the production, assembly, quality assurance testing and packaging of our products. We estimate that for the products we manufacture internally, our U.S. facilities contributed 98% of our manufacturing production based on revenues compared to 2% in India. Our facilities have passed all recent FDA inspections and we have not received any warning letters from the FDA with respect to manufacturing plants we have operated, ~~which~~since webefore ~~believe~~2000. ~~differentiates~~Manufacturing usand ~~from~~supply ~~many~~reliability ~~generic~~has become increasingly valuable to customers as the FDA has increased scrutiny of generics manufacturers.

~~High-quality~~In ~~manufacturing~~addition, ~~and~~we ~~supply~~have ~~reliability~~strategic ~~has~~alliances ~~become~~and ~~increasingly~~relationships ~~valuable~~with toseveral ~~customers~~pharmaceutical asand ~~the~~chemical ~~FDA~~companies ~~has~~that ~~increased~~provide ~~scrutiny~~us ofwith ~~generics~~products ~~manufacturers. Moreover,~~for ~~within~~sale aunder ~~price~~various ~~band~~distribution, wemanufacturing, ~~believe~~development ~~customers~~and ~~find~~licensing ~~supply reliability to be the most important factor in choosing a supplier~~agreements. As ~~a result, we believe we have differentiated ourselves historically by the quality~~ of ~~our~~December ~~manufacturing~~31, ~~and supply reliability. In fact~~2014, we ~~have~~manufactured ~~not experienced a meaningful supply delivery disruption since 2007~~ and/or atdistributed ~~times have been able to capitalize on competitors’ past manufacturing issues. For example,~~ a ~~generic~~total ~~competitor vacated the market for divalproex, the generic version~~ of ~~Depakote®,~~approximately in95 ~~June 2013~~products. AsOf ~~a result~~these, ~~our~~we ~~sales~~manufactured ~~volume~~ and ~~unit~~distributed ~~price~~approximately ~~for~~70 ~~our~~products, ~~divalproex~~and ~~were~~we ~~benefited,~~distributed ~~placing~~approximately ~~the~~25 ~~product~~products ~~among~~that ~~our~~were ~~top~~manufactured ~~five~~ by ~~revenue for 2013~~others.

ORDER BACKLOG

The ~~approximate~~value ~~dollar amount~~ of open purchase orders (gross sales basis), ~~believed~~which by management believes to be firm as of December 31, ~~2013~~2014, was approximately $~~44.9~~69 million. These orders represent unfilled orders as of December 31, ~~2013~~2014, along with orders that were scheduled to be shipped at December 31, ~~2013~~2014. Open orders are subject to cancellation without penalty.

COMPETITION

The pharmaceutical industry is highly competitive. At times, we may not be able to differentiate our products from our competitors’ products, successfully develop or introduce new products that are less expensive than our competitors’ products, or offer purchasers payment and other commercial terms as favorable as those offered by our competitors. We believe that our principal generic competitors are Teva Pharmaceutical Industries Limited (“Teva”), Sandoz ~~Pharmaceuticals~~(a division of Novartis AG) (“Sandoz”), Mylan ~~Laboratories,~~Inc. (“Mylan”) and Actavis ~~Group~~plc (“Actavis”), based upon ~~sales~~the ~~volumes~~markets in which we compete. Our ~~principal~~ strategy focuses on high-value, first-to-file or first-to-market opportunities, regardless of therapeutic category. By specializing in ~~addressing~~high-barrier-to-entry ~~our~~products ~~generic~~that ~~competition~~are iseither difficult to ~~offer~~manufacture ~~customers~~or arequire ~~consistent~~complex ~~supply~~legal ofchallenges, awe ~~broad~~endeavor ~~line~~to ofmarket ~~generic~~more ~~drugs~~profitable atand ~~competitive~~longer-lived ~~pricing~~products relative to our competitors. There can be no assurance, however, that this strategy will enable us to compete successfully in the industry or that we will be able to develop and implement any new or additional viable strategies.

The Hatch-Waxman amendments to the ~~Federal~~FDCA ~~Food, Drug, and Cosmetic Act~~ provide for a period of 180 days of generic marketing exclusivity for each applicant that is first-to-file an ANDA containing a ~~certification of invalidity, non-infringement or unenforceability related to a patent listed with respect to the corresponding brand drug (commonly referred to as a “~~Paragraph IV certification”). The holder of an approved first-to-file ANDA ~~containing a Paragraph IV certification~~ that is successful in challenging the applicable ~~brand~~branded drug patent(s) generally enjoys higher market share and ~~revenues~~revenue during this period of marketing exclusivity. At the expiration of the exclusivity period, other generic distributors may enter the market, resulting in a significant price decline for the drug. (In some instances, price declines have exceeded 90%.) As a result of price declines, we may at our discretion provide price adjustments to our customers for the difference between our new (lower) price and the price at which we previously sold the product then held in inventory by our customers. These types of price adjustments are commonly known as shelf stock adjustments. There are circumstances under which, as a matter of business strategy, we may decide not to provide price adjustments to certain customers, and consequently, we may receive returns of our customers' unsold products and lose future sales volume to competitors rather than reduce our pricing.

Competition in the generic drug industry has also increased due to the advent of authorized generics. “ Authorized generics” are generic pharmaceutical products that are introduced by brand companies, either directly or through ~~partnering~~third ~~arrangements~~parties, ~~with~~under ~~other~~the ~~generic~~brand’s ~~companies~~NDA approval. Authorized generics ~~are~~may ~~equivalent~~be tosold ~~the~~during ~~brand~~(and ~~companies’~~after) ~~brand~~the ~~name~~statutory ~~drugs,~~exclusivity ~~but~~period ~~are~~granted ~~sold~~to atthe ~~relatively~~first-to-file ~~lower~~generic ~~prices~~equivalent ~~than~~to the ~~brand~~branded ~~name drugs~~product. This is a significant source of competition for us, because brand companies do not face any regulatory barriers to introducing a generic version of their own ~~brand~~branded ~~name~~ drugs. Further, authorized generics may be sold during any period of generic marketing exclusivity granted to a generic company, which significantly undercuts the profits that a generic company could otherwise receive as an exclusive marketer of a generic product. Such actions have the effect of reducing the potential market share and profitability of our generic products and may inhibit us from introducing generic products corresponding to certain ~~brand~~branded ~~name~~ drugs. We have also marketed authorized generics in partnership with brand companies, including during the exclusivity periods of our generic competitors.

Increased price competition has also resulted from consolidation among wholesalers and retailers and the formation of large buying groups, which has caused reductions in sales prices and gross margin. This competitive environment has led to an increase in customer demand for downward price adjustments from the distributors of generic pharmaceutical products. Such price reductions are likely to continue, or even increase, which could have a material adverse effect on our ~~revenues~~revenue and gross margin.

The principal competitive factors in the generic pharmaceutical market include: (i) introduction of other generic drug manufacturers’ products in direct competition with our products, (ii) introduction of authorized generic products in direct competition with our products, particularly during exclusivity periods, (iii) consolidation among distribution outlets through mergers and acquisitions and the formation of buying groups, (iv) ability of generic competitors to quickly enter the market after the expiration of patents or exclusivity periods, diminishing the amount and duration of significant profits, (v) the willingness of generic drug customers, including wholesale and retail customers, to switch among pharmaceutical manufacturers, (vi) pricing pressures by competitors and customers, (vii) a company’s reputation as a manufacturer and distributor of quality products, (viii) a company’s level of service (including maintaining sufficient inventory levels for timely deliveries), (ix) product appearance and labeling, and (x) a company’s breadth of product offerings.

~~Our~~• ~~brand~~introduction ~~products~~of ~~benefit~~other ~~from~~generic ~~patent~~drug ~~protection,~~manufacturers’ ~~making~~products ~~them~~in ~~subject~~direct tocompetition ~~Paragraph~~with ~~IV patent challenges that could jeopardize~~ our ~~market exclusivity for these~~ products~~. Consequently~~, ~~competition from generic equivalents, and especially a successful~~


•	introduction of authorized generic products in direct competition with our products, particularly during exclusivity periods,


•	consolidation among distribution outlets through mergers and acquisitions and the formation of buying groups,


•	ability of generic competitors to quickly enter the market after the expiration of patents or exclusivity periods, diminishing the amount and duration of significant profits,


•	the willingness of generic drug customers, including wholesale and retail customers, to switch among products of different pharmaceutical manufacturers;


•	pricing pressures by competitors and customers,

~~Paragraph~~• IVa ~~patent~~company’s ~~challenge~~reputation ~~against~~as ~~one of our brand products, could have an adverse effect on Strativa. In addition, after patent protections expire, generic products can be sold in the market at~~ a ~~significantly~~manufacturer ~~lower cost than the brand version,~~ and, ~~where~~distributor available, may be required or encouraged in preference to the brand version under third party reimbursement programs, or substituted by pharmacies for brand versions by law. Strativa also faces competition from other brand drug companies. Many of ~~our~~quality brand competitors have longer operating histories and greater financial, research and development, marketing and other resources than we do. Consequently, many of our brand competitors may be able to develop products ~~superior to our own. Furthermore~~, we may not be able to differentiate our products from those of our brand competitors or offer customers payment and other commercial terms as favorable as those offered by our brand competitors. The markets in which we compete and intend to compete are undergoing, and are expected to continue to undergo, rapid and significant change. We expect brand competition to intensify as technological advances and consolidations continue.


•	a company’s level of service (including maintaining sufficient inventory levels for timely deliveries),


•	product appearance and labeling, and


•	a company’s breadth of product offerings.

Our branded products benefit from patent protection, making them subject to Paragraph IV patent challenges that could jeopardize our market exclusivity for these products. Consequently, competition from generic equivalents following a successful Paragraph IV patent challenge against one of our branded products could have an adverse effect on Par Specialty. In addition, after patent protections expire, generic products can be sold in the market at a significantly lower cost than the branded version, and, where available, may be required or encouraged in preference to the branded version under third party reimbursement programs. Generic products may also be substituted for branded products by pharmacies, and state laws sometimes require pharmacies to effect such substitution. Par Specialty also faces competition from other brand drug companies. Many of our brand competitors have longer operating histories, broader product portfolios and greater financial, research and development, marketing and other resources than we do. Consequently, many of our brand competitors may be able to develop products superior to our own. Furthermore, we may not be able to differentiate our products from those of our brand competitors or offer customers payment and other commercial terms as favorable as those offered by our brand competitors. The markets in which we compete and intend to compete are undergoing, and are expected to continue to undergo, rapid and significant change. We expect brand competition to intensify as technological advances and consolidations continue.

RAW MATERIALS

The raw materials essential to our manufacturing business are purchased primarily from U.S. distributors of bulk pharmaceutical chemicals manufactured by foreign companies. To date, we have experienced no significant difficulties in obtaining raw materials and expect that raw materials will generally continue to be available in the future. However, because the federal drug application process requires specification of raw material suppliers, if raw materials from a specified supplier were to become unavailable, FDA approval of a new supplier would be required. A delay of six months or more in the manufacture and marketing of the drug involved while a new supplier becomes qualified by the FDA and its manufacturing process is determined to meet FDA standards could, depending on the particular product, have a material adverse effect on our results of operations and financial condition. Generally, we attempt to mitigate the potential effects of any such situation by providing for, where economically and otherwise feasible, two or more suppliers of raw materials for the drugs that we manufacture. In addition, we may attempt to enter into a contract with a raw material supplier in an effort to ensure adequate supply for ~~our~~certain products.

EMPLOYEES

At December 31, ~~2013~~2014, we had ~~978~~approximately ~~employees~~1,600 ~~none of which were covered by any collective bargaining agreement. As a result of our acquisition of JHP on February 20, 2014, we had approximately1,450~~ employees ~~as of that date~~, of which approximately 200 employees are covered by a collective bargaining agreement. We consider our employee relations to be good.

GOVERNMENT REGULATION

The development, manufacturing, sales, marketing and distribution of our products are subject to extensive ~~governmental~~ regulation by the U.S. federal government, principally the FDA, and, as applicable, the Drug Enforcement Agency, FTC and state and local governments. For both currently marketed and future products, failure to comply with applicable regulatory requirements can, among other things, result in suspension of regulatory approval and possible civil and criminal sanctions. Regulations, enforcement positions, statutes and legal interpretations applicable to the pharmaceutical industry are constantly evolving and are not always clear. Significant changes in regulations, enforcement positions, statutes and legal interpretations could have a material adverse effect on our financial condition and results of ~~operation~~operations.

~~The~~Additionally, ~~enactment~~future ~~of current U.S.~~ healthcare ~~reform~~legislation ~~has~~or aother ~~significant~~legislative ~~impact~~proposals onat ~~our business. As examples,~~ the ~~current~~federal ~~legislation~~and ~~includes~~state ~~measures~~levels ~~that~~could ~~(i)~~bring ~~significantly~~about ~~increase~~major ~~Medicaid~~changes ~~rebates~~in ~~through both~~ the ~~expansion~~affected ofhealth ~~the~~care ~~program~~systems, ~~and~~including ~~significant~~statutory ~~increases~~restrictions inon ~~rebates;~~the ~~(ii)~~means ~~substantially~~that ~~expand~~can ~~the~~be ~~Public~~employed ~~Health~~by ~~System~~brand ~~(340B)~~and ~~program~~generic topharmaceutical ~~allow~~companies ~~other entities~~ to ~~purchase~~settle ~~prescription~~Paragraph ~~drugs~~IV atpatent ~~substantial~~litigations. ~~discounts;~~We ~~(iii)~~cannot ~~extend~~predict the ~~Medicaid~~outcome ~~rebate rate to a significant portion~~ of ~~Managed~~such ~~Medicaid~~initiatives, ~~enrollees;~~but ~~(iv)~~such ~~assess~~initiatives, aif ~~50%~~passed, ~~rebate~~could onresult ~~Medicaid Part D spending~~ in ~~the coverage gap for branded and authorized generic prescription drugs; and (v) levy a~~ significant ~~excise~~costs ~~tax on the industry~~ to ~~fund~~us ~~the~~in ~~healthcare~~terms ~~reform.~~of ~~The~~costs ~~impacts~~ of ~~these~~compliance ~~provisions~~and ~~are~~penalties ~~included~~associated inwith ~~our~~failure ~~current~~to ~~financial statements~~comply.

~~Additionally~~The FDCA, ~~future~~the ~~healthcare~~Controlled ~~legislation~~Substances orAct and other ~~legislative~~federal ~~proposals~~statutes atand ~~the~~regulations ~~federal~~govern ~~and~~the ~~state~~development, ~~levels~~testing, ~~could~~manufacture, ~~bring~~safety, ~~about~~effectiveness, ~~major~~labeling, ~~changes~~storage, inrecord ~~the~~keeping, ~~affected~~approval, ~~health~~import ~~care~~and ~~systems~~export, ~~including~~and ~~statutory~~advertising ~~restrictions~~and onpromotion ~~the~~of ~~means~~our ~~that~~products. ~~can~~Non-compliance bewith ~~employed~~applicable byregulations ~~branded~~can result in judicially and/or ~~generic~~administratively ~~pharmaceutical~~imposed ~~companies~~sanctions, toincluding ~~settle~~the ~~Paragraph~~initiation IVof ~~patent~~product ~~litigations~~seizures, injunctions, fines and criminal prosecutions. WeAdministrative ~~cannot~~enforcement ~~predict~~measures may involve the ~~outcome~~recall of ~~such initiatives~~products, ~~but~~as ~~such~~well ~~initiatives,~~as ifthe ~~passed,~~refusal ~~could~~of ~~result~~an inapplicable ~~significant~~government ~~costs~~authority to usenter ininto ~~terms~~supply ofcontracts ~~costs~~or ofto ~~compliance~~approve NDAs and ~~penalties~~ANDAs. ~~associated~~The ~~with~~FDA ~~failure~~also has the authority to ~~comply~~withdraw its approval of drugs in accordance with its regulatory due process procedures.

The Federal Food, Drug, and Cosmetic Act, the Controlled Substances Act and other federal statutes and regulations govern the development, testing, manufacture, safety, effectiveness, labeling, storage, record keeping, approval, advertising and promotion of our products. Non-compliance with applicable regulations can result in judicially and/or administratively imposed sanctions, including the initiation of product seizures, injunctions, fines and criminal prosecutions. Administrative enforcement measures may involve the recall of products, as well as the refusal of an applicable government authority to enter into supply contracts or to approve new drug applications. The FDA also has the authority to withdraw its approval of drugs in accordance with its regulatory due process procedures.

New Drug Applications and Abbreviated New Drug Applications

FDA approval is required before any new drug, including a generic equivalent of a previously approved ~~brand~~branded ~~name~~ drug, may be marketed. To obtain FDA approval for a new drug, a prospective manufacturer must, among other things, ~~as discussed below,~~ demonstrate that its manufacturing facilities comply with the FDA’s current Good Manufacturing Practices (“cGMP”) regulations., ~~The~~which ~~FDA may inspect the manufacturer’s facilities to ensure such compliance prior to approval or at any other time. The manufacturer~~ is ~~required~~discussed ~~to comply with cGMP regulations at all times during the manufacture and processing of drugs. To comply with the standards set forth~~ in ~~these regulations, we must continue to expend significant time, money and effort in the areas of production, quality control and quality assurance.~~

In order to obtain FDA approval of a new drug, a manufacturer must demonstrate the drug’s safety and effectiveness. There currently are two ways to satisfy the FDA’s safety and effectiveness requirements:9

1.further ~~New~~detail ~~Drug Applications (NDAs): Unless the procedure discussed in paragraph 2~~ below. isThe ~~permitted~~FDA ~~under~~may inspect the ~~Federal Food, Drug, and Cosmetic Act, a prospective~~ manufacturer’s ~~must~~facilities ~~submit~~ to ~~the~~ensure ~~FDA~~such ancompliance ~~NDA~~prior ~~containing~~to ~~complete~~approval ~~pre-clinical~~or ~~and~~at ~~clinical~~any ~~safety~~other ~~and~~time. ~~efficacy~~The ~~data~~manufacturer oris arequired ~~right of reference~~ to ~~such~~comply ~~data.~~with ~~The~~cGMP ~~pre-clinical~~regulations ~~data~~at ~~must~~all ~~provide~~times anduring ~~adequate basis for evaluating~~ the ~~safety~~manufacture and ~~scientific~~processing ~~rationale for the initiation~~ of ~~clinical trials~~drugs. ~~Clinical~~To ~~trials~~comply ~~are~~with ~~conducted~~the instandards ~~three~~set ~~sequential~~forth ~~phases~~in ~~and~~these ~~may~~regulations, ~~take~~we upmust tocontinue ~~several years~~ to ~~complete.~~expend Atsignificant ~~times~~time, ~~the~~money ~~phases may overlap. Data from pre-clinical testing~~ and ~~clinical~~effort ~~trials~~in ~~is submitted to~~ the ~~FDA~~areas asof anproduction, ~~NDA~~quality ~~for~~control ~~marketing~~and ~~approval~~quality assurance.

2.In ~~Abbreviated~~order ~~New Drug Applications (ANDAs): The Hatch-Waxman amendments~~ to ~~the~~obtain ~~Federal Food, Drug, and Cosmetic Act established a statutory procedure for submission and~~ FDA ~~review and~~ approval of ~~ANDAs~~a ~~for~~new generic versions of brand name drugs previously approved by the FDA (such previously approved drugs are referred to as “listed drugs”). Because the safety and efficacy of listed drugs have already been established by the brand companydrug, ~~the FDA waives the requirement for complete clinical trials. However,~~ a ~~generic~~ manufacturer ismust ~~typically~~demonstrate ~~required to conduct bioavailability/bioequivalence studies of its test product against~~ the ~~listed~~ drug.’s ~~The~~safety ~~bioavailability/bioequivalence studies assess the rate~~ and ~~extent of absorption and concentration levels of a drug in the blood stream required to produce a therapeutic effect~~efficacy. ~~Bioequivalence~~There iscurrently ~~established when the rate of absorption and concentration levels of a generic product~~ are ~~substantially~~two ~~equivalent~~ways to ~~the~~satisfy ~~listed drug. For some drugs (e.g., topical anti-fungals), other means of demonstrating bioequivalence may be required by~~ the FDA,’s ~~especially~~safety ~~where rate~~ and~~/or~~ ~~extent~~effectiveness ~~of absorption are difficult or impossible to measure. In addition to the bioequivalence data, an ANDA must contain patent certifications and chemistry, manufacturing, labeling and stability data.~~ requirements:

~~The~~• ~~Hatch-Waxman~~New ~~amendments~~Drug ~~also~~Applications ~~established~~(NDAs). ~~certain~~Unless ~~statutory~~the ~~protections~~procedure ~~for~~discussed ~~listed~~in ~~drugs. Under~~ the ~~Hatch-Waxman~~following ~~amendments,~~paragraph ~~approval~~is ofpermitted anunder ~~ANDA~~the ~~for~~FDCA, a ~~generic~~prospective ~~drug~~manufacturer ~~may~~generally ~~not~~must besubmit ~~made~~to ~~effective~~the ~~for~~FDA ~~interstate~~an ~~marketing~~NDA ~~until~~containing ~~all~~complete ~~relevant~~pre-clinical ~~patents~~and ~~for~~clinical ~~the~~safety ~~listed~~and ~~drug~~efficacy ~~have~~data ~~expired~~ or ~~been~~a ~~determined~~right of reference to besuch ~~invalid~~data. orThe ~~not~~pre-clinical ~~infringed~~data bymust provide an adequate basis for evaluating the ~~generic~~safety ~~drug.~~and ~~Prior~~scientific torationale ~~enactment~~for the initiation of ~~the~~clinical ~~Hatch-Waxman~~trials. ~~amendments,~~Clinical ~~the~~trials ~~FDA~~are ~~did~~conducted ~~not~~in ~~consider~~three ~~the~~sequential ~~patent~~phases ~~status~~and ofmay atake ~~previously~~up ~~approved~~to ~~drug~~several years to complete. InAt ~~addition~~times, ~~under~~ the ~~Hatch-Waxman~~phases ~~amendments,~~may ~~statutory~~overlap. ~~non-patent~~Data ~~exclusivity~~from ~~periods~~pre-clinical ~~are~~testing ~~established~~and ~~following~~clinical ~~approval~~trials ofis ~~certain~~submitted ~~listed~~to ~~drugs,~~the ~~where~~FDA ~~specific~~as ~~criteria~~an ~~are~~NDA ~~met~~for bymarketing ~~the drug~~approval. IfThe ~~exclusivity~~FDA is, ~~applicable~~however, authorized to aapprove ~~particular~~an ~~listed~~alternative ~~drug,~~type ~~the~~of ~~effective~~NDA ~~date~~under ofSection ~~approval~~505(b)(2) of ~~ANDAs~~the ~~for~~FDCA. Section 505(b)(2) permits the ~~generic~~filing ~~version~~of an NDA where at least some of the ~~listed~~information ~~drug~~required isfor ~~usually~~approval ~~delayed~~comes ~~until~~from ~~the~~studies ~~expiration~~not ofconducted by or for the ~~exclusivity~~applicant ~~period,~~and for which, ~~for~~the ~~newly~~applicant ~~approved~~has ~~drugs,~~not ~~can~~obtained bea ~~either~~right ~~three~~of orreference ~~five~~from ~~years~~the data owner. The ~~Hatch-Waxman~~applicant ~~amendments~~may ~~also~~rely ~~provide~~upon ~~for~~the ~~extensions~~FDA's findings of upsafety toand ~~five~~efficacy ~~years~~ for ~~certain~~an ~~patents~~approved ~~covering~~product ~~drugs~~that toacts ~~compensate~~as the ~~patent~~“listed ~~holder~~drug.” ~~for~~The ~~the~~FDA ~~reduction~~may inalso ~~the~~require ~~effective~~505(b)(2) ~~market~~applicants ~~life~~to ofperform ~~the~~additional ~~patented~~studies ~~drug~~or ~~resulting~~measurements ~~from~~to support the ~~time~~change ~~spent~~from in the ~~federal~~listed ~~regulatory review process~~drug.

~~During~~• ~~1995,~~Abbreviated ~~patent~~New ~~terms~~Drug ~~for~~Applications (ANDAs). The Hatch-Waxman amendments to the FDCA established a ~~number~~statutory procedure for submission and FDA review and approval of ~~listed~~ANDAs for generic versions of branded drugs ~~were~~previously ~~extended~~approved ~~when~~by the ~~Uruguay~~FDA ~~Round~~(such ~~Agreements~~previously ~~Act~~approved ~~(the~~drugs are referred to as “~~URAA~~listed drugs”). ~~went~~Because ~~into~~the ~~effect~~safety inand ~~order~~efficacy toof ~~implement~~listed ~~the~~drugs ~~General~~have ~~Agreement~~already onbeen ~~Tariffs~~established ~~and~~by ~~Trade~~the ~~(“GATT”)~~brand tocompany, ~~which~~ the ~~United~~FDA ~~States~~waives ~~became~~the arequirement ~~treaty~~for ~~signatory~~complete inclinical ~~1994~~trials. ~~Under GATT~~However, ~~the~~a ~~term~~generic ofmanufacturer ~~patents~~is ~~was~~typically ~~established~~required asto 20conduct ~~years~~bioequivalence ~~from~~studies ~~the~~of ~~date~~its oftest ~~patent~~product ~~application~~against the listed drug. InThe ~~the~~bioequivalence ~~United~~studies ~~States~~for orally administered, systemically available drug products assess the ~~patent~~rate ~~terms~~and ~~historically~~extent ~~have~~to ~~been~~which ~~calculated~~the atactive 17pharmaceutical ~~years~~ingredient is absorbed into the bloodstream from the ~~date~~drug ofproduct ~~patent~~and ~~grant~~becomes available at the site of action. ~~The~~Bioequivalence ~~URAA~~is ~~provided~~established ~~that~~when ~~the~~there ~~term~~is an absence of ~~issued~~a ~~patents~~significant bedifference ~~either~~in the ~~existing~~rate 17and ~~years~~extent ~~from~~for absorption of the ~~date~~generic ofproduct ~~patent~~and ~~grant~~the orlisted 20drug. ~~years~~For ~~from~~some ~~the~~drugs ~~date~~(e.g., oflocally ~~application~~acting drugs like topical anti-fungals), ~~whichever~~other ~~was~~means ~~longer.~~of ~~The~~demonstrating ~~effect~~bioequivalence ~~generally~~may ~~was~~be torequired ~~extend~~by the ~~patent~~FDA, ~~life~~especially where rate and/or extent of ~~already~~absorption ~~issued~~are ~~patents~~difficult or impossible to measure. In addition to the bioequivalence data, ~~thus~~an ~~delaying~~ANDA ~~FDA~~must ~~approvals~~contain ofpatent ~~applications~~certifications ~~for~~and ~~generic~~chemistry, ~~products~~manufacturing, labeling and stability data.

~~The~~Supplemental ~~Medicare~~NDAs ~~Prescription~~or ~~Drug~~ANDAs ~~Improvement~~are ~~and~~required ~~Modernization~~for, ~~Act~~among ofother ~~2003~~things, ~~streamlined~~approval ~~the~~to ~~generic~~transfer ~~drug~~certain ~~approval~~products ~~process~~from byone ~~limiting~~manufacturing asite ~~drug company~~ to ~~only~~another ~~one~~or ~~30-month~~to ~~stay~~change ofan aAPI ~~generic~~supplier, ~~drug’s~~and ~~entry~~may ~~into~~be ~~the~~under ~~market~~review for ~~resolution of~~ a ~~patent~~year ~~challenge~~or ~~for~~more. ~~ANDAs~~In ~~filed after August 18~~addition, ~~2003.~~certain ~~This~~products ~~rule~~may ~~was~~only ~~designed~~be toapproved ~~help~~for ~~maintain~~transfer aonce ~~balance~~new ~~between~~bioequivalence ~~the~~studies ~~brand~~are ~~companies’~~conducted ~~intellectual~~or ~~property~~other ~~rights~~requirements ~~and~~are ~~the desire to allow generic drugs to be brought to the market in a timely fashion~~satisfied.

The ~~FDA~~Hatch-Waxman ~~issued~~amendments aalso ~~final~~established ~~rule~~certain onstatutory ~~June~~protections ~~18,~~for ~~2003~~listed (drugs. Under the ~~“final~~Hatch-Waxman ~~rule”)~~amendments, ~~clarifying~~approval ~~the~~of ~~types~~an ofANDA ~~patents~~for ~~that~~a ~~brand~~generic ~~companies~~drug ~~must~~may ~~submit~~not be made effective for ~~listing~~interstate ~~and~~marketing ~~prohibiting~~until all relevant patents for the ~~submission~~listed ofdrug ~~patents~~have ~~claiming~~expired, ~~packaging~~been withdrawn, ~~intermediates~~delisted, or ~~metabolite~~determined ~~innovations~~to be invalid, unenforceable, or not infringed by the generic drug applicant submitting a Paragraph IV certification. ~~Patents~~Prior ~~claiming~~to enactment of the Hatch-Waxman amendments, the FDA did not consider the patent status of a ~~different~~previously ~~polymorphic~~approved ~~form~~drug. In addition, under the Hatch-Waxman amendments, statutory non-patent exclusivity periods are established following approval of certain listed drugs, where specific criteria are met by the ~~active~~drug. ~~ingredient~~For ~~described~~example, infor new chemical entities, an ~~NDA~~ANDA ~~must~~or 505(b)(2) application referencing that drug may not be ~~submitted~~filed ifwith the ~~NDA~~FDA ~~holder~~until ~~has~~the ~~test~~expiration ~~data~~of ~~demonstrating~~five years after approval of that drug, unless the ~~drug~~submission ~~product~~is ~~containing~~accompanied ~~the~~by ~~polymorph~~a ~~will~~Paragraph ~~perform~~IV certification, in which case the ~~same~~applicant ~~way~~may assubmit its application four years following the ~~drug~~original product ~~described~~approval. inThe FDCA also provides for a period of three years of exclusivity if the NDA., ~~These~~including ~~changes~~a ~~are~~505(b)(2) ~~consistent~~NDA, ~~with~~includes ~~concerns~~reports ~~raised~~of inone ~~2002~~or more new clinical investigations, other than bioavailability or bioequivalence studies, that were conducted by or for the ~~FTC~~applicant inand ~~its~~are ~~report~~essential onto ~~generic~~the approval of the application. Additionally, drugs approved for so-called “orphan indications” (those diseases for which the patient population is sufficiently small) are entitled to a seven year data exclusivity period. The ~~final~~Hatch-Waxman ~~rule~~amendments also ~~clarifies~~provide ~~the~~for ~~type~~extensions of ~~patent~~up ~~information~~to ~~that~~five isyears ~~required~~for certain patents covering drugs to becompensate ~~submitted~~the ~~and~~patent ~~revises~~holder for the ~~declaration~~reduction ~~that~~in ~~NDA~~the ~~applicants~~effective ~~must~~market ~~provide~~life ~~regarding~~of ~~their~~the ~~patents~~patented todrug ~~help~~resulting ~~ensure~~from ~~that~~the ~~NDA~~time ~~applicants~~spent ~~submit~~in ~~only~~the ~~appropriate~~federal ~~patents.~~regulatory review process.

~~The~~Upon ~~final~~approval ~~rule~~of ~~was~~an ~~intended~~NDA or a supplement thereto, NDA sponsors are required to ~~make~~list with the FDA each patent ~~submission~~with ~~and~~claims ~~listing~~that, ~~process~~according ~~more~~to ~~efficient~~the NDA holder/patent holder, ascover ~~well~~the asapplicant's product or an approved method of using the product. Each of the patents listed by the NDA sponsor is published in the Orange Book. When an ANDA applicant files its application with the FDA, the applicant is required to ~~enhance~~certify to the FDA concerning any patents listed for the reference product in the Orange Book, except for patents covering methods of use for which the ANDA ~~and~~applicant is not seeking approval. To the extent that the Section 505(b)(2) ~~application~~applicant ~~(described~~is ~~below)~~relying ~~approval~~on ~~process.~~studies ~~The~~conducted ~~changes~~for ~~were~~an ~~designed~~already approved product, the applicant is required to ~~enable~~certify ~~consumers~~to the FDA concerning any patents listed for the approved product in the Orange Book to ~~save~~the ~~billions~~same ofextent that an ANDA applicant would.

Specifically, the applicant must certify with respect to each patent that:


•	the required patent information has not been filed;


•	the listed patent has expired;


•	the listed patent has not expired, but will expire on a particular date and approval is sought after patent expiration; or

~~dollars~~• ~~each~~the ~~year~~listed bypatent ~~making~~is itinvalid, ~~easier~~unenforceable ~~for~~or ~~generic~~will ~~drug~~not ~~manufacturers~~be toinfringed ~~get~~by ~~safe and effective products on~~ the ~~market~~new ~~when the appropriate patent protection expires~~product.

~~Section~~A ~~505(b)(2)~~certification ~~was~~that ~~added to~~ the ~~Federal~~new ~~Food,~~product ~~Drug,~~will ~~and Cosmetic Act by the Hatch-Waxman amendments. This provision permits the FDA to rely, for approval of an NDA, on data~~ not ~~developed~~infringe by the ~~applicant.~~already Aapproved ~~505(b)(2)~~product's ~~application must include identification of the~~ listed ~~drug~~patents for which the FDA has made a finding of safety and effectiveness and on which finding the applicant relies in seeking approval of its proposed drug product. A 505(b)(2) application may rely on studies published in scientific literature or anthat ~~FDA~~such ~~finding~~patents ofare ~~safety~~invalid ~~and/~~or ~~efficacy~~unenforceable ~~for~~is ancalled ~~approved~~a ~~product~~Paragraph ~~for~~IV ~~support, in addition to clinical studies performed by the applicant~~certification.

~~The~~If ~~approval~~the ofANDA aor 505(b)(2) ~~application~~applicant ~~may~~has ~~result~~provided ina ~~three~~Paragraph ~~years~~IV ofcertification ~~exclusivity~~to ~~under~~ the ~~Hatch-Waxman~~FDA, ~~amendments~~the ifapplicant ~~one~~must oralso ~~more~~send notice of the ~~clinical~~Paragraph ~~studies~~IV ~~(other~~certification ~~than~~to ~~bioavailability/bioequivalence~~the ~~studies)~~NDA ~~was~~and ~~essential~~patent toholders once the ~~approval~~ANDA ofor ~~the~~505(b)(2) application ~~and~~has ~~was~~been ~~conducted~~accepted for filing by the ~~applicant~~FDA. The ~~approval~~NDA ofand apatent ~~505(b)(2)~~holders ~~application~~ may ~~result~~then initiate a patent infringement lawsuit in ~~five~~response ~~years~~to the notice of ~~exclusivity~~the ifParagraph itIV iscertification. ~~for~~The filing of a ~~new~~patent ~~chemical~~infringement ~~entity.~~lawsuit Ifwithin ~~appropriate~~45 ~~under~~days ~~U.S.~~after ~~patent~~the ~~laws,~~receipt of a Paragraph IV certification automatically prevents the FDA from approving the ANDA or 505(b)(2) ~~NDAs~~application ~~are~~until ~~eligible for~~ the ~~FDA’s~~earlier ~~patent~~of ~~certification~~30 ~~protection.~~months ~~Such~~after ~~approvals~~the ~~have~~receipt of the ~~potential~~Paragraph toIV benotice, ~~delayed~~expiration ~~due~~of tothe patent, ~~and~~or ~~exclusivity~~a ~~rights~~decision in the infringement case that ~~apply~~is favorable to the ~~listed~~ANDA ~~drug~~applicant.

On February 6, 2015, the FDA issued proposed regulations concerning submission of patent information to FDA, patent certifications by ANDA and 505(b)(2) applicants, notices of Paragraph IV certifications, and the 30-month stay. We cannot predict when the regulations might be finalized or whether, if finalized, the regulations will be substantially similar to the proposal. When final regulations are promulgated, we will have a clearer view of their impact on this aspect of our business.

With respect to Par Specialty Pharmaceuticals, our current strategy is to bypass the substantial investments associated with the development of branded drugs and instead to focus on the profitability of our existing branded products and consider opportunities to add to our portfolio through in-licensing and acquisition of late-stage development products or currently marketed products. If we were to undertake the process of developing a branded product and bringing it to market, the first step in obtaining FDA approval for a drug that has not been previously approved is pre-clinical testing. Pre-clinical tests are intended to provide a laboratory evaluation of the product to determine its chemistry, formulation and stability. Toxicology studies are also performed to assess the potential safety and efficacy of the product. The results of these studies are submitted to the FDA as part of an investigational new drug (“IND”) application. The toxicology studies are analyzed to ensure that clinical trials can safely proceed. There is a 30-day period in which the FDA can raise concerns regarding the trials proposed in an IND. If the FDA raises any concerns, the developer must address those concerns before the clinical trials can begin. An IND becomes effective after such 30-day period if the FDA does not raise any concerns. Prior to the start of any clinical study, an independent institutional review board must review and approve such study.

There are three main stages of clinical trial development:


•	In Phase I, the drug is tested for safety, absorption, tolerance and metabolism in a small number of subjects.


•	In Phase II, after successful Phase I evaluations, the drug is tested for efficacy in a limited number of patients. The drug is further tested for safety, absorption, tolerance and metabolism.


•	In Phase III, after successful Phase II evaluations, further tests are done to determine safety and efficacy in a larger number of patients who are to represent the population in which the drug will eventually be used.

The developer then submits an NDA containing the results from the pre-clinical and clinical trials. The NDA drug development and approval process takes approximately three to ten years or more.

Pricing Regulation

Successful commercialization of our products depends, in part, on the availability of governmental and third-party payor reimbursement for the cost of our products. Government authorities and third-party payors increasingly are challenging the price of medical products and services. On the government side, there is a heightened focus, at both the federal and state levels, on decreasing costs and reimbursement rates in Medicaid, Medicare and other government insurance programs. This has led to an increase in federal and state legislative initiatives related to drug prices, which could significantly influence the purchase of pharmaceutical products, resulting in lower prices and changes in product demand. With respect to the Medicaid program, certain proposed provisions of the Deficit Reduction Act of 2005 went into effect January 1, 2007, and a final rule went into effect as of October 1, 2007, that resulted in changes to certain formulas used to calculate pharmacy reimbursement under Medicaid (currently under a stay of execution). If enacted, these changes could lead to reduced payments to pharmacies. Many states have also created preferred drug lists and include drugs on those lists only when the manufacturers agree to pay a supplemental rebate. If our current products or future drug candidates are not included on these preferred drug lists, physicians may not be inclined to prescribe them to their Medicaid patients, thereby diminishing the potential market for our products.

Moreover, government regulations regarding reporting and payment obligations are complex, and we are continually evaluating the methods we use to calculate and report the amounts owed with respect to Medicaid and other government pricing programs. Our calculations are subject to review and challenge by various government agencies and authorities, and it is possible that any such review could result either in material changes to the method used for calculating the amounts owed to such agency or the amounts themselves. Because the process for making these calculations, and our judgments supporting these calculations, involve subjective decisions, these calculations are subject to audit. In the event that a government authority challenges or finds ambiguity with regard to our report of payments, such authority may impose civil and/or criminal sanctions, which could have a material adverse effect on our business. From time to time we conduct routine reviews of our government pricing calculations. These reviews may have an impact on government price reporting and rebate calculations used to comply with various government regulations regarding reporting and payment obligations.

Healthcare Reform

In the United States, there have been a number of federal and state proposals during the last several years regarding the pricing of pharmaceutical products and other changes to the healthcare system. It is uncertain what other legislative proposals may be adopted

or what actions federal, state, or private payors may take in response to any healthcare reform proposals or legislation. We cannot predict the effect such reforms may have on our business, and no assurance can be given that any such reforms will not have a material adverse effect.

By way of example, in March 2010, the Patient Protection and Affordable Care Act of 2010, as amended by the Health Care and Education Reconciliation Act of 2010, or collectively, the Affordable Care Act, was signed into law, which, among other things, includes changes to the coverage and payment for drug products under government health care programs. The current legislation includes measures that (i) significantly increase Medicaid rebates through both the expansion of the program and significant increases in rebates; (ii) substantially expand the Public Health System (340B) program to allow other entities to purchase prescription drugs at substantial discounts; (iii) extend the Medicaid rebate rate to a significant portion of Managed Medicaid enrollees; (iv) assess a 50% rebate on Medicaid Part D spending in the coverage gap for branded and authorized generic prescription drugs; and (v) levy a significant excise tax on the industry to fund the healthcare reform. The impacts of these provisions are included in our current financial statements.

Fraud and Abuse Regulation

Pharmaceutical companies are subject to various federal and state laws ~~relating~~that toare ~~sales and marketing practices~~ intended to combat health care fraud and abuse~~. These include anti-kickback laws~~, ~~false claims laws~~ and ~~FDA~~that ~~regulation~~govern ofcertain ~~advertising and promotion~~ of ~~pharmaceutical~~our ~~products.~~business Wepractices, ~~have~~especially ~~incurred~~our ~~and~~interactions ~~will continue to incur costs to comply~~ with ~~these~~customers ~~laws. While we intend to comply in all respects with fraud~~ and ~~abuse~~potential ~~laws,~~customers ~~there~~through ~~has~~sales ~~been an increase in government enforcement efforts at both the federal~~ and ~~state level and~~marketing, ~~due~~or toresearch ~~the breadth of regulation~~ and ~~the~~development ~~absence~~activities. ofThese ~~guidance~~include inanti-kickback ~~some cases~~laws, itfalse isclaims ~~possible that our practices might be challenged by government authorities. Violations of fraud and abuse~~ laws, ~~may~~sunshine ~~be punishable by civil and/or criminal sanctions including fines~~laws, ~~civil~~privacy ~~monetary penalties~~laws, asand ~~well~~FDA asregulation ~~the possibility~~ of ~~exclusion~~advertising ~~from~~and ~~federal~~promotion ~~health~~of ~~care~~pharmaceutical ~~programs~~products. ~~Any such violations could have a material adverse effect on our business.~~


•	Anti-kickback laws, of which the Federal health care programs anti-kickback law is most commonly the subject of enforcement proceedings, prohibit, among other things, the knowing and willful offer or payment of remuneration intended to induce, or in exchange for, ordering (or arranging for or recommending ordering) covered products or services, including our products.


•	False claims laws prohibit knowingly presenting, or causing to be presented, claims for payment to third party payers (Medicare and Medicaid) that are false or fraudulent and, under the Federal False Claims Act, a claim is deemed false or fraudulent if it is made pursuant to an illegal kickback.


•	Sunshine laws, including the Federal Open Payments law enacted as part of the Affordable Care Act, require pharmaceutical manufacturers to disclose payments and other transfers of value to physicians and certain other health care providers or professionals, and in the case of some state sunshine laws, restrict or prohibit certain such payments.

•

Privacy laws, such as the privacy regulations implemented under the Health Insurance Portability and Accountability Act (HIPAA), restrict covered entities from using or disclosing protected health information. Covered entities commonly include physicians, hospitals, and health insurers from which we may seek to acquire data to aid in our research, development, sales and marketing activities. Although pharmaceutical manufacturers are not covered entities under HIPAA, our ability to acquire or use protected health information from covered entities may be affected by privacy laws.


•	The FDA regulates the sale and marketing of prescription drug products and, among other things, prohibits pharmaceutical manufacturers from promoting products for unapproved uses.

We have incurred and will continue to incur costs to comply with these laws.

While we intend to comply in all respects with fraud and abuse laws, there has been an increase in government enforcement efforts at both the federal and state level. Numerous cases have been brought against pharmaceutical manufacturers under the Federal False Claims Act, alleging, among other things, that certain sales or marketing-related practices violate the Anti-kickback statute or the FDA’s regulations, and many of these cases have resulted in settlement agreements under which the companies were required to change certain practices, pay substantial fines, and operate under the supervision of a Federally-appointed monitor for a period of years. Due to the breadth of these laws and their implementing regulations and the absence of guidance in some cases, it is possible that our practices might be challenged by government authorities. Violations of fraud and abuse laws may be punishable by civil and/or criminal sanctions including fines, civil monetary penalties, as well as the possibility of exclusion of our products from payment by Federal health care programs. Any such violations or challenges could have a material adverse effect on our business.

AWP Litigation

Many government and third-party payors reimburse the purchase of certain prescription drugs based on a drug’s Average Wholesale Price or “AWP.” In the past several years, state and federal government agencies have conducted ongoing investigations of manufacturers’ reporting practices with respect to AWP, which they have suggested have led to excessive payments by state and federal government agencies for prescription drugs. We, asand ~~well as~~ numerous other pharmaceutical companies, ~~were~~have been named as adefendants ~~defendant~~ in various state and federal court actions alleging improper or fraudulent practices related to the reporting of AWP.

Drug Pedigree Laws

State and federal governments have proposed or passed various drug pedigree laws which can require the tracking of all transactions involving prescription drugs from the manufacturer to the pharmacy (or other dispensing) level. Companies are required to maintain records documenting the chain of custody of prescription drug products beginning with the purchase of such products from the manufacturer. Compliance with these pedigree laws requires implementation of extensive tracking systems as well as heightened documentation and coordination with customers and manufacturers. While we fully intend to comply with these laws, there is uncertainty

1112

from the manufacturer. Compliance with these pedigree laws requires implementation of extensive tracking systems as well as heightened documentation and coordination with customers and manufacturers. While we fully intend to comply with these laws, there is uncertainty about future changes in legislation and government enforcement of these laws. Failure to comply could result in fines or penalties, as well as loss of business that could have a material adverse effect on our financial results.

Federal Regulation of Patent Litigation Settlements and Authorized Generic Arrangements

As part of the Medicare Prescription Drug Improvement and Modernization Act of 2003, companies are required to file with the FTC and the DOJ certain types of agreements entered into between brand and generic pharmaceutical companies related to the settlement of patent litigation and/or manufacture, marketing and sale of generic versions of ~~brand~~branded drugs. This requirement could affect the manner in which generic drug manufacturers resolve intellectual property litigation and other disputes with brand pharmaceutical companies, and could result generally in an increase in private-party litigation against pharmaceutical companies or additional investigations or proceedings by the FTC or other governmental authorities.

Other

InThe ~~addition to the~~ U.S. federal government, various states and localities have laws regulating the manufacture and distribution of pharmaceuticals, as well as regulations dealing with the substitution of generic drugs for ~~brand~~branded ~~name~~ drugs. Our operations are also subject to regulation, licensing requirements and inspection by the states and localities in which our operations are located and/or in which we conduct business.

Certain of our activities are also subject to FTC enforcement actions. The FTC enforces a variety of antitrust and consumer protection laws designed to ensure that the nation’s markets function competitively, are vigorous, efficient and free of undue restrictions.

WeFederal, state, local and foreign laws of general applicability, such as laws regulating working conditions, also govern us. In addition, like other manufacturers, we are ~~governed~~subject byto ~~federal~~numerous and increasingly stringent federal, state and local environmental laws and regulations concerning, among other things, the generation, handling, storage, transportation, treatment and disposal of ~~general~~toxic ~~applicability~~and hazardous substances, ~~including~~the discharge of pollutants into the air and water and the cleanup of contamination. We are required to maintain and comply with environmental permits and controls for some of our operations, and these permits are subject to modification, renewal and revocation by the issuing authorities. Our environmental capital expenditures and costs for environmental compliance may increase in the future as a result of changes in environmental laws ~~regulating~~and ~~matters~~regulations or increased manufacturing activities at any of our facilities. We could incur significant costs or liabilities as a result of any failure to comply with environmental ~~quality~~laws, ~~working~~including ~~conditions~~fines, ~~health~~penalties, third-party claims and ~~safety~~the costs of undertaking a clean-up at a current or former site or at a site to which our wastes were transported. In addition, we have grown in part by acquisition, and ~~equal~~our ~~employment~~diligence ~~opportunity~~may not have identified environmental impacts from historical operations at sites we have acquired in the past or may acquire in the future.

~~Business~~Our Strategy

Our goal is to ~~successfully~~strengthen ~~manage both~~ our ~~generic~~position ~~and~~as ~~branded~~a ~~businesses~~leading ~~for~~pharmaceutical ~~the~~company ~~long term~~ by ~~continuing~~developing ~~to commit to provide high-quality pharmaceuticals that are affordable~~ and ~~accessible~~commercializing togeneric ~~patients.~~drugs ~~We believe that this strategy will enable us to grow market share and develop long-term relationships~~ with ~~our~~limited ~~customers.~~competition, Wehigh ~~strive~~barriers to ~~achieve~~entry ~~sustainable long-term growth with enhanced profitability~~ and ~~improved~~longer ~~cash~~life ~~flow~~cycles. In implementing our strategy, we are focused on the following:

~~Identify~~Grow ~~and~~our ~~Execute~~core business in attractive high-value segments. Our strategy focuses on ~~Product~~high-value generic products, including first-to-file and ~~Business~~first-to-market ~~Development~~opportunities. ~~Opportunities~~By ~~with~~specializing ~~Focus~~in onhigh-barrier-to-entry ~~Sustainable~~products ~~Market~~that ~~Share~~are either difficult to manufacture and/or present complex legal and regulatory challenges, we seek to market products that are more profitable and longer-lived relative to our competitors.

~~Through~~Advance our ~~applied~~pipeline ~~discipline~~to ofcontinue ~~intelligent~~building ~~product~~our ~~selection,~~portfolio. We wehave ~~seek~~expanded ~~commercially~~our ~~compelling~~development ~~opportunities~~portfolio byfrom ~~targeting~~approximately ~~first-to-file~~60 ~~status and~~ products ~~with~~in ~~high~~development ~~barriers~~at toDecember ~~entry~~31, ~~due~~2011 to ~~the~~100 ~~complex~~as ~~nature~~ of ~~the~~December ~~formulation~~31, ~~and the difficulty of the manufacturing process~~2014. ~~Furthermore,~~We wehave ~~also~~115 ~~believe~~ANDAs inpending ~~our~~with ~~in-house~~the ~~expertise~~FDA at ~~litigating~~December ~~Paragraph~~31, IV2014, ~~challenges~~including ~~and~~32 ~~capturing~~potential first-to-file ~~status~~and onsix ~~key~~potential ~~product opportunities. We believe this strategy will allow us~~ first-to ~~frequently maintain strong~~ -market share for multiple years in products we introduce. We believe our expertise in research and development, manufacturing, regulatory matters and business development, including acquisitions, enables us to effectively and efficiently pursue these opportunities ~~and support our partners~~.

InStrategically ~~February~~expand ~~2014,~~our ~~Par~~technology ~~completed~~capabilities ~~its~~across ~~acquisition~~development ofand ~~JHP~~manufacturing. ~~Pharmaceuticals,~~We ahave ~~leading~~made ~~specialty~~significant ~~pharmaceutical~~investments ~~company~~to ~~that~~enhance ~~develops,~~our ~~manufactures~~technology platforms and ~~markets~~have ~~branded~~expanded ~~and~~our ~~generic~~capabilities ~~sterile~~to ~~injectable~~manufacture products~~. The~~ ~~acquisition~~including isinjectables, ~~consistent~~nasal ~~with our strategy of targeting products~~sprays, ~~dosage~~ophthalmics ~~forms~~ and ~~technologies~~transdermal ~~that present higher barriers to market entry~~patches. ~~While~~We ~~the~~believe ~~market~~this ~~for~~will ~~sterile~~become ~~products~~an isincreasingly ~~growing~~strategic ~~rapidly,~~asset ~~injectables~~over ~~are capital intensive and technically challenging, with demanding quality and compliance requirements~~time. ~~These~~ ~~higher~~We ~~barriers~~intend to ~~entry~~continue ~~have~~to ~~typically~~invest ~~resulted~~ in ~~fewer~~expanding ~~generic~~our ~~entrants~~technology incapabilities ~~specific~~across ~~product~~development ~~categories~~ and ~~longer~~manufacturing ~~product~~to ~~life~~develop ~~cycles~~high-barrier-to-entry products.

~~Another~~Build ~~facet~~upon of our ~~strategy~~success isin tostrategic ~~pursue~~acquisitions ~~authorized~~and ~~generics,~~business andevelopment. ~~area~~We ~~where~~have wean ~~believe~~established wehistory ~~are a partner~~ of ~~choice~~executing ~~because~~and ofintegrating ~~our~~strategic ~~quick~~acquisitions ~~decision-making,~~that ~~regulatory~~have ~~compliance~~enhanced ~~acumen,~~and ~~strong~~deepened ~~trade~~our presence, ~~favorable~~in ~~economics,~~our ~~financial~~industry. ~~resources~~Through ~~and~~these ~~legal expertise. Additionally~~acquisitions, we ~~believe~~have ~~that~~expanded ~~several~~our ~~branded~~portfolio ~~drug~~of ~~companies~~products, ~~prefer~~pipeline, tomanufacturing ~~partner~~and ~~with~~technological uscapabilities. ~~because~~We weexpect ~~are~~business ~~not~~development ~~perceived~~to asremain a ~~direct~~priority ~~competitor~~for ~~to their other branded products. Our presence in authorized generics provides~~ us ~~with~~as awe ~~differentiated~~seek ~~competitive~~to ~~position~~identify and ~~additive~~execute ~~revenue~~on ~~and~~transactions ~~gross~~that ~~margin~~fit ~~opportunities. In~~our ~~recent~~strategy ~~years,~~and ~~Par~~focus ~~introduced~~on ~~authorized generic versions of several major pharmaceuticals, including Atacand®, Maxalt~~high-~~MLT®~~barrier-to-entry ~~and Entocort EC®~~products.

Diversify Our Portfolio by Continuing to Introduce New Products and Maintain Strong Pipeline

Through new product launches and the benefits from recent acquisitions, which have significantly expanded our pipeline and provided us with a platform for future development opportunities, we expect to further diversify our sales and gross margin. We believe that our research and development platform, combined with a rigorous process for selecting products that both fit our core strengths and address attractive markets, allows us to continue to build a robust pipeline. We plan to continue our development efforts and pursuit of product acquisition opportunities to maintain and grow the number of our future product launches. As part of our strategy, we are currently evaluating, and intend to continue to evaluate, potential product acquisitions and other business development opportunities, primarily with respect to our generics product business.

Further Develop Industry-Leading Manufacturing Platform

We have invested substantially in further developing our manufacturing platform and believe it will become an increasingly strategic asset over time. We are committed to high product quality standards and allocate significant capital and resources to quality assurance, quality control and manufacturing excellence. This focus is demonstrated by our performance in FDA inspections at all of our facilities, where no warning letters have been received since 2007. Through our recent acquisitions, we enhanced our capabilities to manufacture modified and immediate release products and added low cost manufacturing in India. We plan to further enhance our manufacturing platform and expand our capabilities to include new dosage forms in the future.

Continue to Enhance the Profitability of our Branded Products Division

We find the defensibility and high gross margins of our branded business compelling, including our existing branded products, Megace® ES and Nascobal® Nasal Spray. We believe there is further opportunity to improve the profitability in our branded products division. We will focus our marketing efforts principally on Nascobal®, with initiatives planned to accelerate its growth. We will also continue to consider new strategic licenses and acquisitions to expand Strativa’s presence in supportive care and adjacent commercial areas.

INFORMATION TECHNOLOGY

Our Information Technology (“IT”) contributes state-of-the-industry infrastructure for reliable and compliant operations, business-driven solutions that align with our objectives for profitable growth and innovative ideas bound to business performance and efficiency goals. Our IT department is organized into three departments: Business Applications, Technology Operations, and Scientific Systems. Each department maintains its own development, implementation and support teams.

The Business Applications department purchases, develops, and maintains business applications systems jointly with internal departments. This department follows industry best practices in project management, systems development life cycle, change management, account management, computer systems validation, and data archiving. The major Business Applications systems are:

· Oracle JDEdwards Enterprise Resource Planning, including Financials, Supply Chain / Logistics and Manufacturing

· Oracle Hyperion Enterprise Performance Management

· Model N Revenue Management

· IBM Sterling GIS Electronic Data Interchange

· Peoplesoft Human Resources Information System

· QAD Enterprise Applications

The Technology Operations department purchases, deploys and maintains computing and communication infrastructure systems that enable reliable and efficient business operations. This department follows industry best practices in capacity planning, configuration management, incident/problem prevention and management, disaster recovery, data backup and restoration, data center operations, and security management. The major Technology Operations areas are:

· Electronic mail, messaging and collaboration tools

· Data center operations

· Computer assets and software license management

· Network, telecommunications and video conferencing operations

· Authentication, network security and anti-virus measures

· Personal computer and mobile device management

· Internet portals, SharePoint and Web services

· Document management and eDiscovery

The Scientific Systems department purchases, develops, and maintains systems that support Quality Control, Regulatory, and Manufacturing operations. This department follows industry best practices in GxP compliance, project management, systems development life cycle, change management, computer systems validation, and data archiving. The major Scientific Systems are:

· IBM SCORE Electronic Submissions

· Waters Empower Data Acquisition

· Labware LIMS

· TrackWise Compliance Tracking

ITEM 1A. Risk Factors

Any of the following risks could materially adversely affect our business, financial condition or results of operations. The risks described below are those which we believe are the material risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may also materially and adversely affect our business or results of operations in the future.

~~Risks~~• ~~Related~~The toBusiness ~~Our~~Applications ~~Indebtedness~~department purchases, develops, and maintains business applications systems jointly with internal departments. This department follows industry best practices in project management, systems development life cycle, change management, account management, computer systems validation, and data archiving.

~~Our~~• ~~substantial~~The ~~indebtedness~~Technology ~~could~~Operations ~~adversely~~department ~~affect~~purchases, ~~our~~deploys ~~financial~~and ~~condition~~maintains computing and ~~prevent~~communication usinfrastructure ~~from~~systems ~~fulfilling~~that ~~our~~enable ~~obligations~~reliable ~~under~~and ~~the~~efficient ~~contractual~~business ~~terms~~operations. ~~related~~This todepartment ~~our~~follows ~~indebtedness~~industry best practices in capacity planning, configuration management, incident/problem prevention and management, disaster recovery, data backup and restoration, data center operations, and security management.

We• ~~currently~~The ~~have~~Scientific aSystems ~~substantial~~department ~~amount of indebtedness. As of December 31~~purchases, ~~2013~~develops, ~~our~~and ~~total~~maintains ~~debt~~systems ~~was~~that ~~$1,545~~support ~~million~~Quality ~~(excluding~~Control, ~~original issue discount (“OID”) or upfront payments)~~Regulatory, and weManufacturing ~~had unused commitments of $150 million under our Senior Credit Facilities~~operations. We ~~also~~This ~~incurred~~department anfollows ~~additional~~industry ~~$395~~best ~~million~~practices ~~of debt~~ in ~~the~~GxP ~~first~~compliance, ~~quarter~~project ofmanagement, ~~2014~~systems ~~with~~development ~~the~~life ~~closing~~cycle, ofchange ~~our~~management, ~~acquisition~~computer ofsystems ~~JHP~~validation, ~~Pharmaceuticals. We~~and ~~may~~data ~~also incur significant additional indebtedness in the future~~archiving.

~~Subject~~ITEM ~~to the limits contained in the credit agreement governing our Senior Credit Facilities and the indenture governing our 7~~1A.~~375%~~ Risk ~~Senior~~Factors Notes due 2020 (the “Notes”), the issuance of which has been registered under the Securities Act of 1933, as amended (the “Securities Act”), we may be able to incur substantial additional debt from time to time to finance working capital, capital expenditures, investments or acquisitions, or for other purposes. If we do so, the risks related to our high level of debt could intensify. Specifically, our high level of debt could have important consequences to the holders of the Notes, including, but not limited to:

•The ~~making~~risks itdescribed ~~more~~below ~~difficult~~are ~~for~~not usthe only risks we face. Additional risks and uncertainties not currently known to ~~satisfy~~us ~~our~~or ~~obligations~~those ~~with~~we ~~respect~~currently view to ~~the~~be ~~Notes~~immaterial also may materially and adversely affect our ~~other~~business, ~~debt;~~prospects, operating results or financial condition.

•Risks ~~requiring~~Related ~~a substantial portion of our cash flows~~ to beOur ~~dedicated~~Business ~~to debt service payments instead of other purposes, thereby reducing the amount of cash flows available for working capital, capital expenditures, acquisitions and other general corporate purposes;~~

•If ~~limiting~~we ~~our~~are ~~ability~~unable to ~~obtain~~successfully ~~additional~~develop ~~financing~~or tocommercialize ~~fund~~new ~~future working capital~~products, ~~capital~~our ~~expenditures,~~operating ~~acquisitions~~results orwill ~~other general corporate requirements;~~suffer.

•Developing ~~increasing~~and commercializing a new product is time consuming, costly and subject to numerous factors that may delay or prevent development and commercialization. Our future results of operations will depend to a significant extent upon our ~~vulnerability~~ability to ~~general~~successfully ~~adverse~~commercialize ~~economic~~new products in a timely manner. There are numerous difficulties in developing and ~~industry~~commercializing ~~conditions;~~new products, including:

• ~~exposing~~the usability to ~~the~~develop ~~risk~~products ofin ~~increased~~a ~~interest~~timely ~~rates~~manner asand ~~certain~~in ofcompliance ~~our~~with ~~borrowings,~~regulatory ~~including borrowings under our Senior Credit Facilities, are at variable rates of interest~~requirements;

• ~~limiting~~the ~~our~~success ~~flexibility~~of inthe ~~planning~~clinical ~~for~~testing ~~and~~process ~~reacting~~ to ~~changes~~assure inthat new products are safe and effective or the ~~industry~~bioequivalent into ~~which~~the wereference ~~compete~~listed drug;

• ~~placing~~the usrisk atthat aany ~~disadvantage~~of ~~compared~~our toproducts ~~other~~presently under development, ~~less~~if ~~leveraged~~and ~~competitors~~when fully developed and tested, will not perform as expected;

• ~~increasing~~delays ~~our~~or ~~cost~~unanticipated ofcosts, ~~borrowing;~~including delays associated with the FDA listing and approval process and the ability to obtain in a timely manner and maintain required regulatory approvals;

• ~~preventing~~legal usactions ~~from~~against ~~raising~~our ~~the~~generic ~~funds~~products ~~necessary~~brought toby ~~repurchase~~brand ~~all Notes tendered to us upon the occurrence of certain changes of control~~competitors, ~~which~~and ~~would~~legal ~~constitute~~challenges ato ~~default~~our ~~under~~branded ~~the~~product ~~indenture~~intellectual ~~governing the Notes.~~property;

In• ~~addition,~~ the ~~indenture~~availability, ~~that~~on ~~governs~~commercially ~~the~~reasonable ~~Notes~~terms, and the credit agreement governing our senior senior credit facilities (the “Senior Credit Facilities”) contain restrictive covenants that limit our ability to engage in activities that may be in our long-term best interest. Our failure to comply with those covenants could result in an event of ~~default~~raw ~~which~~materials, ifincluding ~~not~~APIs ~~cured~~and orother ~~waived,~~key ~~could~~ingredients; ~~result in the acceleration of all our debt.~~ and

~~Our~~• ~~leveraged business model includes constituents (e.g., the Sponsor and debt holders) that by the nature of their relationship to~~ our ~~enterprise~~ability ~~may have different points of view on the use of company resources as compared~~ to ~~our~~scale-up ~~management. The~~manufacturing ~~financial~~methods ~~and contractual obligations related~~ to ~~our~~successfully ~~debt~~manufacture ~~also~~commercial ~~represent~~quantities aof ~~natural~~products ~~constraint~~in oncompliance ~~any~~with ~~intended~~regulatory ~~use of company resources~~requirements.

~~The~~As ~~terms~~a result of these and other difficulties, products currently in development may or may not receive necessary regulatory approvals on a timely basis or at all. This risk exists particularly with respect to the ~~credit~~introduction ~~agreement~~of ~~governing~~branded ~~our~~products ~~Senior~~because ~~Credit~~of ~~Facilities~~the uncertainties, higher costs and ~~the~~lengthy ~~indenture~~time ~~governing~~frames associated with research and development of such products and the ~~Notes~~inherent ~~restrict~~unproven market acceptance of such products. If any of our ~~current~~products, ~~and~~when ~~future~~acquired ~~operations~~or developed and approved, ~~particularly~~cannot be successfully or timely commercialized, our ~~ability~~operating toresults ~~respond~~could tobe ~~changes~~adversely oraffected. toWe ~~take~~cannot ~~certain~~guarantee ~~actions~~that any investment we make in developing products will be recouped, even if we are successful in commercializing those products.

~~The~~If ~~indenture~~we ~~governing~~fail ~~the~~to ~~Notes~~obtain ~~and~~exclusive ~~the~~marketing ~~credit~~rights ~~agreement~~for ~~governing~~ our ~~Senior~~generic ~~Credit~~products ~~Facilities~~or ~~contain~~fail ato ~~number~~introduce ofthese ~~restrictive~~generic ~~covenants~~products ~~that impose significant operating and financial restrictions~~ on usa ~~and~~timely ~~may~~basis, ~~limit~~ our ~~ability~~revenues, togross ~~engage~~margin inand ~~acts~~operating ~~that~~results may bedecline ~~in our long-term best interest, including restrictions on our ability to:~~significantly.

•The ~~incur~~Hatch-Waxman ~~additional~~amendments ~~indebtedness;~~to the Federal Food, Drug, and Cosmetic Act (the “FDCA”) provide for a period of 180 days of generic marketing exclusivity for any applicant that is first to file an ANDA containing a certification of invalidity, non-infringement or unenforceability related to a patent listed with respect to the corresponding branded drug (commonly referred to as a “Paragraph IV certification”). “First filers” are often able to price the applicable generic drug to yield relatively high gross margins during this 180-day marketing exclusivity period. At various times in the past, a large portion of our revenues have been derived from the sales of generic drugs during such 180-day marketing exclusivity period and from the sale of other generic products for which there otherwise was limited competition.

•ANDAs ~~pay~~that ~~dividends~~contain orParagraph ~~make~~IV ~~other~~certifications ~~distributions~~generally orbecome ~~repurchase~~the orsubject ~~redeem~~of ~~our~~patent ~~capital~~litigation ~~stock;~~that can be both lengthy and costly. There is no certainty that we will prevail in any such litigation, that we will be the first to file and granted the 180-day marketing

• prepay, redeem or repurchase certain debt;

• make loans and investments;

• sell assets;

• incur liens;

• enter into transactions with affiliates;

• alter the businesses we conduct;

• enter into agreements restricting our subsidiaries’ ability to pay dividends; and

• consolidate, merge or sell all or substantially all of our assets.

In addition, the restrictive covenants in the credit agreement governing our Senior Credit Facilities require us to maintain specified financial ratios. Our ability to meet those financial ratios can be affected by events beyond our control.

A breach of the covenants under the indenture governing the Notes or under the credit agreement governing our Senior Credit Facilities could result in an event of default under the applicable indebtedness. Such a default may allow the creditors to accelerate the related debt and may result in the acceleration of any other debt to which a cross-acceleration or cross-default provision applies. In addition, an event of default under the credit agreement governing our Senior Credit Facilities would permit the lenders under our Senior Credit Facilities to terminate all commitments to extend further credit under that facility. Furthermore, if we were unable to repay the amounts due and payable under our Senior Credit Facilities, those lenders could proceed against the collateral granted to

~~them~~exclusivity toperiod, ~~secure~~or, if we are granted the 180-day marketing exclusivity period, that ~~indebtedness~~we will not forfeit such period. In ~~the~~Even ~~event~~where we are awarded marketing exclusivity, we may be required to share our ~~lenders~~exclusivity orperiod ~~noteholders~~with ~~accelerate~~other first filers. In addition, brand companies often authorize a generic version of the ~~repayment~~corresponding branded drug to be sold during any period of ~~our~~marketing ~~borrowings~~exclusivity that is awarded (described further below), wewhich ~~and~~reduces ~~our~~gross ~~subsidiaries~~margins during the marketing exclusivity period. Brand companies may ~~not~~also ~~have~~reduce ~~sufficient~~the ~~assets~~price of their branded product to ~~repay~~compete ~~that~~directly ~~indebtedness~~with generics entering the market, which would similarly have the effect of reducing gross margins. AsFurthermore, atimely ~~result~~commencement of ~~these~~the ~~restrictions~~litigation by the patent owner imposes an automatic stay of ANDA approval by the FDA for 30 months, weunless ~~may~~the case is decided in the ANDA applicant’s favor during that period. Finally, if the court decision is adverse to the ANDA applicant, the ANDA approval will be: delayed until the challenged patent expires, and the applicant forfeits the 180-day marketing exclusivity.

•The ~~limited~~majority of our revenues are generated by our generic products division. Our future profitability depends, to a significant extent, upon our ability to introduce, on a timely basis, new generic products that are either the first-to-market (or among the first-to-market) or that otherwise can gain significant market share. The timeliness of our product introductions is dependent upon, among other things, the timing of regulatory approval of our products, which to a large extent is outside of our control, as well as the timing of competing products. As additional distributors introduce comparable generic pharmaceutical products, price competition intensifies, market access narrows, and product sales prices and gross margins decline, often significantly and rapidly. Accordingly, our revenues and future profitability are dependent, in ~~how~~large part, upon our ability or the ability of our development partners to file ANDAs with the FDA timely and effectively or to enter into contractual relationships with other parties that have obtained marketing exclusivity. No assurances can be given that we ~~conduct~~will be able to develop and introduce successful products in the future within the time constraints necessary to be successful. If we or our development partners are unable to continue to timely and effectively file ANDAs with the FDA or to partner with other parties that have obtained marketing exclusivity, our revenues, gross margin and operating results may decline significantly, and our prospects and business; may be materially adversely affected.

•We ~~unable~~face tointense ~~raise~~competition ~~additional~~in ~~debt~~the orpharmaceutical ~~equity~~industry ~~financing~~from toboth ~~operate~~brand ~~during~~and ~~general~~generic ~~economic~~companies, orwhich ~~business~~could ~~downturns;~~significantly orlimit our growth and materially adversely affect our financial results.

•The ~~unable~~pharmaceutical toindustry ~~compete~~is ~~effectively~~highly orcompetitive. toThe ~~take~~principal ~~advantage~~competitive offactors ~~new~~in ~~business~~the ~~opportunities.~~pharmaceutical market include:

~~These~~• ~~restrictions~~introduction ~~may~~of ~~affect~~other ~~our~~generic ~~ability~~drug tomanufacturers’ ~~grow~~products in ~~accordance~~direct competition with our ~~strategy.~~products;

We• ~~may~~introduction ~~not be able to generate sufficient cash to service all~~ of ~~our~~authorized ~~indebtedness,~~generic ~~including~~products ~~the~~in ~~Notes,~~direct ~~and~~competition ~~may~~with ~~be forced to take other actions to satisfy~~ our ~~obligations under our indebtedness~~products, ~~which~~particularly ~~may~~during ~~not~~exclusivity ~~be successful.~~periods;

~~Our~~• ability toof ~~make~~generic ~~scheduled~~competitors ~~payments~~to onquickly orenter ~~refinance~~the ~~our~~market ~~debt~~after ~~obligations, including~~ the ~~Notes,~~expiration ~~depends~~of onpatents ~~our~~or ~~financial~~exclusivity ~~condition and operating performance~~periods, ~~which~~diminishing ~~are~~the ~~subject~~amount ~~to prevailing economic~~ and ~~competitive~~duration ~~conditions and to certain financial, business, legislative, regulatory and other factors beyond our control. We may be unable to maintain a level~~ of ~~cash~~significant ~~flows from operating activities sufficient to permit us to pay the principal, premium, if any, and interest on our indebtedness, including the Notes.~~profits;

If• ~~our~~consolidation ~~cash~~among ~~flows~~distribution ~~and~~outlets ~~capital~~through ~~resources~~mergers ~~are insufficient to fund our debt service obligations, we could face substantial liquidity problems~~ and ~~could~~acquisitions ~~be forced to reduce or delay investments~~ and ~~capital expenditures or to dispose of material assets or operations, seek additional debt or equity capital or restructure or refinance our indebtedness, including~~ the ~~Notes.~~formation We may not be able to effect any such alternative measures on commercially reasonable terms or at all and, even if successful, those alternative actions may not allow us to meet our scheduled debt service obligations. The credit agreement governing our Senior Credit Facilities and the indenture governing the Notes restrict our ability to dispose of ~~assets~~buying and use the proceeds from those dispositions and also restrict our ability to raise debt or equity capital to be used to repay other indebtedness when it becomes due. We may not be able to consummate those dispositions or to obtain proceeds in an amount sufficient to meet any debt service obligations when due.groups;

~~Our~~• ~~inability~~the towillingness ~~generate~~of ~~sufficient~~generic ~~cash~~drug ~~flows~~customers, toincluding ~~satisfy~~wholesale ~~our~~and ~~debt~~retail ~~obligations~~customers, or to ~~refinance~~switch ~~our~~among ~~indebtedness~~products ~~on commercially reasonable terms or at all, would materially and adversely affect our financial position and results~~ of ~~operations~~different ~~and~~pharmaceutical ~~our ability to satisfy our obligations under the Notes.~~manufacturers;

If• wepricing ~~cannot~~pressures ~~make~~by ~~scheduled~~competitors ~~payments on our debt, we will be in default~~ and, ~~as a result:~~customers;

• ~~our~~a ~~debt~~company’s ~~holders~~reputation ~~could~~as ~~declare~~a ~~all~~manufacturer ~~outstanding principal~~ and ~~interest~~distributor toof bequality ~~due and payable~~products;

• ~~the~~a ~~lenders~~company’s ~~under~~level ~~the~~of ~~Senior~~service ~~Credit~~(including ~~Facilities~~maintaining ~~could~~sufficient ~~terminate~~inventory ~~their~~levels ~~commitments~~for totimely ~~loan us money and foreclose against the assets securing their borrowings~~deliveries); ~~and~~

• weproduct ~~could~~appearance beand ~~forced~~labeling; ~~into bankruptcy or liquidation, which could result in the loss of the noteholders’ investment in the Notes.~~ and

We• ~~will require~~ a ~~significant~~company’s ~~amount~~breadth of ~~cash~~product ~~to service our indebtedness~~offerings. ~~The ability to generate cash or refinance our indebtedness as it becomes due depends on many factors, some of which are beyond our control.~~

~~Par~~Many ~~Pharmaceutical~~of ~~Companies,~~our ~~Inc.~~competitors ishave alonger ~~holding~~operating ~~company,~~histories and asgreater ~~such has no independent operations or material assets other than its ownership of equity interests in its subsidiaries~~financial, research and ~~its subsidiaries’ contractual arrangements with customers~~development, ~~and~~marketing ~~it will depend on its subsidiaries to distribute funds to it so that it may pay its obligations~~ and ~~expenses,~~other ~~including~~resources ~~satisfying~~than ~~its~~we ~~obligations under the Notes~~do. ~~Our~~ ~~ability to make scheduled payments on~~Consequently, ormany toof ~~refinance~~ our ~~respective~~competitors ~~obligations~~may ~~under,~~be ~~our~~able ~~indebtedness, including the Notes, and~~ to ~~fund~~develop ~~planned~~products ~~capital expenditures~~ and/or ~~other~~processes ~~corporate~~competitive ~~expenses will depend on the ability of our subsidiaries to make distributions~~with, ~~dividends~~ or ~~advances~~superior to ~~Par Pharmaceutical Companies~~, ~~Inc., which in turn will depend on~~ our ~~subsidiaries'~~own. ~~future operating performance and on economic~~Furthermore, ~~financial,~~we ~~competitive,~~may ~~legislative,~~not ~~regulatory~~be ~~and~~able ~~other factors and any legal and regulatory restrictions on the payment of distributions and dividends~~ to ~~which~~differentiate ~~they~~our ~~may~~products befrom ~~subject.~~those ~~Many~~ of ~~these factors are beyond~~ our ~~control.~~competitors; Weto ~~cannot~~successfully ~~assure~~develop ~~our~~or ~~creditors~~introduce ~~that~~new ~~our~~products-on ~~business~~a ~~will~~timely ~~generate~~basis ~~sufficient~~or ~~cash~~at ~~flow from operations,~~ all-that ~~currently~~are ~~anticipated~~less ~~cost~~costly ~~savings~~than ~~and~~those ~~operating~~of ~~improvements~~our ~~will~~competitors; ~~be realized~~ or ~~that future borrowings will be available~~ to usoffer incustomers anpayment ~~amount~~and ~~sufficient~~other tocommercial ~~enable~~terms usas tofavorable ~~satisfy~~as ~~our~~those ~~respective~~offered ~~obligations~~by ~~under~~ our ~~indebtedness or to fund our other needs~~competitors. In ~~order~~The ~~for~~markets usin towhich ~~satisfy~~we ~~our~~compete ~~obligations under our indebtedness~~ and ~~fund~~intend ~~planned capital expenditures, we must continue~~ to ~~execute~~compete ~~our~~are ~~business~~undergoing, ~~strategy. If~~and we are ~~unable~~expected to docontinue ~~so, we may need~~ to ~~reduce~~undergo, orrapid ~~delay~~and ~~our~~significant ~~planned capital expenditures or refinance all or a portion of our indebtedness on or before maturity~~change. ~~Significant~~We ~~delays~~expect incompetition ~~our~~to ~~planned~~intensify ~~capital~~as ~~expenditures~~technological ~~may~~advances ~~materially~~ and ~~adversely~~consolidations ~~affect our future revenue prospects~~continue. In ~~addition,~~New wedevelopments ~~cannot~~by ~~assure~~other ~~our~~manufacturers ~~creditors~~and ~~that~~distributors wecould ~~will~~render ~~be able to refinance any of~~ our ~~indebtedness,~~products ~~including~~uncompetitive ~~the Notes and our Senior Credit Facilities, on commercially reasonable terms~~ or ~~at all~~obsolete.

~~Despite~~We believe that our ~~current~~principal ~~level~~generic ofcompetitors ~~indebtedness~~are Teva, weSandoz, Mylan and Actavis. These companies, among others, collectively compete with the majority of our ~~subsidiaries~~products. We also face price competition generally as other generic manufacturers enter the market. Any such price competition may ~~still~~be especially pronounced where our competitors source their products from jurisdictions where production costs may be ~~able~~lower to(sometimes ~~incur~~significantly) ~~substantially~~than ~~more~~our ~~debt~~production costs, especially lower-cost foreign jurisdictions. ~~This~~Any of these factors, in turn, could ~~further~~result ~~exacerbate~~in ~~the~~reductions ~~risks~~in our sales prices and gross margin. This price competition has led to an increase in customer demands for downward price adjustments by generic pharmaceutical distributors. Our principal strategy in addressing our ~~financial~~competition ~~condition~~is ~~described~~to ~~above~~offer customers a consistent supply of our generic drugs, as well as to pursue product opportunities with the potential for less competition, such as high-barrier-to-entry first-to-file or first-to-market products. There can be no assurance, however, that this strategy will enable us to compete successfully in the industry or that we will be able to develop and implement any new or additional viable strategies.

We and our subsidiaries may be able to incur significant additional indebtedness in the future. Although the indenture governing the Notes and the credit agreement governing our Senior Credit Facilities contain restrictions on the incurrence of additional indebtedness, these restrictions are subject to a number of qualifications and exceptions, and the additional indebtedness incurred in compliance with these restrictions could be substantial. If we incur any additional indebtedness that ranks equally with the Notes, subject to collateral arrangements, the holders of that debt will be entitled to share ratably with the holders of the Notes in any proceeds distributed in connection with any insolvency, liquidation, reorganization, dissolution or other winding up of our company. This may have the effect of reducing the amount of proceeds paid to holders of the Notes. These restrictions also will not prevent us from incurring obligations that do not constitute indebtedness. In addition, as of December 31, 2013, our Senior Credit Facilities had

~~unused~~Competition ~~commitments~~in the generic drug industry has also increased due to the proliferation of ~~$150~~authorized ~~million,~~generic ~~which~~pharmaceutical ~~amount~~products. ~~could~~Authorized ~~increase~~generics are generic pharmaceutical products that are introduced by ~~$250~~brand ~~million~~companies, (either directly or athrough ~~greater~~third ~~amount~~parties, ifunder wethe ~~meet~~brand's ~~specified~~NDA ~~financial~~approval ~~ratios),~~for its own branded drug. Authorized generics do not face any regulatory barriers to introduction and are not prohibited from sale during the ~~availability~~180-day ofmarketing ~~which~~exclusivity isperiod ~~subject~~granted to ~~certain~~the ~~conditions~~first-to-file generic applicant. ~~All~~ The sale of ~~those~~authorized ~~borrowings~~generics ~~would~~adversely beimpacts ~~secured~~the ~~indebtedness. If~~market ~~new~~share ~~debt~~of a generic product that has been granted 180 days of marketing exclusivity. This is ~~added~~a tosignificant ~~our~~source ~~current~~of ~~debt~~competition ~~levels~~for us, ~~the~~because ~~related~~an ~~risks~~authorized generic can materially decrease the profits that we ~~and~~could receive as an otherwise exclusive marketer of a product. Such actions have the ~~guarantors~~effect ~~now~~of ~~face~~reducing ~~could~~the ~~intensify~~potential market share and profitability of our generic products and may inhibit us from developing and introducing generic pharmaceutical products corresponding to certain branded drugs.

~~Our~~As ~~variable~~our ~~rate~~competitors ~~indebtedness~~introduce ~~subjects~~their usown togeneric ~~interest~~equivalents ~~rate~~of ~~risk,~~our ~~which~~generic ~~could~~pharmaceutical ~~cause~~products, our ~~debt~~revenues ~~service~~and ~~obligations~~gross tomargin ~~increase~~from ~~significantly~~such products generally decline, often rapidly.

~~Borrowings~~Revenues ~~under~~and ~~our~~gross ~~Senior~~margin ~~Credit~~derived ~~Facilities~~from ~~are~~generic atpharmaceutical ~~variable~~products ~~rates~~often offollow ~~interest~~a ~~and~~pattern ~~expose~~based uson toregulatory ~~interest~~and ~~rate~~competitive ~~risk. The~~factors ~~Senior~~that ~~Credit~~we ~~Facility~~believe ~~includes~~are aunique ~~LIBOR~~to ~~floor~~the ofgeneric 1pharmaceutical industry.~~00%,~~ ~~which~~As atthe ~~December~~patent(s) ~~31,~~for ~~2013~~a isbrand inname ~~excess~~product ofor the ~~specified~~statutory ~~LIBOR~~marketing ~~rate. If~~exclusivity ~~the~~period ~~three~~(if ~~month~~any) ~~LIBOR~~expires, ~~spot~~the ~~rate~~first ~~were~~generic manufacturer to ~~increase~~receive orregulatory ~~decrease~~approval byfor ~~0.125%~~a ~~from~~generic ~~current~~equivalent ~~rates,~~of ~~interest~~the ~~expense~~product ~~would~~often ~~not~~is ~~change~~able ~~due~~ to ~~application~~capture a substantial share of the 1market.~~00%~~ ~~floor~~However, ~~previously~~as ~~mentioned. If~~other ~~the~~generic ~~specified~~manufacturers ~~LIBOR~~receive ~~rate~~regulatory ~~were~~approvals tofor ~~increase~~their ~~above~~own ~~1.00%~~generic versions, ~~our~~that ~~debt~~market ~~service~~share, ~~obligations~~and the price of that product, will typically decline depending on several factors, including the ~~variable~~number ~~rate~~of ~~indebtedness~~competitors, ~~would~~the ~~increase~~price ~~even~~of ~~though~~the branded product and the ~~amount~~pricing ~~borrowed~~strategy ~~remained~~of the ~~same,~~new ~~and~~competitors. ~~our~~We ~~net~~cannot ~~income~~provide ~~and~~assurance ~~cash~~that ~~flows,~~we ~~including~~will ~~cash~~be ~~available~~able ~~for~~to ~~servicing~~continue ~~our~~to ~~indebtedness,~~develop ~~would~~such ~~correspondingly~~products ~~decrease. An~~or ~~increase~~that the number of ~~0.125%~~competitors ~~over~~with ~~the~~such ~~1.00%~~products ~~floor~~will ~~previously~~not ~~mentioned~~increase ~~would~~to ~~result~~such inan extent that we may stop marketing a ~~$1.1~~product ~~million~~for ~~increase~~which inwe ~~our~~previously ~~annual~~obtained ~~interest~~approval, ~~expense~~which ~~associated~~may ~~with~~have ~~the~~a ~~Senior~~material ~~Credit~~adverse ~~Facilities~~impact on our revenues and gross margin.

~~During~~Due ~~2013, we entered into derivatives~~ to ~~hedge the variable cash flows associated with existing variable-rate debt under~~ our ~~Credit~~dependence ~~Agreement~~on ~~beginning~~a aslimited number of ~~September 30~~products, ~~2013. Our~~our ~~objective~~business incould ~~using~~be ~~interest~~materially ~~rate~~adversely ~~derivatives~~affected isif ~~to add certainty to interest expense amounts and to manage~~ our ~~exposure~~key toproducts ~~interest~~do ~~rate~~not ~~movements,~~perform specifically to protect us from variability in cash flows attributable to changes in LIBOR interest rates. To accomplish this objective, we entered into interest rate caps. Interest rate caps designated as ~~cash~~well flow hedges involve the receipt of variable-rate amounts from a counterparty if LIBOR exceeds the strike rate in exchange for the company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount. As of December 31, 2013, we had five outstanding interest rate caps with various termination dates and notional amounts. The derivatives had a combined notional value of $600 million, all with an effective date as ~~of September 30, 2013 and with termination dates each September 30th beginning in 2014 and ending in 2018~~expected. Consistent with the terms of the Credit Agreement, the interest rate caps have a strike of 1%, which matches the LIBOR floor of 1.0% on the debt. The premium is deferred and paid over the life of the instrument. The effective annual interest rate related to these interest rate caps was a fixed weighted average rate of approximately 4.9% (including applicable margin of 3.25% per the Credit Agreement) at December 31, 2013.

InWe ~~the~~generate ~~future,~~a wesignificant ~~may~~portion ~~enter~~of ~~into~~our ~~additional~~total ~~interest~~revenues ~~rate~~and ~~swaps~~gross ~~that~~margin ~~involve~~from the ~~exchange~~sale of ~~floating~~a limited number of products. For the year ended December 31, 2014, our top ten revenue products accounted for ~~fixed~~approximately ~~rate~~50% ~~interest~~of ~~payments~~our intotal ~~order~~net torevenues ~~reduce~~and ~~interest~~a ~~rate~~significant ~~volatility~~portion of our gross margin. ~~However,~~ weAny ~~may~~material ~~not~~adverse ~~maintain~~developments, ~~interest~~including ~~rate~~increased ~~swaps~~competition and supply shortages, with respect to ~~all~~the sale or use of these products, or our ~~variable~~failure ~~rate~~to ~~indebtedness,~~successfully ~~and~~introduce ~~any~~new ~~swaps~~key weproducts, ~~enter~~could ~~into~~have ~~may~~a ~~not~~material ~~fully~~adverse ~~mitigate~~effect on our ~~interest~~revenues ~~rate~~and ~~risk~~gross margin.

IfThe wemajority ~~default~~of on our ~~obligations~~products toare ~~pay~~produced ~~our~~at ~~other~~a ~~indebtedness,~~few welocations ~~may~~and ~~not~~a bebusiness ~~able~~interruption toat ~~make~~one ~~payments~~or more of these locations could have a material adverse effect on ~~the~~our ~~Notes~~business, financial position and results of operations.

~~Any~~We ~~default~~produce ~~under~~ the ~~agreements~~majority governing our indebtedness, including a default under our Senior Credit Facilities that is not waived by the lenders required to waive a default thereunder, and the remedies sought by such creditors, could prevent us from paying principal, premium, if any, and interest on the Notes and substantially decrease the market value of the ~~Notes. If~~products that we ~~are~~manufacture ~~unable~~at ~~to generate sufficient cash flow and are otherwise unable to obtain funds necessary to meet required payments of principal, premium, if any, and interest on~~ our ~~indebtedness,~~manufacturing orfacility ifin weNew ~~otherwise fail to comply with the various covenants~~York, ~~including financial~~ and ~~operating~~a ~~covenants,~~significant innumber ~~the~~at ~~instruments governing~~ our ~~indebtedness,~~manufacturing ~~including~~facilities ~~covenants~~ in ~~the~~California ~~agreements~~and ~~governing~~India. ~~our~~Our ~~Senior~~recently ~~Credit~~acquired ~~Facilities,~~facility ~~we could be~~ in ~~default~~Michigan ~~under~~produces ~~the~~all ~~terms~~ of ~~the~~our ~~agreements~~injectable ~~governing such indebtedness~~products. InMost ~~the event~~ of ~~such~~our ~~default,~~inventory ~~the~~passes ~~holders~~through ~~of such indebtedness may be able to cause all of~~ our ~~available~~warehouse ~~cash flow to be used to pay such indebtedness and,~~ in ~~any~~New event, could elect to declare all the funds borrowed thereunder to be due and payable, together with accrued and unpaid interest; the lenders under our Senior Credit Facilities could elect to terminate their commitments thereunder, cease making further loans and institute foreclosure proceedings against our assets, and we could be forced into bankruptcy or liquidationYork. ~~Upon~~A ~~any~~significant ~~such~~disruption ~~bankruptcy~~at ~~filing, we would be stayed from making~~ any ~~ongoing payments on the Notes, and the holders~~ of ~~the~~these ~~Notes would not be entitled to receive post-petition interest or applicable fees~~facilities, ~~costs~~even oron ~~charges, or any “adequate protection” under Title 11 of the United States Code (“Bankruptcy Code”). Furthermore, if~~ a ~~bankruptcy~~short-term ~~case were to be commenced under the Bankruptcy Code~~basis, we could beimpair ~~subject~~our toability ~~claims, with respect~~ to ~~any~~produce ~~payments~~and ~~made~~ship ~~within~~products ~~90 days prior~~ to ~~commencement of such a case, that we were insolvent at~~ the ~~time~~market ~~any~~on ~~such payments were made and that all or~~ a ~~portion~~timely ~~of such payments~~basis, which could ~~include~~have ~~repayments of amounts due under the Notes, might be deemed to constitute~~ a ~~preference~~material ~~under~~adverse ~~the~~effect ~~Bankruptcy~~on Code, and that such payments should be voided by the bankruptcy court and recovered from the recipients for the benefit of the entire bankruptcy estate. Also, in the event that we were to become a debtor in a bankruptcy case seeking reorganization or other relief under the Bankruptcy Code, a delay and/or substantial reduction in payments under the Notes may otherwise occur. If our ~~operating performance declines~~business, wefinancial ~~may~~position in the future need to obtain waivers from the required lenders under our Senior Credit Facilities to avoid being in default. If we breach our covenants under the agreements governing our Senior Credit Facilities and ~~seek~~results aof ~~waiver, we may not be able to obtain a waiver from the required lenders and holders~~operations. ~~If this occurs, we would be in default under our Senior Credit Facilities, the lenders could exercise their rights, as described above, and we could be forced into bankruptcy or liquidation.~~

Our profitability depends on our major customers. If these relationships do not continue as expected, our business, condition (financial and otherwise), prospects and results of operations could materially suffer.

We have approximately 120 customers, some of which are part of larger buying groups. For the year ended December 31, 2014, our four largest customers in terms of net product sales dollars accounted for approximately 70% of our total revenues, as follows; McKesson Drug (24.7%), Cardinal Health Inc. (18.3%), CVS Health Corporation (14.5%) and AmerisourceBergen Corporation (13.4%). The loss of any one or more of these or any other major customer or the substantial reduction in orders from any one or more of our major customers could have a material adverse effect upon our future operating results and financial condition.

We may experience declines in the sales volume and prices of our products as a result of the continuing trend of consolidation of certain customer groups, which could have a material adverse effect on our business, financial position and results of operations.

Our ability to successfully commercialize any generic or branded pharmaceutical product depends in large part upon the acceptance of the product by third parties, including pharmacies, government formularies, other retailers, physicians and patients. Therefore, our success will depend in large part on market acceptance of our products. We make a significant amount of our sales to a relatively small number of drug wholesalers and retail drug chains. These customers represent an essential part of the distribution chain of our pharmaceutical products. Drug wholesalers and retail drug chains have undergone, and are continuing to undergo, significant consolidation. This consolidation may result in these groups gaining additional purchasing leverage and consequently increasing the product pricing pressures facing our business. Additionally, the emergence of large buying groups representing independent retail pharmacies and other drug distributors, and the prevalence and influence of managed care organizations and similar institutions, potentially enable those groups to demand larger price discounts on our products. For example, there has been a recent trend of large wholesalers

~~The Notes~~ and ~~the~~retailer ~~related~~customers ~~guarantees~~forming ~~are~~partnerships, ~~unsecured~~such ~~and~~as ~~effectively~~the ~~subordinated~~alliance tobetween ~~our~~Walgreens and ~~our~~AmerisourceBergen ~~subsidiary~~Corporation, ~~guarantors’~~the ~~indebtedness~~alliance ~~under~~between ~~the~~Rite ~~Senior~~Aid ~~Credit~~and ~~Facilities~~McKesson Drug Company and ~~any~~the ~~other~~alliance ~~existing~~between CVS and ~~future~~Cardinal ~~secured~~Health. ~~indebtedness~~The result of ~~ours~~these todevelopments ~~the~~may ~~extent~~have ofa ~~the~~material ~~value~~adverse ofeffect ~~the~~on ~~property~~our ~~securing~~business, ~~that~~financial ~~indebtedness~~position and results of operations.

~~The~~We ~~Notes~~depend ~~are~~to ~~not~~a ~~secured~~large byextent ~~any~~on ofthird-party ~~our~~suppliers orand ~~our~~distributors ~~subsidiary~~for ~~guarantors’~~the ~~assets. As~~raw amaterials ~~result,~~for ~~the~~our ~~Notes~~products, ~~and~~particularly the ~~related~~chemical ~~guarantees~~compounds ~~are~~comprising ~~general~~the ~~unsecured~~APIs ~~obligations~~that ~~ranking~~we ~~effectively~~use ~~junior in right of payment~~ to ~~all~~manufacture of our ~~and our subsidiary guarantors’ existing and future senior secured indebtedness~~products, ~~including~~as ~~indebtedness~~well ~~under~~as ~~the~~for ~~Senior~~certain ~~Credit~~finished ~~Facilities with respect to the assets that secure that indebtedness~~goods. In ~~addition,~~A weprolonged ~~may~~interruption ~~incur additional secured debt~~ in the ~~future. The~~supply ~~effect~~ of ~~this~~such ~~subordination~~products iscould ~~that~~have ~~upon~~ a ~~default~~material inadverse ~~payment~~effect on, ~~or the acceleration of, any of~~ our ~~secured indebtedness~~business, orfinancial inposition the event of bankruptcy, insolvency, liquidation, dissolution or reorganization of our company or the subsidiary guarantors, the proceeds from the sale of assets securing our secured indebtedness will be available to pay obligations on the Notes only after all indebtedness under the Senior Credit Facilities and ~~that~~results ~~other secured debt has been paid in full. As a result, the holders~~ of ~~the Notes may receive less, ratably, than the holders of secured debt in the event of our or our subsidiary guarantors’ bankruptcy, insolvency, liquidation, dissolution or reorganization~~operations.

AsThe raw materials essential to our manufacturing business are purchased primarily from U.S. distributors of ~~December~~bulk ~~31,~~pharmaceutical ~~2013~~chemicals manufactured by foreign companies. If we experience supply interruptions or delays, we ~~had~~may ahave ~~total~~to ~~unused~~obtain ~~availability~~substitute ~~under~~materials ~~our~~or ~~Senior~~products, ~~Credit~~which ~~Facilities~~in turn would require us to obtain amended or additional regulatory approvals, subjecting us to additional expenditures of ~~$150~~significant ~~million~~time and resources. ~~The~~ ~~Senior~~In ~~Credit~~addition, ~~Facilities~~changes ~~also~~in ~~allow~~our anraw ~~aggregate~~material suppliers could result in significant delays in production, higher raw material costs and loss of ~~$250~~sales ~~million~~and ~~(or~~customers, because regulatory authorities must generally approve raw material sources for pharmaceutical products, which may be time consuming. Any significant supply interruption could have a ~~greater~~material ~~amount~~adverse ifeffect weon ~~meet~~our ~~certain~~business, ~~specified~~condition (financial ~~ratios~~and other), prospects and results of operations. To date, we have experienced no significant difficulties in ~~uncommitted~~obtaining ~~incremental~~raw ~~facilities~~materials. However, because the ~~availability~~federal drug application process requires specification of ~~which~~raw ~~will~~material suppliers, if raw materials from a specified supplier were to become unavailable, FDA approval of a new supplier would be ~~subject~~required. A delay in the manufacture and marketing of the drug involved while a new supplier becomes qualified by the FDA and its manufacturing process is determined to meet FDA standards could, depending on the particular product, have a material adverse effect on our ~~meeting~~results of operations and financial condition. Generally, we attempt to mitigate the potential effects of any such situation by providing for, where economically and otherwise feasible, two or more suppliers of raw materials for the drugs that we manufacture. In addition, we may attempt to enter into a contract with a raw material supplier in an effort to ensure adequate supply for certain ~~conditions~~of our products.

The ~~Notes~~testing ~~are~~required ~~structurally~~for ~~subordinated~~the toregulatory ~~all~~approval ~~obligations~~ of our ~~existing~~products ~~and~~is ~~future~~conducted ~~subsidiaries~~primarily ~~that~~by ~~are~~independent ~~not~~third ~~and~~parties. doAny ~~not~~failure ~~become~~by ~~guarantors~~any of ~~the~~these ~~Notes~~third parties to perform this testing properly and in a timely manner may have an adverse effect upon our ability to obtain regulatory approvals.

Our ~~material~~applications ~~existing~~for ~~direct~~the ~~and~~regulatory ~~indirect~~approval ~~wholly~~of ~~owned~~our ~~domestic subsidiaries~~products, ~~and,~~including ~~subject~~both tointernally-developed ~~certain~~and ~~exceptions~~in-licensed products, ~~each~~incorporate the results of ~~our~~testing ~~future~~and ~~domestic~~other ~~subsidiaries~~information that ~~guarantees~~is ~~our~~conducted ~~indebtedness~~ or ~~indebtedness~~gathered ofprimarily ~~any~~by ofindependent ~~the~~third ~~guarantors~~parties ~~guarantee~~(including, ~~the~~for ~~Notes. Our~~example, ~~subsidiaries~~manufacturers ~~that~~of doraw ~~not~~materials, ~~guarantee~~testing ~~the Notes~~laboratories, ~~including~~CROs ~~all~~or ofindependent ~~our~~research ~~non-domestic~~facilities). ~~subsidiaries,~~Our ~~have~~ability noto ~~obligation,~~obtain ~~contingent~~and ormaintain ~~otherwise,~~regulatory toapproval ~~pay~~of ~~amounts due under~~ the ~~Notes~~products orbeing totested ~~make~~is ~~any~~dependent ~~funds~~upon ~~available~~the toquality ~~pay~~of ~~those~~the ~~amounts,~~work ~~whether~~performed by ~~dividend,~~these ~~distribution~~third parties, ~~loan~~the orquality ~~other~~of ~~payment. The~~the ~~Notes~~third ~~are~~parties’ ~~structurally~~facilities, ~~subordinated to all indebtedness~~ and ~~other~~the ~~obligations~~accuracy of ~~any~~the ~~non-guarantor~~information ~~subsidiary~~provided ~~such~~by ~~that~~third inparties. ~~the~~We ~~event~~have oflittle ~~insolvency,~~or ~~liquidation,~~no ~~reorganization,~~control ~~dissolution~~over orany ~~other~~of ~~winding~~these upfactors. ofIf ~~any~~this ~~subsidiary~~testing ~~that~~ is not aperformed ~~guarantor~~properly, ~~all~~our ofability ~~that~~to ~~subsidiary’s~~obtain ~~creditors~~or ~~(including~~maintain ~~trade~~regulatory ~~creditors)~~approvals, ~~would~~and ~~be entitled~~ to ~~payment~~launch inor ~~full~~continue ~~out~~selling ofproducts, ~~that~~could ~~subsidiary’s~~be ~~assets~~restricted ~~before~~or ~~any~~delayed. Additionally, ~~distribution~~while iswe ~~made~~recently toacquired usour orown ~~the~~CRO ~~holders~~in ofIndia ~~the~~that ~~Notes.~~may supplant Ina ~~any~~portion of these ~~events~~services provided by third parties, we ~~may~~have ~~not~~no ~~have~~experience ~~sufficient~~running ~~assets~~a toCRO ~~pay~~and ~~amounts~~may ~~due~~need onto ~~the~~continue ~~Notes~~to ~~with~~rely ~~respect~~on third parties to ~~the~~provide ~~assets~~a majority of these ~~subsidiaries~~services.

InWe ~~addition,~~depend ~~the~~on ~~indenture~~third-party ~~governing~~agreements ~~the~~for ~~Notes,~~a ~~subject~~portion toof ~~some~~our ~~limitations~~product offering, ~~permits~~including ~~the~~certain ~~non-guarantor~~key ~~subsidiaries~~products, ~~to incur additional indebtedness~~ and ~~does not contain~~ any ~~limitation~~failure onto ~~the~~maintain ~~amount~~these ofarrangements ~~other~~or ~~liabilities,~~enter ~~such~~into assimilar ~~trade~~arrangements ~~payables,~~with ~~that~~new ~~may~~partners becould ~~incurred~~result byin ~~these~~a ~~non-guarantor~~material ~~subsidiaries~~adverse effect.

~~From~~We ~~the~~have ~~time~~broadened ~~that~~ our ~~non~~product offering by entering into a variety of third-~~guarantor~~party ~~subsidiary~~agreements ~~was~~covering ~~acquired~~any combination of joint development, supply, marketing and/or distribution of products. For example, we have entered into an agreement with Croda Europe, Ltd. for development and supply of API used in ~~February~~our ~~2012~~generic ~~through~~omega-3-acid ethyl esters oral capsules product, and with Glenmark Generics (“Glenmark”) to market and distribute Glenmark’s generic ezetimibe product. For the year ended December 31, ~~2013~~2014, a significant percentage of our ~~non-guarantor~~total ~~subsidiary~~net ~~represented~~product ~~less~~sales ~~than~~were 3%generated from products manufactured under contract or under license. We cannot provide assurance that the development or supply efforts of ~~each~~our contractual partners will continue to be successful, that we will be able to renew such agreements or that we will be able to enter into new agreements for additional products. Any alteration to or termination of our ~~total~~current ~~assets~~distribution and marketing agreements, ~~stockholders’~~any ~~equity~~failure to enter into new and similar agreements, ~~revenues~~or interruption of our product supply under the distribution and marketing agreements, ~~income~~could ~~from~~materially ~~continuing~~adversely ~~operations~~affect ~~before~~our ~~income~~business, ~~taxes~~condition (financial and ~~cash~~otherwise), ~~flows~~prospects ~~from~~or ~~operating~~results ~~activities~~of operations.

InOur ~~addition,~~recent ~~our~~acquisitions ~~subsidiaries~~and ~~that~~any ~~provide,~~acquisitions orwe ~~will~~may ~~provide,~~undertake ~~guarantees~~in ofthe future involve numerous risks, including the ~~Notes~~risks ~~will~~that we may be ~~automatically~~unable ~~released~~to ~~from~~integrate ~~those~~the ~~guarantees~~acquired ~~upon~~businesses ~~the~~successfully ~~occurrence~~and ofthat ~~certain~~we ~~events,~~may ~~including~~assume ~~the~~liabilities ~~following:~~that could adversely affect us.

•We ~~the~~recently ~~designation~~completed several important acquisitions, including our acquisitions of ~~that~~Par ~~subsidiary~~Sterile ~~guarantor~~in February 2014 and Innoteq, Inc. (“Innoteq”) and Par Biosciences Private Limited (“Par Biosciences” and formerly known as Ethics Bio Lab Private Limited) in January 2015. We also entered into an ~~unrestricted~~agreement ~~subsidiary;~~to acquire an API development and manufacturing facility from Nuray Chemicals Private Limited (“Nuray”). We expect to evaluate strategic acquisitions in the future. Acquisitions involve numerous risks, including operational risks associated with the integration of acquired businesses. These risks include, but are not limited to:

• the release or discharge of any guarantee or indebtedness that resulted in the creation of the guarantee of the Notes by such subsidiary guarantor; or

• the sale or other disposition, including the sale of substantially all the assets, of that guarantor.

If any guarantee is released, no holder of the Notes will have a claim as a creditor against that subsidiary, and the indebtedness and other liabilities, including trade payables and preferred stock, if any, whether secured or unsecured, of that subsidiary will be effectively senior to the claim of any holders of the Notes.

Upon a change of control, we may not have the ability to raise the funds necessary to finance the change of control offer required by the indenture governing the Notes, which would violate the terms of the Notes.

Upon the occurrence of specific kinds of change of control events, we will be required to offer to repurchase all Notes at 101% of their principal amount, plus accrued and unpaid interest to the purchase date. Additionally, under the Senior Credit Facilities, a change of control (as defined therein) constitutes an event of default that permits the lenders to accelerate the maturity of borrowings under the credit agreement and terminate their commitments to lend. The source of funds for any purchase of the Notes and repayment of borrowings under our Senior Credit Facilities would be our available cash or cash generated from our subsidiaries’ operations or other sources, including borrowings, sales of assets or sales of equity. We may not be able to repurchase the Notes upon a change of control because we may not have sufficient financial resources to purchase all of the Notes that are tendered upon a change of control and repay our other indebtedness that will become due. We may require additional financing from third parties to fund any such purchases, and we may be unable to obtain financing on satisfactory terms or at all. Further, our ability to repurchase the Notes may be limited by law. In order to avoid the obligations to repurchase the Notes and events of default and potential breaches of the credit agreement governing our Senior Credit Facilities, we may have to avoid certain change of control transactions that would otherwise be beneficial to us.

In addition, some important corporate events, such as leveraged recapitalizations, may not, under the indenture that governs the Notes, constitute a “change of control” that would require us to repurchase the Notes, even though those corporate events could increase the level of our indebtedness or otherwise adversely affect our capital structure, credit ratings or the value of the Notes. Such a transaction may not involve a change in voting power or beneficial ownership or, even if it does, may not involve a change that constitutes a “change of control” as defined in the indenture governing the Notes that would trigger our obligation to repurchase the Notes. Therefore, if an event occurs that does not constitute a “change of control” as defined in the indenture governing the Notes, we will not be required to make an offer to repurchase the Notes, and the holders of the Notes may be required to continue to hold the Notes despite the event.

Holders of the Notes may not be able to determine when a change of control giving rise to their right to have the Notes repurchased has occurred following a sale of “substantially all” of our assets.

The definition of change of control in the indenture that governs the Notes includes a phrase relating to the sale of “all or substantially all” of our assets. There is no precise established definition of the phrase “substantially all” under applicable law. Accordingly, the ability of a holder of Notes to require us to repurchase their Notes as a result of a sale of less than all our assets to another person may be uncertain.

Because each guarantor’s liability under its guarantee may be reduced to zero, voided or released under certain circumstances, holders of the Notes may not receive any payments from some or all of the guarantors.

The Notes have the benefit of the guarantees of the subsidiary guarantors. However, the guarantees by the subsidiary guarantors are limited to the maximum amount that the subsidiary guarantors are permitted to guarantee under applicable law. As a result, a subsidiary guarantor’s liability under its guarantee could be reduced to zero, depending upon the amount of other obligations of such subsidiary guarantor. Further, under certain circumstances, a court under federal and state fraudulent conveyance and transfer statutes could void the obligations under a guarantee or further subordinate it to all other obligations of the guarantor. In addition, holders of the Notes will lose the benefit of a particular guarantee if it is released under certain circumstances.

Federal and state fraudulent transfer laws may permit a court to void the Notes and/or the guarantees, and if that occurs, holders of the Notes may not receive any payments on the Notes.

Federal and state fraudulent transfer and conveyance statutes may apply to the issuance of the Notes and the incurrence of the guarantees of the Notes. Under federal bankruptcy law and comparable provisions of state fraudulent transfer or conveyance laws, which may vary from state to state, the Notes or the guarantees thereof could be voided as a fraudulent transfer or conveyance if we or any of the guarantors, as applicable, (a) issued the Notes or incurred the guarantees with the intent of hindering, delaying or defrauding creditors, or (b) received less than reasonably equivalent value or fair consideration in return for either issuing the Notes or incurring the guarantees and, in the case of (b) only, one of the following is also true at the time thereof:

• we or any of the guarantors, as applicable, were insolvent or rendered insolvent by reason of the issuance of the Notes or the incurrence of the guarantees;

• the issuance of the Notes or the incurrence of the guarantees left us or any of the guarantors, as applicable, with an unreasonably small amount of capital or assets to carry on the business;

• we or any of the guarantors intended to, or believed that we or such guarantor would, incur debts beyond our or the guarantor’s ability to pay as they mature; or

• we or any of the guarantors were a defendant in an action for money damages, or had a judgment for money damages docketed against us or the guarantor if, in either case, the judgment is unsatisfied after final judgment.

As a general matter, value is given for a transfer or an obligation if, in exchange for the transfer or obligation, property is transferred or a valid antecedent debt is secured or satisfied. A court would likely find that a subsidiary guarantor did not receive reasonably equivalent value or fair consideration for its guarantee to the extent the guarantor did not obtain a reasonably equivalent benefit directly or indirectly from the issuance of the Notes.

We cannot be certain as to the standards a court would use to determine whether or not we or the subsidiary guarantors were insolvent at the relevant time or, regardless of the standard that a court uses, whether the Notes or the guarantees would be subordinated to our or any of our subsidiary guarantors’ other debt. In general, however, a court would deem an entity insolvent if:

• the sum of its debts, including contingent and unliquidated liabilities, was greater than the fair saleable value of all of its assets;

• the present fair saleable value of its assets was less than the amount that would be required to pay its probable liability on its existing debts, including contingent liabilities, as they become absolute and mature; or

• it could not pay its debts as they became due.

If a court were to find that the issuance of the Notes or the incurrence of a guarantee was a fraudulent transfer or conveyance, the court could void the payment obligations under the Notes or that guarantee, could subordinate the Notes or that guarantee to presently existing and future indebtedness of ours or of the related subsidiary guarantor or could require the holders of the Notes to repay any amounts received with respect to that guarantee. In the event of a finding that a fraudulent transfer or conveyance occurred, holders of the Notes may not receive any repayment on the Notes. Further, the avoidance of the Notes could result in an event of default with respect to our and our subsidiaries’ other debt that could result in acceleration of that debt.

Finally, as a court of equity, the bankruptcy court may subordinate the claims in respect of the Notes to other claims against us under the principle of equitable subordination if the court determines that (1) the holder of Notes engaged in some type of

inequitable conduct, (2) the inequitable conduct resulted in injury to our other creditors or conferred an unfair advantage upon the holders of Notes, and (3) equitable subordination is not inconsistent with the provisions of the Bankruptcy Code.

The ability of noteholders to transfer the Notes may be limited by the absence of an active trading market and an active trading market may not develop for the Notes.

The Notes were new issues of securities for which there was no established trading market. We expect the Notes to be eligible for trading by “qualified institutional buyers,” as defined under Rule 144A of the Securities Act, but we do not intend to list the Notes on any national securities exchange or include the Notes in any automated quotation system. In addition, market making activities may be limited. Therefore, an active market for the Notes may not develop or be maintained, which would adversely affect the market price and liquidity of the Notes. In that case, the holders of the Notes may not be able to sell their Notes at a particular time or at a favorable price. Even if an active trading market for the Notes does develop, there is no guarantee that it will continue. Historically, the market for non-investment grade debt has been subject to severe disruptions that have caused substantial volatility in the prices of securities similar to the Notes. The market, if any, for the Notes may experience similar disruptions, and any such disruptions may adversely affect the liquidity in that market or the prices at which the noteholders may sell the Notes. In addition, the Notes may trade at a discount from their initial offering price, depending upon prevailing interest rates, the market for similar Notes, our performance and other factors.

A lowering or withdrawal of the ratings assigned to the Notes or our other debt by rating agencies may increase our future borrowing costs and reduce our access to capital.

The Notes have been rated by Moody’s and Standard & Poor’s and may in the future be rated by additional rating agencies. On January 31, 2014, Standard & Poor’s lowered our Corporate Credit Rating and our issue-level rating on our Notes, and Moody’s changed our rating outlook from stable to negative. These actions were taken after each rating agency reassessed our risk profile in conjunction with our acquisition of JHP and the related additional borrowings. Any rating assigned to the Notes or our other debt could be lowered or withdrawn entirely by a rating agency if, in that rating agency’s judgment, future circumstances relating to the basis of the rating, such as adverse changes, so warrant. Consequently, real or anticipated changes in our credit ratings will generally affect the market value of the Notes. Credit ratings are not recommendations to purchase, hold or sell the Notes. Additionally, credit ratings may not reflect the potential effect of risks relating to the structure or marketing of the Notes. Any downgrade by either Standard & Poor’s or Moody’s may result in higher borrowing costs. Any future lowering of our ratings likely would make it more difficult or more expensive for us to obtain additional debt financing. If any credit rating initially assigned to the Notes is subsequently lowered or withdrawn for any reason, noteholders may not be able to resell the Notes without a substantial discount.

Many of the covenants in the indenture that governs the Notes will not apply during any period in which the Notes are rated investment grade by both Moody’s and Standard & Poor’s.

Many of the covenants in the indenture that governs the Notes will not apply to us during any period in which the Notes are rated investment grade by both Moody’s and Standard & Poor’s, provided at such time no default or event of default has occurred and is continuing. These covenants will restrict among other things, our ability to pay distributions, incur debt and to enter into certain other transactions. There can be no assurance that the Notes will ever be rated investment grade, or that if they are rated investment grade, that the Notes will maintain these ratings. However, suspension of these covenants would allow us to incur debt, pay dividends and make other distributions and engage in certain other transactions that would not be permitted while these covenants were in force. To the extent the covenants are subsequently reinstated, any such actions taken while the covenants were suspended would not result in an event of default under the indenture that will govern the Notes.

If a bankruptcy petition were filed by or against us, holders of Notes may receive a lesser amount for their claim than they would have been entitled to receive under the indenture governing the Notes.

If a bankruptcy petition were filed by or against us under the Bankruptcy Code, the claim by any holder of the Notes for the principal amount of the Notes may be limited to an amount equal to the sum of:

• the original issue price for the Notes; and

• that unpaid portion of any OID that does not constitute “unmatured interest” for purposes of the Bankruptcy Code.

Any OID that was not amortized as of the date of the bankruptcy filing would constitute unmatured interest. Accordingly, holders of the Notes under these circumstances may receive a lesser amount than they would be entitled to receive under the terms of the indenture governing the Notes, even if sufficient funds are available.

Risks Related to Our Business

Our recent acquisitions involve numerous risks, including the risks that we may be unable to integrate the acquired businesses successfully and that we may assume liabilities that could adversely affect us.

On November 1, 2013, our wholly owned subsidiary, Par Formulations Private Limited, entered into a definitive agreement to purchase Nuray Chemicals Private Limited, a privately held Chennai, India based API developer and manufacturer (“Nuray”). The closing of the acquisition is subject to the receipt of applicable regulatory approvals and other customary closing terms and conditions.

On February 20, 2014, we completed the acquisition of JHP Group Holdings, Inc., the parent company of JHP Pharmaceuticals, LLC (“JHP”), a leading specialty pharmaceutical company that develops, manufactures and markets branded and generic sterile injectable products. JHP, which focuses on the U.S. sterile injectable drug market, manufactures and sells branded and generic aseptic injectable pharmaceuticals in hospital and clinical settings, and provides contract manufacturing services for global pharmaceutical companies. JHP’s sterile manufacturing facility in Rochester, Michigan, has the capability to manufacture small-scale clinical through large-scale commercial products.

Acquisitions involve numerous risks, including operational risks associated with the integration of acquired businesses. These risks include, but are not limited to:


•	difficulties in achieving identified financial revenue synergies, growth opportunities, operating synergies and cost savings;


•	difficulties in assimilating the personnel, operations and products of an acquired company, and the potential loss of key employees;


•	difficulties in consolidating information technology platforms, business applications and corporate infrastructure;


•	difficulties in integrating our corporate culture with local customs and cultures;


•	possible overlap between our products or customers and those of an acquired entity that may create conflicts in relationships or other commitments detrimental to the integrated businesses;


•	our inability to achieve expected revenues and gross margins for any products we may acquire;


•	possible contingent liability that includes, among others, known or unknown environmental, patent or product liability claims;


•	the diversion of management’s attention from other business concerns; and


•	risks and challenges of entering or operating in markets in which we have limited or no prior experience, including the unanticipated effects of export controls, exchange rate fluctuations, foreign legal and regulatory requirements, and foreign political and economic conditions.

In addition, foreign acquisitions involve numerous risks, including those related to the absence of policies and procedures sufficient to assure compliance by a foreign entity with U.S. regulatory and legal requirements. There can be no assurance that we will not be subject to liability arising from conduct which occurred prior to our acquisition of any entity.

We incur significant transaction costs associated with our acquisitions, including substantial fees for investment bankers, attorneys, and accountants. Any acquisition could result in our assumption of unknown and/or unexpected, and perhaps material, liabilities. Additionally, in any acquisition agreement, the negotiated representations, warranties and agreements of the selling parties may not entirely protect us, and liabilities resulting from any breaches may not be subject to indemnification by the suing parties and/or could exceed negotiated indemnity limitations. These factors could impair our growth and ability to compete; divert resources from other potentially more profitable areas; or otherwise cause a material adverse effect on our business, financial position and results of operations.

The financial statements of the companies we have acquired or may acquire in the future are prepared by management of such companies and are not independently verified by our management. In addition, any pro forma financial statements prepared by us to give effect to such acquisitions may not accurately reflect the results of operations of such companies that would have been achieved had the acquisition of such entities been completed at the beginning of the applicable financial reporting periods. Finally, we cannot guarantee that we will continue to acquire businesses at valuations consistent with our prior acquisitions or that we will complete acquisitions at all.

We ~~own~~may ~~and~~make ~~operate~~acquisitions ~~facilities~~of, ~~located~~or investments in, ~~India~~complementary ~~and~~businesses ~~are~~or ~~subject~~products, towhich ~~regulatory,~~may ~~economic,~~be ~~social~~on ~~and~~terms ~~political~~that ~~uncertainties~~may innot ~~India,~~turn ~~which~~out ~~could~~to ~~cause~~be acommercially ~~material~~advantageous, ~~adverse~~may ~~effect~~require onadditional ~~our~~debt ~~business,~~or ~~financial~~equity ~~position~~financing, and ~~results~~may ofinvolve ~~operations~~numerous risks, including those set forth above.

We ~~are~~regularly ~~subject~~review tothe ~~certain~~potential ~~risks~~acquisition ~~associated~~of ~~with~~technologies, ~~having~~products, aproduct ~~portion~~rights ofand ~~our~~complementary ~~assets~~businesses and ~~operations~~are ~~located~~currently inevaluating, ~~India. Our~~and ~~operations~~intend into ~~India~~continue ~~may~~to beevaluate, ~~adversely~~potential ~~affected~~product byand/or ~~general~~company ~~economic~~acquisitions ~~conditions~~ and ~~economic~~other ~~and~~business ~~fiscal~~development ~~policy~~opportunities. inWe ~~India,~~may ~~including~~choose ~~changes~~to inenter ~~exchange~~into ~~rates~~such ~~and~~transactions ~~controls~~at any time. Nonetheless, ~~interest~~we ~~rates~~cannot ~~and~~provide ~~taxation~~assurance ~~policies;~~that ~~any~~we ~~reversal~~will ofbe ~~India’s~~able ~~recent~~to ~~economic~~identify ~~liberalization~~suitable ~~and~~acquisition ~~deregulation~~or ~~policies;~~investment ~~increased~~candidates. ~~government~~To ~~regulation;~~the asextent ~~well~~that aswe ~~social~~do ~~stability~~identify ~~and~~candidates ~~political,~~that ~~economic~~we orbelieve ~~diplomatic~~to ~~developments~~be ~~affecting~~suitable, ~~India~~we incannot ~~the~~provide ~~future. India~~assurance ~~has,~~that ~~from~~we ~~time~~will be able to ~~time,~~reach ~~experienced~~an ~~instances~~agreement ofwith ~~civil~~the ~~unrest~~selling ~~and~~party ~~hostilities~~or parties, ~~both~~that ~~internally~~the ~~and~~terms ~~with~~we ~~neighboring~~may ~~countries. Rioting,~~agree ~~military~~to ~~activity,~~will ~~terrorist~~be ~~attacks,~~commercially oradvantageous ~~armed~~to ~~hostilities~~us, ~~could~~or ~~cause~~that ~~our~~we ~~operations~~will ~~there~~be able to besuccessfully ~~adversely~~consummate ~~affected~~such investments or ~~suspended. We~~acquisitions ~~generally~~even doafter ~~not~~definitive documents have ~~insurance~~been ~~for~~signed. ~~losses~~If ~~and~~we ~~interruptions~~make ~~caused~~any byacquisitions ~~terrorist~~or ~~attacks~~investments, ~~military~~we ~~conflicts~~may ~~and~~finance ~~wars. In~~such ~~addition,~~acquisitions ~~India~~or isinvestments ~~known~~through toour ~~have~~cash ~~experienced~~reserves, ~~governmental~~debt ~~corruption~~financing to(such ~~some~~as ~~degree~~borrowings ~~and,~~available into ~~some~~us ~~circumstances,~~under ~~anti-bribery~~our ~~laws~~senior ~~may~~credit ~~conflict~~facilities ~~with~~(the ~~some~~“Senior ~~local~~Credit ~~customs~~Facilities”), ~~and~~including ~~practices. Our~~any ~~operations~~incremental infacilities ~~India~~thereunder), which may ~~subject~~increase usour toleverage, ~~heightened~~or ~~scrutiny~~by ~~under~~issuing ~~the~~additional ~~U.S.~~equity ~~Foreign~~securities, ~~Corrupt~~which ~~Practices~~could ~~Act~~dilute ~~(“FCPA”)~~the ~~and~~holdings ~~similar~~of ~~anti~~our then-~~bribery~~existing ~~laws~~stockholders. ~~and~~If ~~could~~we ~~subject~~require usfinancing, towe ~~liability~~cannot ~~under~~provide ~~such~~assurance ~~laws~~that ~~despite~~we ~~our~~will ~~best~~be ~~efforts~~able to ~~comply~~obtain ~~with~~required ~~such~~financing ~~laws. As~~when aneeded ~~result~~on ofacceptable ~~our~~terms ~~policy~~or toat ~~comply~~all. ~~with~~Any ~~the~~future ~~FCPA~~acquisitions ~~and~~may ~~similar~~involve ~~anti-bribery~~numerous ~~laws~~risks, weincluding ~~may~~but benot atlimited ~~a competitive disadvantage~~ to ~~competitors~~the ~~that~~types ~~are~~of ~~not~~risks ~~subject~~set ~~to,~~forth orabove dowith ~~not~~respect ~~comply~~to ~~with,~~our ~~such~~recent ~~laws~~acquisitions.

WeOur ~~have~~expansion ~~increased~~into ~~exposure~~international markets subjects us to ~~tax~~increased ~~liabilities~~regulatory oversight and regulatory, ~~including~~economic, ~~foreign~~social ~~tax~~and ~~liabilities~~political uncertainties, which could cause a material adverse effect on our business, financial position and results of operations.

AsWe aare ~~corporation~~subject to certain risks associated with aour ~~subsidiary~~plans to commercialize products in ~~India,~~the weU.K. ~~are~~and ~~subject~~other toEuropean ~~income~~markets ~~taxes~~and aswith ~~well~~having asassets ~~non-income~~and ~~based~~operations ~~taxes,~~located in ~~both~~foreign ~~the~~jurisdictions, ~~United~~including ~~States~~our ~~and~~operations in India and England. ~~Significant~~We ~~judgment~~are isinexperienced ~~required~~operating in ~~determining~~these ~~our~~jurisdictions, ~~worldwide~~and ~~provision~~we ~~for~~have ~~income~~no ~~taxes~~experience ~~and~~in ~~other~~seeking ~~tax~~regulatory ~~liabilities.~~approvals, ~~Changes~~marketing or selling products in ~~tax~~the ~~laws~~U.K. or ~~tax~~other ~~rulings~~European markets. Our operations in these jurisdictions may ~~have~~be aadversely ~~significantly~~affected ~~adverse~~by ~~impact~~general oneconomic ~~our~~conditions ~~effective~~and ~~tax~~economic ~~rate. Recent~~and ~~proposals~~fiscal bypolicy, ~~the~~including ~~current~~changes Uin exchange rates and controls, interest rates and taxation policies, increased government regulation, and, with respect to India, any reversal of India’s recent economic liberalization and deregulation policies, as well as social stability and political, economic or diplomatic developments in the future.S. ~~administration~~Certain ~~for~~jurisdictions ~~fundamental~~have, Ufrom time to time, experienced instances of civil unrest and hostilities, both internally and with neighboring countries.S. ~~international~~Rioting, ~~tax~~military ~~reform~~activity, ifterrorist ~~enacted~~attacks, or armed hostilities could ~~have~~cause aour ~~significant~~operations ~~adverse~~there ~~impact~~to onbe ~~our~~adversely ~~effective~~affected ~~tax~~or ~~rate~~suspended. In ~~addition,~~We wegenerally do not have ~~potential~~insurance ~~tax~~for ~~exposures~~losses ~~resulting~~and ~~from~~interruptions ~~the~~caused ~~varying~~by ~~application~~terrorist ofattacks, ~~statutes~~military conflicts and wars. In addition, ~~regulations~~India is known to have experienced governmental corruption and, in some

2018

~~interpretations~~circumstances, ~~which~~anti-bribery ~~include~~laws ~~exposures~~may onconflict ~~intercompany~~with ~~terms~~some oflocal ~~cross~~customs ~~border~~and ~~arrangements~~practices. ~~among~~Our ~~any~~international ~~foreign~~operations ~~subsidiary~~may insubject ~~relation~~us to ~~various~~heightened ~~aspects~~scrutiny ofunder ~~our~~the ~~business,~~U.S. ~~including~~Foreign ~~research~~Corrupt ~~and~~Practices ~~development~~Act ~~activities~~(“FCPA”), ~~and~~the ~~manufacturing. Tax~~UK ~~authorities~~Bribery inAct ~~various~~and ~~jurisdictions~~similar ~~may~~anti-bribery ~~disagree~~laws, ~~with~~ and ~~subsequently~~could ~~challenge~~subject ~~the~~us ~~amount~~to ofliability ~~profits~~under ~~taxed~~such inlaws ~~their~~despite ~~country,~~our ~~which~~best ~~may~~efforts ~~result~~to incomply ~~increased~~with ~~tax~~such ~~liability,~~laws. ~~including~~As ~~accrued~~a ~~interest~~result ~~and~~of ~~penalties,~~our ~~which~~policy ~~would~~to ~~cause~~comply ~~our~~with ~~tax~~the ~~expense~~FCPA, tothe ~~increase. This~~UK ~~could~~Bribery ~~have~~Act aand ~~material~~similar ~~adverse~~anti-bribery ~~effect~~laws, onwe ~~our~~may ~~business,~~be ~~financial~~at ~~position~~a ~~and~~competitive ~~results~~disadvantage ofto ~~operations~~competitors ~~and~~that ~~our~~are ~~ability~~not subject to, ~~satisfy~~or ~~our~~do ~~obligations~~not ~~under~~comply ~~the~~with, ~~Notes~~such laws.

WeOur competitors or other third parties may ~~make~~allege ~~acquisitions~~that ~~of,~~we orare ~~investments~~infringing intheir intellectual property, ~~complementary~~forcing ~~businesses~~us orto ~~products~~expend substantial resources in litigation, ~~which~~the ~~may~~outcome beof onwhich ~~terms~~is ~~that~~uncertain. ~~are~~Any ~~not~~unfavorable ~~commercially~~outcome ~~advantageous~~of such litigation, ~~may~~including ~~require~~losses ~~additional~~related ~~debt~~to or“at-risk” ~~equity~~product ~~financing~~launches, ~~and~~could ~~may~~have ~~involve~~a ~~numerous~~material ~~risks~~adverse effect on our business, ~~including~~financial ~~those~~position ~~set~~and ~~forth~~results ~~above~~of operations.

WeCompanies ~~regularly~~that ~~review~~produce ~~the~~branded ~~potential~~pharmaceutical ~~acquisition of technologies,~~ products, ~~product~~routinely ~~rights~~bring ~~and~~litigation ~~complementary~~against ~~businesses~~ANDA ~~and~~or ~~are~~similar ~~currently~~applicants ~~evaluating,~~that ~~and~~seek ~~intend~~regulatory toapproval ~~continue~~ to ~~evaluate,~~manufacture ~~potential product acquisitions~~ and ~~other~~market ~~business~~generic ~~development~~forms ~~opportunities. We~~of ~~may~~their ~~choose~~branded toproducts ~~enter~~alleging ~~into~~patent ~~such~~infringement ~~transactions~~or atother ~~any~~violations ~~time. Nonetheless,~~of weintellectual ~~cannot~~property ~~provide assurance that we will be able to identify suitable acquisition or investment candidates~~rights. To ~~the~~Patent ~~extent~~holders ~~that~~may wealso dobring ~~identify~~patent ~~candidates~~infringement ~~that~~suits weagainst ~~believe~~companies ~~to be suitable, we cannot provide assurance~~ that weare ~~will~~currently bemarketing ~~able~~and ~~to reach an agreement with the~~ selling ~~party~~approved orgeneric ~~parties,~~products. ~~that~~Litigation ~~the~~often ~~terms~~involves wesignificant ~~may~~expense ~~agree~~and tocan ~~will~~delay ~~be commercially advantageous to us,~~ or ~~that~~prevent weintroduction ~~will be able to successfully consummate such investments~~ or ~~acquisition~~sale ~~even~~of ~~after~~our ~~definitive~~generic ~~documents have been signed~~products. If wepatents ~~make~~are ~~any~~held ~~acquisitions or investments~~valid, weenforceable ~~may~~and ~~finance~~infringed ~~such~~by ~~acquisitions or investments through~~ our ~~cash reserves~~products, ~~debt~~we ~~financing~~would, ~~(such~~unless aswe ~~borrowings~~could ~~available~~obtain toa uslicense ~~under~~from the ~~Senior~~patent ~~Credit Facilities~~holder, ~~including~~need ~~any~~to ~~incremental~~delay ~~facilities~~selling ~~thereunder), which may increase~~ our ~~leverage,~~corresponding orgeneric byproduct ~~issuing additional equity securities~~and, ~~which~~if ~~could~~we ~~dilute~~are ~~the~~already ~~holdings~~selling of our ~~then-existing stockholders. If we require financing~~product, wecease ~~cannot~~selling ~~provide~~and ~~assurance~~potentially ~~that~~destroy weexisting ~~will~~product ~~be able to obtain required financing when needed on acceptable terms or at all~~stock. ~~Any~~ ~~future acquisitions may involve numerous risks, including but not limited to the types of risks set forth above with respect to our recent acquisitions.~~

IfThere may be situations in which we may make business and legal judgments to market and sell products that are ~~unable~~subject to ~~successfully~~claims ~~develop~~of alleged patent infringement prior to final resolution of those claims by the courts, based upon our belief that such patents are invalid, unenforceable, or ~~commercialize~~are ~~new~~not infringed by our marketing and sale of such products. This is referred to in the pharmaceutical industry as an “at-risk” launch. The risk involved in an at-risk launch can be substantial because, if a patent holder ultimately prevails against us, the remedies available to such holder may include, among other things, damages measured by the profits lost by the patent holder, which can be significantly higher than the profits we make from selling the generic version of the product. For example, in September 2014, we paid $100 million to settle claims relating to our ~~operating~~at-risk ~~results~~launch ~~will~~of ~~suffer~~our generic omeprazole/sodium bicarbonate capsules. Par Sterile and its development partner are currently engaged in patent litigation in the U.S. District Court for the District of New Jersey with respect to two zoledronic acid products that Par Sterile, as well as several other generic manufacturers, launched in 2013, following FDA approval of their respective ANDAs but prior to the District Court reaching a finding on the merits of the alleged claims in the litigation. See discussion in Item 3, “Legal Proceedings” elsewhere in the Annual Report on Form 10-K. We could face substantial damages from adverse court decisions in such matters. We could also be at risk for the value of such inventory that we are unable to market or sell.

~~Developing~~We ~~and commercializing a new product is time consuming~~are, ~~costly~~ and ~~subject~~will continue to ~~numerous~~be ~~factors~~in ~~that~~the ~~may delay or prevent development and commercialization. Our~~ future, ~~results of operations will depend to~~ a ~~significant~~party ~~extent upon our ability~~ to ~~successfully~~legal ~~commercialize~~proceedings ~~new~~that ~~products~~could inresult ~~a timely manner. There are numerous difficulties~~ in ~~developing~~unexpected ~~and~~adverse ~~commercializing new products, including:~~outcomes.

•We are a party to other legal proceedings, including matters involving personnel and employment issues, breach of contract claims and other proceedings arising in the ~~ability~~ordinary course of business. In addition, there are an increasing number of investigations and proceedings in the health care industry generally that seek recovery under the statutes and regulations identified in “Business-Government Regulation.” We evaluate our exposure to ~~develop~~these legal proceedings and ~~manufacture~~establish ~~products~~reserves for the estimated liabilities in ~~compliance~~accordance with ~~regulatory~~GAAP. Assessing ~~standards~~and predicting the outcome of these matters involves substantial uncertainties. Unexpected outcomes in these legal proceedings, or changes in management’s evaluations or predictions and accompanying changes in established reserves, could have a ~~timely~~material ~~manner;~~adverse impact on our financial results.

• the success of the clinical testing process to assure that new products are safe and effective;

• the risk that any of our products presently under development, if and when fully developed and tested, will not perform as expected;

• the ability to obtain requisite regulatory approvals for such products in a timely manner;

• the availability, on commercially reasonable terms, of raw materials, including APIs and other key ingredients;

• legal actions against our generic products brought by brand competitors, and legal challenges to our intellectual property rights brought against our brand products by generic competitors;

• delays or unanticipated costs, including delays associated with the FDA listing and/or approval process; and

• our ability to avoid infringing our competitors’ intellectual property rights.

As a result of these and other difficulties, products currently in development may or may not receive necessary regulatory approvals on a timely basis or at all. This risk exists particularly with respect to the development of branded products because of the uncertainties, higher costs and lengthy time frames associated with research and development of such products and the inherent unproven market acceptance of such products. If any of our products, when acquired or developed and approved, cannot be successfully or timely commercialized, our operating results could be adversely affected. We cannot guarantee that any investment we make in developing products will be recouped, even if we are successful in commercializing those products.

If we fail to obtain exclusive marketing rights for our generic pharmaceutical products or fail to introduce these generic products on a timely basis, our revenues, gross margin and operating results may decline significantly.

The Hatch-Waxman amendments to the Federal Food, Drug, and Cosmetic Act provide for a period of 180 days of generic marketing exclusivity for any applicant that is first-to-file an ANDA containing a certification of invalidity, non-infringement or unenforceability related to a patent listed with respect to the corresponding brand drug (commonly referred to as a “Paragraph IV certification”). The holder of an approved ANDA containing a Paragraph IV certification that is successful in challenging the applicable brand drug patent(s) is often able to price the applicable generic drug to yield relatively high gross margins during this 180-day marketing exclusivity period. At various times in the past, a large portion of our revenues have been derived from the sales of generic drugs during such 180-day marketing exclusivity period and from the sale of other generic products for which there otherwise was limited competition. ANDAs that contain Paragraph IV certifications generally become the subject of patent litigation that can be both lengthy and costly. There is no certainty that we will prevail in any such litigation, that we will be the first-to-file and granted the 180-day marketing exclusivity period, or, if we are granted the 180-day marketing exclusivity period, that we will not forfeit such period. Even where we are awarded marketing exclusivity, we may be required to share our exclusivity period with other ANDA applicants who submit Paragraph IV certifications. In addition, brand companies often authorize a generic version of the corresponding brand drug to be sold during any period of marketing exclusivity that is awarded (described further below), which

reduces gross margins during the marketing exclusivity period. Brand companies may also reduce their price of their brand product to compete directly with generics entering the market, which would similarly have the effect of reducing gross margins. Furthermore, timely commencement of the litigation by the patent owner imposes an automatic stay of ANDA approval by the FDA for 30 months, unless the case is decided in the ANDA applicant’s favor during that period. Finally, if the court decision is adverse to the ANDA applicant, the ANDA approval will be delayed until the challenged patent expires, and the applicant will not be granted the 180-day marketing exclusivity. The majority of our revenues are generated by our generic products division. Our future profitability depends, to a significant extent, upon our ability to introduce, on a timely basis, new generic products that are either the first-to-market (or among the first-to-market) or that otherwise can gain significant market share. The timeliness of our products is dependent upon, among other things, the timing of regulatory approval of our products, which to a large extent is outside of our control, as well as the timing of competing products. As additional distributors introduce comparable generic pharmaceutical products, price competition intensifies, market access narrows, and product sales prices and gross margins decline, often significantly and rapidly. Accordingly, our revenues and future profitability are dependent, in large part, upon our ability or the ability of our development partners to file ANDAs with the FDA timely and effectively or to enter into contractual relationships with other parties that have obtained marketing exclusivity. No assurances can be given that we will be able to develop and introduce successful products in the future within the time constraints necessary to be successful. If we or our development partners are unable to continue to timely and effectively file ANDAs with the FDA or to partner with other parties that have obtained marketing exclusivity, our revenues, gross margin and operating results may decline significantly, and our prospects and business may be materially adversely affected.

We face intense competition in the pharmaceutical industry from both brand and generic companies, which could significantly limit our growth and materially adversely affect our financial results.

The pharmaceutical industry is highly competitive. Many of our competitors have longer operating histories and greater financial, research and development, marketing and other resources than we do. Consequently, many of our competitors may be able to develop products and/or processes competitive with, or superior to, our own. Furthermore, we may not be able to differentiate our products from those of our competitors; to successfully develop or introduce new products—on a timely basis or at all—that are less costly than those of our competitors; or to offer customers payment and other commercial terms as favorable as those offered by our competitors. The markets in which we compete and intend to compete are undergoing, and are expected to continue to undergo, rapid and significant change. We expect competition to intensify as technological advances and consolidations continue. New developments by other manufacturers and distributors could render our products uncompetitive or obsolete.

We believe that our principal generic competitors are Teva Pharmaceutical Industries, Sandoz Pharmaceuticals, Mylan Laboratories, and Actavis Group. These companies, among others, collectively compete with the majority of our products. We also face price competition generally as other generic manufacturers enter the market. Any such price competition may be especially pronounced where our competitors source their products from jurisdictions where production costs may be lower (sometimes significantly) than our production costs, especially foreign jurisdictions such as India and China. Also price competition generally arises as a result of consolidation among wholesalers and retailers and the formation of large buying groups, including the recent trend of large wholesalers and retail customers forming partnerships, such the alliance involving Walgreens and AmerisourceBergen Corporation, and the alliance between Rite Aid and McKesson Drug Co. Any of these factors, in turn, could result in reductions in our sales prices and gross margin. This price competition has led to an increase in customer demands for downward price adjustments by generic pharmaceutical distributors. Our principal strategy in addressing our competition is to offer customers a consistent supply of a broad line of generic drugs. There can be no assurance, however, that this strategy will enable us to compete successfully in the industry or that we will be able to develop and implement any new or additional viable strategies.

Competition in the generic drug industry has also increased due to the proliferation of authorized generic pharmaceutical products. “Authorized generics” are generic pharmaceutical products that are introduced by brand companies, either directly or through partnering arrangements with other generic companies. Authorized generics are equivalent to the brand companies’ brand name drugs, but are sold at relatively lower prices than the brand name drugs. An authorized generic product is not prohibited from sale during the 180-day marketing exclusivity period granted to the first generic manufacturer to receive regulatory approval with a Paragraph IV certification in respect to the applicable brand product. The sale of authorized generics adversely impacts the market share of a generic product that has been granted 180 days of marketing exclusivity. This is a significant source of competition for us, because brand companies do not face any regulatory barriers to introducing a generic version of their brand name products. Because authorized generics may be sold during our marketing exclusivity period, they can materially decrease the profits that we could receive as an otherwise exclusive marketer of a product. Such actions have the effect of reducing the potential market share and profitability of our generic products and may inhibit us from developing and introducing generic pharmaceutical products corresponding to certain brand name drugs.

As our competitors introduce their own generic equivalents of our generic pharmaceutical products, our revenues and gross margin from such products generally decline, often rapidly.

Revenues and gross margin derived from generic pharmaceutical products often follow a pattern based on regulatory and competitive factors that we believe are unique to the generic pharmaceutical industry. As the patent(s) for a brand name product or the statutory marketing exclusivity period (if any) expires, the first generic manufacturer to receive regulatory approval for a generic equivalent of the product often is able to capture a substantial share of the market. However, as other generic manufacturers receive regulatory approvals for competing products, that market share, and the price of that product, will typically decline depending on several factors, including the number of competitors, the price of the brand product and the pricing strategy of the new competitors. We cannot provide assurance that we will be able to continue to develop such products or that the number of competitors with such

products will not increase to such an extent that we may stop marketing a product for which we previously obtained approval, which may have a material adverse impact on our revenues and gross margin.

Due to our dependence on a limited number of products, our business will be materially adversely affected if these products do not perform as well as expected.

We generate a significant portion of our total revenues and gross margin from the sale of a limited number of products. For the year ended December 31, 2013, our key products, metoprolol succinate ER (“metoprolol”), budesonide, lamotrigine, propafenone, bupropion ER, Nascobal® and Megace® ES, accounted for approximately 44% of our total net revenues for both periods and a significant portion of our gross margin. Any material adverse developments, including increased competition and supply shortages, with respect to the sale or use of these products, or our failure to successfully introduce other key products, could have a material adverse effect on our revenues and gross margin.

A significant number of our products are produced at one location that could experience business interruptions, which could have a material adverse effect on our business, financial position and results of operations.

We produce the majority of the products that we manufacture at a manufacturing facility in New York, and we expect to produce a growing number of products at our newly-acquired subsidiaries’ manufacturing facilities in California and India. Our recently acquired facility in Michigan produces all of our injectable products. A significant disruption at any of these facilities, even on a short-term basis, could impair our ability to produce and ship products to the market on a timely basis, which could have a material adverse effect on our business, financial position and results of operations.

We depend to a large extent on third-party suppliers and distributors for the raw materials, particularly the chemical compounds comprising the active pharmaceutical ingredients that we use to manufacture our products as well as certain finished goods. A prolonged interruption in the supply of such products could have a material adverse effect on our business, financial position and results of operations.

The raw materials essential to our manufacturing business are purchased primarily from U.S. distributors of bulk pharmaceutical chemicals manufactured by foreign companies or directly from foreign manufacturers. If we experience supply interruptions or delays, we may have to obtain substitute materials or products, which in turn would require us to obtain amended or additional regulatory approvals, subjecting us to additional expenditures of time and resources. In addition, changes in our raw material suppliers could result in significant delays in production, higher raw material costs and loss of sales and customers, because regulatory authorities must generally approve raw material sources for pharmaceutical products, which may be time consuming. Any significant supply interruption could have a material adverse effect on our business, condition (financial and other), prospects and results of operation. To date, we have experienced no significant difficulties in obtaining raw materials. However, because the federal drug application process requires specification of raw material suppliers, if raw materials from a specified supplier were to become unavailable, FDA approval of a new supplier would be required. A delay in the manufacture and marketing of the drug involved while a new supplier becomes qualified by the FDA and its manufacturing process is determined to meet FDA standards could, depending on the particular product, have a material adverse effect on our results of operations and financial condition. Generally, we attempt to mitigate the potential effects of any such situation by providing for, where economically and otherwise feasible, two or more suppliers of raw materials for the drugs that we manufacture. In addition, we may attempt to enter into a contract with a raw material supplier in an effort to ensure adequate supply for our products.

The use of legal, regulatory and legislative strategies by brand competitors, including authorized generics and citizen’s petitions, as well as the potential impact of proposed legislation, may increase our costs associated with the introduction or marketing of our generic products, delay or prevent such introduction and/or significantly reduce the profit potential of our products.

Brand drug companies often pursue strategies that may serve to prevent or delay competition from generic alternatives to their ~~brand~~branded products. These strategies include, but are not limited to:

• ~~entering into agreements with our generic competitors to begin~~ marketing an authorized generic version of a ~~brand~~branded product at the same time that we introduce a generic equivalent of that product directly or through agreement with a generic competitor;

• filing “citizen’s petitions” with the FDA, ~~including by timing the filings so as~~ to thwart generic competition by causing delays of our product approvals;

• ~~seeking~~using torisk ~~establish~~evaluation ~~regulatory~~ and ~~legal~~mitigation ~~obstacles~~strategies ~~that~~(“REMS”) ~~would~~- ~~make~~related itdistribution ~~more~~restrictions ~~difficult~~or other means of limiting access to ~~demonstrate~~their abranded ~~generic~~products to prevent us from obtaining product’s samples needed to conduct bioequivalence ~~and/~~testing required for ANDA approval, thereby delaying or ~~“sameness”~~preventing tous ~~the~~from ~~related~~obtaining ~~brand~~FDA ~~product~~approval of a generic version of such branded products;

• ~~initiating~~seeking ~~legislative~~to ~~and~~secure ~~administrative~~patent ~~efforts~~protection inof ~~various~~certain ~~states~~“Elements to ~~limit~~Assure ~~the~~Safe ~~substitution~~Use” of a REMS program, which are required medical interventions or other actions healthcare professionals need to execute prior to prescribing or dispensing the drug to the patient, in an attempt to thwart the generic ~~versions~~company’s ofability ~~brand~~to ~~pharmaceutical~~avoid ~~products~~infringement ~~for~~of the ~~related~~patents ~~brand~~in ~~products~~question or secure approval;


•	seeking to establish regulatory and legal obstacles that would make it more difficult to demonstrate a generic product’s bioequivalence or “sameness” to the related branded product;


•	initiating legislative and administrative efforts in various states to limit the substitution of generic versions of branded pharmaceutical products for the corresponding branded products;


•	filing suits for patent infringement that automatically delay FDA approval of generic products;

• introducing “next-generation” products prior to the expiration of market exclusivity for their ~~brand~~branded product, which often materially reduces the demand for the generic product for which we may be seeking FDA approval;

• obtaining extensions of market exclusivity by conducting clinical trials of ~~brand~~branded drugs in pediatric populations or by other methods as discussed below;

• persuading the FDA to withdraw the approval of ~~brand~~branded drugs for which the patents are about to expire, thus allowing the brand company to develop and launch new patented products serving as substitutes for the withdrawn products;


•	seeking to obtain new patents on drugs for which patent protection is about to expire;

23• filing patent applications that are more complex and costly to challenge;

• seeking temporary restraining orders and injunctions against selling a generic equivalent of their ~~brand~~branded product based on alleged misappropriation of trade secrets or breach of confidentiality obligations ~~against a generic company that has received final FDA approval and is attempting to begin commercialization of the generic product~~;

• seeking temporary restraining orders and injunctions against a generic company that has received final FDA approval for a product and is attempting to launch “at risk” prior to resolution of related patent litigation;

• reducing the marketing of the ~~brand~~branded product to healthcare providers, thereby reducing the ~~brand~~branded drug’s commercial exposure and market size, which in turn adversely affects the market potential of the equivalent generic product; and

• converting ~~brand~~branded prescription drugs that are facing potential generic competition to over-the-counter products, thereby significantly impeding the growth of the generic prescription market for the drugs.

The Food and Drug Modernization Act of 1997 includes a pediatric exclusivity provision that may provide an additional six months of market exclusivity for indications of new or currently marketed drugs if certain agreed upon pediatric studies are completed by the applicant. Brand companies are utilizing this provision to extend periods of market exclusivity. Some companies have lobbied Congress for amendments to the Hatch-Waxman legislation that would give them additional advantages over generic competitors. For example, although the term of a company’s drug patent can be extended to reflect a portion of the time ana New Drug Application (“NDA”) is under regulatory review, some companies have proposed extending the patent term by a full year for each year spent in clinical trials, rather than the one-half year that is currently permitted. If proposals like these were to become effective, our entry into the market and our ability to generate revenues associated with new generic products may be delayed, reduced or eliminated, which could have a material adverse effect on our business.

FDA policy and guidance may result in our generic products not being able to utilize fully the 180-day marketing exclusivity period, which would adversely affect our results of operations.

In March 2000, the FDA issued a new policy and guidance document regarding the timing of approval of ANDAs following court decisions on patent infringement and validity and the start of the 180-day marketing exclusivity period described above. As a result of this FDA policy and guidance document and other relevant litigation, we may not be able to utilize all or any portion of any 180-day marketing exclusivity period on ANDA products on which we were first-to-file with a Paragraph IV certification, depending on the timing and results of court decisions in patent litigation (either our litigation or another ANDA applicant’s litigation), which could adversely affect our results of operations and future profitability.

The Medicare Prescription Drug Improvement and Modernization Act of 2003 also changed the scope and timing of some ANDA approvals and the start of the 180-day marketing exclusivity period after a court decision. We are presently unable to predict the magnitude of the impact, if any, the FDA’s current policy may have on our business, prospects or financial condition. Any inability to use fully the 180-day marketing exclusivity period for any of our products, however, will adversely affect our results of operations.

We have approximately 60 customers, some of which are part of larger buying groups. For the year ended December 31, 2013, our four largest customers in terms of net sales dollars accounted for approximately 70% of our total revenues. The loss of any one or more of these or any other major customer or the substantial reduction in orders from any one or more of our major customers could have a material adverse effect upon our future operating results and financial condition.

We make a significant amount of our sales to a relatively small number of drug wholesalers and retail drug chains. These customers represent an essential part of the distribution chain of our pharmaceutical products. Drug wholesalers and retail drug chains have undergone, and are continuing to undergo, significant consolidation. This consolidation may result in these groups gaining additional purchasing leverage and consequently increasing the product pricing pressures facing our business. Additionally, the emergence of large buying groups representing independent retail pharmacies and other drug distributors, and the prevalence and influence of managed care organizations and similar institutions, potentially enable those groups to demand larger price discounts on our products. The result of these developments may have a material adverse effect on our business, financial position and results of operations.

Our ability to market any product successfully depends, in large part, upon the acceptance of the product by third parties over which we have no control.

Our ability to market successfully any generic or branded pharmaceutical product depends, in large part, upon the acceptance of the product by third parties, including physicians, pharmacies, government formularies and other retailers, and patients. Therefore, our success will depend in large part on third-party acceptance of our branded products, and on our ability to convince such third parties that our generic versions of brand name products are manufactured as safely and with the same efficacy as their brand name counterparts or other generic equivalents. In addition, because some of our generic products are manufactured in different forms than their brand name counterparts (e.g., tablet versus capsule), we sometimes must also convince third parties to accept a product in a form different from what they are accustomed to.

The testing required for the regulatory approval of our products is conducted by independent third parties. Any failure by any of these third parties to perform this testing properly and in a timely manner may have an adverse effect upon our ability to obtain regulatory approvals.

Our applications for the regulatory approval of our products, including both internally-developed and in-licensed products, incorporate the results of testing and other information that is conducted or gathered by independent third parties (including, for example, manufacturers of raw materials, testing laboratories, contract research organizations or independent research facilities). Our ability to obtain and maintain regulatory approval of the products being tested is dependent upon the quality of the work performed by these third parties, the quality of the third parties’ facilities, and the accuracy of the information provided by third parties. We have little or no control over any of these factors. If this testing is not performed properly, our ability to obtain or maintain regulatory approvals, and to launch or continue selling products, could be restricted or delayed.

We depend on distribution and marketing agreements, and any failure to maintain these arrangements or enter into similar arrangements with new partners could result in a material adverse effect.

We have broadened our product line by entering into distribution and marketing agreements, as well as contract manufacturing agreements, through which we distribute generic pharmaceutical products manufactured by others. We have entered into distribution agreements with several companies to develop, distribute and promote such generic pharmaceutical products. For the year ended December 31, 2013, a significant percentage of our total net product sales were generated from products manufactured under contract or under license. We cannot provide assurance that the manufacturing efforts of our contractual partners will continue to be successful, that we will be able to renew such agreements or that we will be able to enter into new agreements for additional products. Any alteration to or termination of our current material distribution and marketing agreements, any failure to enter into new and similar agreements, or interruption of our product supply under the distribution and marketing agreements, could materially adversely affect our business, condition (financial and otherwise), prospects or results of operations.

We expend a significant amount of resources on research and development, including milestones on in-licensed products, which may not lead to successful product introductions.

Much of our development effort is focused on technically difficult-to-formulate products and/or products that require advanced manufacturing technology. We expend resources on research and development primarily to enable us to manufacture and market FDA-approved pharmaceuticals in accordance with FDA regulations. Typically, research expenses related to the development of innovative compounds and the filing of NDAs are significantly greater than those expenses associated with ANDAs. We have entered into, and may in the future enter into, agreements that require us to make significant milestone payments upon achievement of various research and development events and regulatory approvals. As we continue to develop and in-license new products, we will likely incur increased research and licensing expenses. Because of the inherent risk associated with research and development efforts in the industry, particularly with respect to new drugs, our research and development expenditures may not result in the successful introduction of FDA-approved new pharmaceutical products. Also, after we or our development partners submit an ANDA or NDA, the FDA may request that we conduct additional studies. As a result, we may be unable to reasonably determine the total research and development costs required to develop a particular product. Finally, we cannot be certain that any investment made in developing products will be recovered, even if we are successful in commercialization. To the extent that we expend significant resources on research and development efforts and are not ultimately able to introduce successful new products as a result of those efforts, our business, financial position and results of operations may be materially adversely affected.

Our ~~brand~~branded pharmaceutical expenditures may not result in commercially successful products.

Commercializing ~~brand~~branded pharmaceutical products is more costly than generic products. We have made significant investments in the development of the ~~brand~~branded segment of our business, ~~Strativa~~Par ~~Pharmaceuticals~~Specialty. This has led to increased infrastructure costs. We cannot be certain that these business expenditures will result in the successful development or launch of ~~brand~~branded products that will prove to be commercially successful or will improve the long-term profitability of our business. Just as our generic products take market share from the corresponding branded products, we will confront the same competitive pressures from other generic pharmaceutical companies that may seek to introduce generic versions of our branded products. ~~Specifically,~~ ~~generic~~Generic products are generally sold at a significantly lower cost than the branded version, and, where available, may be required or encouraged in preference to the branded version under third party reimbursement programs, or ~~substituted~~may be required by ~~pharmacies~~law to be substituted for branded versions by ~~law~~pharmacies. Competition from generic equivalents, accordingly, could have an adverse effect on our ~~Strativa~~Par Specialty segment. While we have endeavored (with our relevant partners, as applicable) to protect our branded assets by securing regulatory exclusivities and intellectual property protections, such exclusivities and protections are subject to expiry and to legal challenges,. ~~including~~For ~~our~~example, ~~litigation~~on ~~against two generic manufacturers for their Paragraph IV filings with respect to Megace®ES. On~~ February 21, 2014, a U.S. District Court issued an opinion invalidating on obviousness grounds the single patent we asserted in ~~the~~a litigation ~~against~~we ~~the~~brought ~~first~~against ~~generic filer with respect to Megace® ES. The generic filer has disclosed its intent to launch its ANDA product should it receive final FDA approval. Any such launch of~~ a ~~generic~~Paragraph ~~version~~IV ~~would~~challenge ~~have a material adverse impact on our brand sales of Megace® ES.~~

We continue to consider product or business acquisitions or licensing arrangements to expand our brand product line. Any growth of the Strativa segment will be based largely on the successful commercialization of our existing products and the acquisition or in-licensing of new product opportunities. Our current and future investments in acquisition or license arrangements may not lead to expected, adequate or any returns on investment. In the past, we have invested significant sums in license arrangements for products under development, which have been terminated unsuccessfully. We also may not be able to execute future license agreements on reasonable or favorable terms in order to continue to grow or sustain our brand business segment. In addition, we 20

25to our Megace® ES product. We appealed the District Court’s decision and on December 3, 2014, the U.S. Court of Appeals for the Federal Circuit reversed and remanded the case to the District Court for further findings. See discussion in Item 3, “Legal Proceedings”, elsewhere in this Annual Report on Form 10-K. The launch of a generic version of Megace® ES or Nascobal® Nasal Spray would have a material adverse impact on our branded product sales of such product.

We continue to consider product or business acquisitions or licensing arrangements to expand our brand product line. Any growth of the Par Specialty segment will be based largely on the successful commercialization of our existing products and the acquisition or in-licensing of new product opportunities. Our current and future investments in acquisition or license arrangements may not lead to expected, adequate or any returns on investment. In the past, we have invested significant sums in license arrangements for products under development, which have been terminated unsuccessfully. We also may not be able to execute future license or acquisition agreements on reasonable or favorable terms in order to continue to grow or sustain Par Specialty. In addition, we cannot be certain that our ~~brand~~branded product expenditures will result in commercially successful launches of these products or will improve the long-term profitability of ~~Strativa~~Par Specialty. ~~Strativa~~For ~~relaunched~~example, ~~Nascobal®~~ in ~~2009. In~~ 2010, ~~Strativa~~we launched two ~~brand~~branded products that did not meet our commercial expectations, and in 2011 we returned all rights to these two products to our respective third-party development partners, resulting in a write-down of assets specifically related to these products. Any future commercialization efforts that do not meet expectations could similarly result in a write-down of assets related to the relevant products.

Our reporting and payment obligations under the Medicaid rebate program and other governmental purchasing and rebate programs are complex and may involve subjective decisions. Any determination that we have failed to comply with those obligations could subject us to penalties and sanctions, which could have a material adverse effect.

The regulations regarding reporting and payment obligations with respect to Medicaid reimbursement and rebates and other governmental programs are complex and, as discussed elsewhere in this Annual Report on Form 10-K, we and other pharmaceutical companies are defendants in a number of suits filed by state attorneys general and have been notified of an investigation by the DOJ with respect to Medicaid reimbursement and rebates. Our calculations and methodologies are subject to review and challenge by the applicable governmental agencies, and it is possible that such reviews could result in material changes. In addition, because our processes for these calculations and the judgments involved in making these calculations involve, and will continue to involve, subjective decisions and complex methodologies, these calculations are subject to the risk of errors. Any governmental agencies that have commenced (or that may commence) an investigation of our company could impose, based on a claim of violation of fraud and false claims laws or otherwise, civil and/or criminal sanctions, including fines, penalties and possible exclusion from federal health care programs (including Medicaid and Medicare). Some of the applicable laws may impose liability even in the absence of specific intent to defraud. Furthermore, should there be ambiguity with regard to how to properly calculate and report payments, and even in the absence of any such ambiguity, a governmental authority may take a position contrary to a position that we have taken and may impose civil and/or criminal sanctions on us. Any such penalties, sanctions, or exclusion from federal health care programs could have a material adverse effect on our business, financial position and results of operations. From time to time we conduct routine reviews of our government pricing calculations. These reviews may have an impact on government price reporting and rebate calculations used to comply with various government regulations regarding reporting and payment obligations.

Our competitors, including branded pharmaceutical companies, or other third parties may allege that we are infringing their intellectual property, forcing us to expend substantial resources in resulting litigation, the outcome of which is uncertain. Any unfavorable outcome of such litigation, including losses related to “at risk” product launches, could have a material adverse effect on our business, financial position and results of operations.

Companies that produce brand pharmaceutical products routinely bring litigation against ANDA or similar applicants that seek regulatory approval to manufacture and market generic forms of their branded products. These companies allege patent infringement or other violations of intellectual property rights as the basis for filing suit against an ANDA or similar applicant. Likewise, patent holders may bring patent infringement suits against companies that are currently marketing and selling their approved generic products. Litigation often involves significant expense and can delay or prevent introduction or sale of our generic products. If patents are held valid and infringed by our products, we would, unless we could obtain a license from the patent holder, need to delay selling our corresponding generic product and, if we are already selling our product, cease selling in that jurisdiction and potentially remit or destroy existing product stock.

There may also be situations in which we may make business and legal judgments to market and sell products that are subject to claims of alleged patent infringement prior to final resolution of those claims by the courts, based upon our belief that such patents are invalid, unenforceable, or would not be infringed by our marketing and sale of such products. This is referred to in the pharmaceutical industry as an “at risk” launch. The risk involved in an at risk launch can be substantial because, if a patent holder ultimately prevails against us, the remedies available to such holder may include, among other things, damages measured by the profits lost by the patent holder, which can be significantly higher than the profits we make from selling the generic version of the product. We could face substantial damages from such adverse court decisions. We could also be at risk for the value of such inventory that we are unable to market or sell. See Item 3, “Legal Proceedings” elsewhere in this Annual Report on Form 10-K for a discussion of a lawsuit filed against us by Santarus, Inc. relating to our launch of our generic omeprazole/sodium bicarbonate 20 mg and 40 mg capsule product.

Our operating results are affected by many factors and may fluctuate significantly on a quarterly basis.

Our operating results may vary substantially from quarter to quarter and may be greater or less than those achieved in the immediately preceding period or in the comparable period of the prior year. Factors that may cause quarterly results to vary include, but are not limited to, the following:


•	the amount of new product introductions;

• losses related to inventory write-offs ~~prior to product launch~~;


•	marketing exclusivity, if any, which may be obtained on certain new products;


•	the level of competition in the marketplace for certain products;


•	our ability to create demand in the marketplace for our branded products;


•	availability of raw materials and finished products from suppliers;


•	our ability to manufacture products at our manufacturing facilities;


•	the scope and outcome of governmental regulatory actions;


•	our dependence on a small number of products for a significant portion of net revenue or income;

• legal actions against our generic products brought by brand competitors, and legal challenges to our intellectual property rights brought against our ~~brand~~branded products by generic competitors;


•	price erosion and customer consolidation; and


•	significant payments (such as milestones) payable by us under collaboration, licensing, and development agreements to our partners before the related product has received FDA approval.

The profitability of our product sales is also dependent upon the prices we are able to charge for our products, the costs to purchase products from third parties, and our ability to manufacture our products in a cost effective manner. If our revenues decline or do not grow as anticipated, we may not be able to reduce our operating expenses to offset such declines. Failure to achieve anticipated levels of revenues could, therefore, significantly harm our operating results for a particular fiscal period.

do not grow as anticipated, we may not be able to reduce our operating expenses to offset such declines. Failure to achieve anticipated levels of revenues could, therefore, significantly harm our operating results for a particular fiscal period.

In certain circumstances, we issue price adjustments and other sales allowances to our customers. Although we may establish reserves based on our estimates of these amounts, if estimates are incorrect and the reserves are inadequate, it may result in adjustments to these reserves that may have a material adverse effect on our financial position and results of operations.

As described above, the first company to file an ANDA containing a Paragraph IV certification that successfully challenges the patent(s) on a ~~brand~~branded product may be granted 180 days of generic market exclusivity by the FDA for that generic product. At the expiration of such exclusivity period, other generic distributors may enter the market, resulting in a significant price decline for the drug (in some instances, price declines have exceeded 90%). When we experience price declines following a period of generic marketing exclusivity, or at any time when a competitor enters the market or offers a lower price with respect to a product we are selling, we may at our discretion decide to lower the price of our product to retain market share and provide price adjustments to our customers for the difference between our new (lower) price and the price at which we previously sold the product which is still held in inventory by our customers. Because the entry of a competitive generic product is unpredictable, we do not establish reserves for such potential adjustments, and therefore the full effect of such adjustments are not reflected in our operating results until they actually occur. There are also circumstances under which we may decide not to provide price adjustments to certain customers, and consequently, as a matter of business strategy, we may risk a greater level of sale returns of products in the customer’s existing inventory and lose future sales volume to competitors rather than reduce our pricing.

We establish reserves for chargebacks, rebates and incentives, other sales allowances, and product returns at the time of sale, based on estimates. Although we believe our reserves are adequate as of the date of this Annual Report on Form 10-K, we cannot provide assurances that our reserves will ultimately prove to be adequate. Increases in sales allowances may exceed our estimates due to a variety of reasons, including unanticipated competition or an unexpected change in one or more of our contractual relationships. We will continue to evaluate the effects of competition and will record a price adjustment reserve if and when we deem it necessary. Any failure to establish adequate reserves with respect to sales allowances may result in a material adverse effect on our financial position and results of operations.

WeIf ~~are,~~we ~~and~~determine ~~may~~that ~~continue~~our togoodwill beand inother ~~the~~intangible ~~future~~assets have become impaired, awe ~~party~~may torecord ~~legal~~significant ~~proceedings~~impairment ~~that~~charges, ~~could~~which ~~result~~would inadversely ~~unexpected~~affect ~~adverse~~our ~~outcomes~~results of operations.

WeGoodwill ~~are~~and other intangible assets represent a ~~party~~significant toportion ~~other~~of ~~legal~~our ~~proceedings,~~assets. ~~including~~Goodwill ~~matters~~is ~~involving~~the ~~personnel~~excess ~~and~~of ~~employment~~cost ~~issues,~~over ~~patent~~the ~~related~~fair ~~issues~~market ~~and~~value ~~other~~of ~~proceedings~~net ~~arising~~assets acquired in business combinations. In the ~~ordinary~~future, ~~course~~goodwill and intangible assets may increase as a result of ~~business~~future acquisitions. In ~~addition~~We review our goodwill and indefinite lived intangible assets at least annually for impairment. Impairment may result from, ~~there~~among ~~are~~other anthings, ~~increasing~~deterioration ~~number~~in the performance of ~~investigations~~acquired businesses, adverse market conditions and ~~proceedings~~adverse changes in ~~the~~applicable ~~health~~laws ~~care~~or ~~industry~~regulations, ~~generally~~including changes that ~~seek~~restrict ~~recovery~~the ~~under~~activities ~~the~~of ~~statutes~~an ~~and~~acquired ~~regulations~~business. ~~identified~~Any impairment of goodwill or other intangible assets would result in ~~“Business—Government~~a ~~Regulation.” We~~non-cash ~~evaluate~~charge ~~our~~against ~~exposure~~earnings, towhich ~~these~~would ~~legal~~adversely ~~proceedings~~affect ~~and~~our ~~establish~~results ~~reserves~~of ~~for~~operations. For the ~~estimated~~year ~~liabilities~~ended inDecember ~~accordance~~31, ~~with~~2014, ~~GAAP~~we recorded a non-cash impairment charge of $146. ~~Assessing~~9 million related to an adjustment to the forecasted operating results for two IPR&D intangible asset groups and ~~predicting~~either Par Pharmaceutical segment products compared to their originally forecasted operating results at the ~~outcome~~date of ~~these~~acquisition, ~~matters~~inclusive ~~involves~~of ~~substantial~~one ~~uncertainties. Unexpected~~discontinued ~~outcomes~~product, inone ~~these~~partially ~~legal~~impaired ~~proceedings,~~product orprimarily ~~changes~~due into ~~management’s~~the ~~evaluations~~contract orending ~~predictions~~with the partner and ~~accompanying~~a ~~changes~~partially inimpaired ~~established~~IPR&D ~~reserves,~~project ~~could~~from ~~have~~the aacquisition ~~material~~of Par Sterile due to an adverse ~~impact~~court onruling ~~our~~pertaining ~~financial~~to ~~results~~related patent litigation.

We are subject to additional costs and burdens to comply with the terms of the March 5, 2013 resolution of the DOJ’s investigation into sales and marketing activities for Megace^®ES, and we could be subject to increased monetary penalties and/or other sanctions, including exclusion from federal health care programs, if we fail to comply with its terms.

On March 5, 2013, we settled U.S. federal and 49 state investigations into ~~Strativa~~Par Specialty’s sales and marketing activities for Megace® ES by pleading guilty to a misdemeanor misbranding violation of the ~~Federal~~FDCA ~~Food, Drug, & Cosmetic Act~~ and agreeing to pay approximately $45 million in criminal fines and forfeitures and to resolve civil claims. In addition, we entered into a five-year CIA with the Office of Inspector General of the U.S. Department of Health & Human Services (“OIG”). The effective date of the CIA was March 12, 2013. The CIA requires enhancements to our compliance program, fulfillment of reporting and monitoring obligations, and management certifications, among other requirements. Compliance with the terms of the CIA has imposed and will continue to impose additional costs and burdens on us, including in the form of employee training, third party reviews, compliance monitoring, reporting obligations and management attention. If we fail to comply with the CIA, the OIG may impose monetary penalties or exclude us from federal health care programs, including Medicare and Medicaid, which could have a material adverse effect on our cash flows, financial position and results of operations. We may be subject to third party claims and shareholder lawsuits in connection with the settlement.

We have increased exposure to tax liabilities, including foreign tax liabilities.

As a U.S. corporation with subsidiaries in India and England, we are subject to income taxes as well as non-income based taxes in the United States, India and England. Significant judgment is required in determining our worldwide provision for income taxes and

other tax liabilities. Changes in tax laws or tax rulings may have a significantly adverse impact on our effective tax rate. Recent proposals by the current U.S. administration for fundamental U.S. international tax reform, if enacted, could have a significant adverse impact on our effective tax rate. In addition, we have potential tax exposures resulting from the varying application of statutes, regulations and interpretations, which include exposures on intercompany terms of cross-border arrangements among any foreign subsidiaries in relation to various aspects of our business, including research and development activities and manufacturing. Tax authorities in various jurisdictions may disagree with and subsequently challenge the amount of profits taxed in their country, which may result in increased tax liability, including accrued interest and penalties, which would cause our tax expense to increase. This could have a material adverse effect on our business, financial position and results of operations and our ability to satisfy our debt obligations.

We are controlled by the Sponsor, whose interests as an equity holder may conflict with our creditors’ interests.

We are controlled by the Sponsor. The Sponsor controls the election of our directors and thereby has the power to control our affairs and policies, including the appointment of management, the issuance of additional equity and the declaration and payment of dividends if allowed under the terms of the credit agreement governing our Senior Credit Facilities, the terms of the indentures governing the Notes and the terms of our other indebtedness outstanding at the time. The Sponsor has no liability for any obligations under or relating to the Notes, and its interests may be in conflict with the interests of our creditors. For example, if we encounter financial difficulties or are unable to pay our debts as they mature, the Sponsor may pursue strategies that favor equity investors over debt investors. In addition, our equity holders may have an interest in pursuing acquisitions, divestitures, financing or other transactions that, in their judgment, could enhance their equity investments, even though such transactions may involve risk to holders of the Notes. Additionally, the Sponsor may make investments in businesses that directly or indirectly compete with us, or may pursue acquisition opportunities that may be complementary to our business and, as a result, those acquisition opportunities may not be available to us. For information concerning our arrangements with the Sponsor, see Item 13, “Certain Relationships and Related Party Transactions” elsewhere in this Annual Report on Form 10-K.

governing the Notes and the terms of our other indebtedness outstanding at the time. The Sponsor has no liability for any obligations under or relating to the Notes, and its interests may be in conflict with the interests of our creditors. For example, if we encounter financial difficulties or are unable to pay our debts as they mature, the Sponsor may pursue strategies that favor equity investors over debt investors. In addition, our equity holders may have an interest in pursuing acquisitions, divestitures, financing or other transactions that, in their judgment, could enhance their equity investments, even though such transactions may involve risk to holders of the Notes. Additionally, the Sponsor may make investments in businesses that directly or indirectly compete with us, or may pursue acquisition opportunities that may be complementary to our business and, as a result, those acquisition opportunities may not be available to us. For information concerning our arrangements with the Sponsor, see Item 13, “Certain Relationships and Related Party Transactions” elsewhere in this Annual Report on Form 10-K.

Risks Common to Our Industry

Healthcare reform and a reduction in the reimbursement levels by governmental authorities, HMOs, MCOs or other third-party payers may adversely affect our business.

In order to assist us in commercializing products, we have obtained from governmental authorities and private health insurers and other organizations, such as health maintenance organizations (“HMOs”) and managed care organizations (“MCOs”), authorization to receive reimbursement at varying levels for the cost of certain products and related treatments. Third party payers increasingly challenge pricing of pharmaceutical products. The trend toward managed healthcare in the United States, the growth of organizations such as HMOs and MCOs, and legislative proposals to reform healthcare and government insurance programs could significantly influence the purchase of pharmaceutical products, resulting in lower prices and a reduction in product demand. The Patient Protection and Affordable Care Act (“PPACA”) and the Health Care and Education Reconciliation Act of 2010 were signed into law on March 23, 2010 and March 30, 2010, respectively. These laws are referred to herein as “healthcare reform.” A number of provisions of the healthcare reform laws continue to have a negative impact on the price of our products sold to U.S. government entities. As examples, the legislation ~~include~~includes measures that (i) significantly increase Medicaid rebates through both the expansion of the program and significant increases in rebates; (ii) substantially expand the Public Health System (340B) program to allow other entities to purchase prescription drugs at substantial discounts; (iii) extend the Medicaid rebate rate to a significant portion of Managed Medicaid enrollees; (iv) ~~assess~~apply a 50% ~~rebate~~discount onto ~~Medicaid~~Medicare Part D beneficiary spending in the coverage gap for branded and authorized generic prescription drugs; and (v) levy a significant excise tax on the industry to fund the healthcare reform. Such cost containment measures and healthcare reform affect our ability to sell our products and have a material adverse effect on our business, results of operations and financial condition. Additionally, the Medicare Part D Prescription Drug Benefit established a voluntary outpatient prescription drug benefit for Medicare beneficiaries (primarily the elderly over 65 and the disabled). These beneficiaries may enroll in private drug plans. There are multiple types of Part D plans and numerous plan sponsors, each with its own formulary and product access requirements. The plans have considerable discretion in establishing formularies and tiered co-pay structures and in placing prior authorization and other restrictions on the utilization of specific products. In addition, Part D plan sponsors are permitted and encouraged to negotiate rebates with manufacturers. The Medicare Part D program, which went into effect January 1, 2006, is administered by the Centers for Medicare & Medicaid Services (“CMS”) within the Department of Health and Human Services ~~(HHS)~~.

CMS has issued extensive regulations and other sub-regulatory guidance documents implementing the Medicare Part D benefit, and the ~~HHS~~OIG ~~Office of Inspector General~~ has issued regulations and other guidance in connection with the Medicare Part D program. The federal government can be expected to continue to issue guidance and regulations regarding the obligations of Part D sponsors and their subcontractors. Participating drug plans may establish drug formularies that exclude coverage of specific drugs, and payment levels for drugs negotiated with Part D drug plans may be lower than reimbursement levels available through private health plans or other payers. Moreover, beneficiary co-insurance requirements could influence which products are recommended by physicians and selected by patients. There is no assurance that any drug that we market will be offered by drug plans participating under the Medicare Part D program or of the terms of any such coverage, or that covered drugs will be reimbursed at amounts that reflect current or historical levels. Additionally, any reimbursement granted may not be maintained, or limits on reimbursement available from third-party payers may reduce the demand for, or negatively affect the price of those products, and could significantly harm our business, results of operations, financial condition and cash flows. We may also be subject to lawsuits relating to reimbursement programs that could be costly to defend, divert management’s attention and adversely affect our operating results. Most state Medicaid programs have established preferred drug lists, and the process, criteria and timeframe for obtaining placement on the preferred drug list varies from state to state. Under the Medicaid drug rebate program, a manufacturer must pay a rebate for Medicaid utilization of a product. The rebate for single source products (including authorized generics) is based on the greater of (i) a specified percentage of the product’s average manufacturer price or (ii) the difference between the product’s average manufacturer price and the best price offered by the manufacturer. The rebate for multiple source products is a specified percentage of the product’s average manufacturer price. In addition, many states have established supplemental rebate programs as a condition for including a drug product on a preferred drug list. The profitability of our products may depend on the extent to which they appear on the preferred drug lists of a significant number of state Medicaid programs and the amount of the rebates that must be paid to such states. In addition, there is significant fiscal pressure on the Medicaid program, and amendments to lower the pharmaceutical costs of the program are possible. Such amendments could materially adversely affect our anticipated revenues and results of operations. Due to the uncertainties regarding the outcome of future healthcare reform initiatives and their enactment and implementation, we cannot predict which, if any, of the future reform proposals will be adopted or the effect such adoption may have on us. Additionally, future healthcare legislation could also have a significant impact on our business.

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affect the price of those products, and could significantly harm our business, results of operations, financial condition and cash flows. We may also be subject to lawsuits relating to reimbursement programs that could be costly to defend, divert management’s attention and adversely affect our operating results. Most state Medicaid programs have established preferred drug lists, and the process, criteria and timeframe for obtaining placement on the preferred drug list varies from state to state. Under the Medicaid drug rebate program, a manufacturer must pay a rebate for Medicaid utilization of a product. The rebate for single source products (including authorized generics) is based on the greater of (i) a specified percentage of the product’s average manufacturer price or (ii) the difference between the product’s average manufacturer price and the best price offered by the manufacturer. The rebate for multiple source products is a specified percentage of the product’s average manufacturer price. In addition, many states have established supplemental rebate programs as a condition for including a drug product on a preferred drug list. The profitability of our products may depend on the extent to which they appear on the preferred drug lists of a significant number of state Medicaid programs and the amount of the rebates that must be paid to such states. In addition, there is significant fiscal pressure on the Medicaid program, and amendments to lower the pharmaceutical costs of the program are possible. Such amendments could materially adversely affect our anticipated revenues and results of operations. Due to the uncertainties regarding the outcome of future healthcare reform initiatives and their enactment and implementation, we cannot predict which, if any, of the future reform proposals will be adopted or the effect such adoption may have on us. Additionally, future healthcare legislation could also have a significant impact on our business.

Implementation of healthcare reform and changes in the health care regulatory environment may adversely affect our business.

A number of the provisions of the healthcare reform laws required rulemaking action by governmental agencies to be implemented. The laws changed access to health care products and services and created new fees for the pharmaceutical and medical device industries. Future rulemaking could increase rebates, reduce prices or the rate of price increases for health care products and services, or require additional reporting and disclosure. We cannot predict the timing or impact of any future rulemaking.

Due to extensive regulation and enforcement in the pharmaceutical industry, we face significant uncertainties and potentially significant costs associated with our efforts to comply with applicable regulations. Failure to comply could result in material adverse effects to our business, financial position and results of operations.

The pharmaceutical industry operates in a highly regulated environment subject to the actions of courts and governmental agencies that influence the ability of a company to successfully operate its business and is subject to regulation by various governmental authorities at the federal, state and local levels with respect to the development, manufacture, labeling, sale, distribution, marketing, advertising and promotion of pharmaceutical products. Many of these factors are beyond our control and are, therefore, difficult to predict. These risks, along with others, have the potential to materially and adversely affect our business, financial position, results of operations and prospects. Failure to comply with governmental regulations can result in fines, disgorgement of profits, unanticipated compliance expenditures, recall or seizure of products, total or partial suspension of production and/or distribution, suspension of the FDA’s review of NDAs or ANDAs, enforcement actions, injunctions and criminal prosecution. Although we have developed compliance programs to address the regulatory environment, there is no guarantee that these programs will meet regulatory agency standards now or in the future. Additionally, despite our efforts at compliance, there is no guarantee that we may not be deemed to be deficient in some manner in the future. If we are deemed to be deficient in any significant way, our business, financial position and results of operations could be materially affected.

Litigation is common in our industry, can be protracted and expensive, and could delay and/or prevent entry of our products into the market, which could have a material adverse effect on our business.

Litigation concerning ~~patents~~intellectual ~~and~~property ~~branded~~ rights in the pharmaceutical industry can be protracted and expensive. Pharmaceutical companies with patented ~~brand~~branded products ~~frequently~~regularly sue companies that file applications to produce generic equivalents of their patented ~~brand~~branded products for alleged patent infringement or other violations of intellectual property rights, which are expensive to defend and may 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 expire or are held to be invalid, unenforceable or not infringed, ~~invalid,~~by orthe ~~unenforceable~~generic product at issue. When we or our development partners submit an ANDA to the FDA for approval of a generic drug, we and/or our development partners must certify either (1) that there is no patent listed bywith the FDA as covering the relevant ~~brand~~branded product, (2) that any patent listed as covering the ~~brand~~branded product has expired, (3) that the patent listed as covering the ~~brand~~branded product will expire prior to the marketing of the generic product, in which case the ANDA will not be finally approved by the FDA until the expiration of such patent, or (4) that any patent listed as covering the ~~brand~~branded drug is invalid or will not be infringed by the manufacture, sale or use of the generic product for which the ANDA is submitted~~. Under~~ ~~any~~(a ~~circumstance~~“Paragraph inIV” ~~which~~certification). Whenever anwe ~~act~~file ofan ~~infringement~~ANDA iswith ~~alleged~~a toParagraph ~~occur~~IV certification, there is a ~~risk~~high likelihood that a brand pharmaceutical company ~~may~~will sue us for alleged patent infringement and/or other violations of intellectual property rights. Also, competing pharmaceutical companies may file lawsuits against us or our strategic partners alleging patent infringement or other violations of intellectual property rights or may file declaratory judgment actions ofagainst us alleging non-infringement, invalidity, or unenforceability ~~against~~of ~~us relating to~~ our own patents. Because substantially all of our current business involves the ~~marketing~~development and ~~development~~marketing of products that are ~~either~~ subject to ~~the~~potential ~~protection~~claims of ~~our~~patent ~~own~~infringement ~~patents~~by third parties or, ~~the~~with ~~potential~~respect ~~assertion~~to ofour ~~claims~~own bybranded products, are subject to third-party ~~parties~~challenges, 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 our products, which could have a material adverse effect on our business, condition (financial and other), prospects and results of operations. Our development partners are also parties to several lawsuits, the outcome of which may have a material adverse impact on our business. For more information on our material pending litigation, please see Item 3. “Legal Proceedings” elsewhere in this Annual Report on Form 10-K.

could have a material adverse effect on our business, condition (financial and other), prospects and results of operations. For more information on our material pending litigation, please see Item 3 - “Legal Proceedings.”

We are susceptible to product liability claims that may not be covered by insurance, which, if successful, could require us to pay substantial sums.

Like all pharmaceutical companies, we face the risk of loss resulting from, and the adverse publicity associated with, product liability lawsuits, whether or not such claims are valid. We likely cannot avoid such claims. Unanticipated side effects or unfavorable publicity concerning any of our products or product candidates would likely have an adverse effect on our ability to achieve acceptance by prescribing physicians, managed care providers, pharmacies and other retailers, customers, patients and clinical trial participants. Even unsuccessful product liability claims could require us to spend money on litigation, divert management’s time, damage our reputation and impair the marketability of our products. In addition, although we believe that we have adequate product liability insurance coverage, we cannot be certain that our insurance will, in fact, be sufficient to cover such claims or that we will be able to obtain or maintain adequate insurance coverage in the future at acceptable prices. A successful product liability claim that is excluded from coverage or exceeds our policy limits could require us to pay substantial sums. In addition, insurance coverage for product liability may become prohibitively expensive in the future or, with respect to certain high-risk products, may not be available at all, and as a result we may not be able to maintain adequate product liability insurance coverage to mitigate the risk of large claims, or we may be required to maintain a larger self-insured retention than we would otherwise choose.

We are subject to extensive governmental regulation, and any non-compliance may result in fines and/or other sanctions, including product seizures, product recalls, injunctive actions and criminal prosecutions.

As a pharmaceutical manufacturer and distributor, we are subject to extensive regulation by the federal government, principally the FDA and the Drug Enforcement Administration, as well as by state governments. The ~~Federal Food~~FDCA, ~~Drug, and Cosmetic Act,~~ the Controlled Substances Act, the Generic Drug Enforcement Act of 1992 (the “Generic Drug Act”), and other federal, state and local statutes and regulations govern the testing, manufacture, safety, labeling, storage, disposal, tracking, recordkeeping, approval, advertising and promotion (including to the healthcare community) of our products. The Generic Drug Act, a result of legislative hearings and investigations into the generic drug approval process, is particularly relevant to our business. Under the Generic Drug Act, the FDA is authorized to impose debarment and other penalties on individuals and companies that commit illegal acts relating to the generic drug approval process. In some situations, the Generic Drug Act requires the FDA not to accept or review for a period of time any ANDAs submitted by a company that has committed certain violations and provides for temporary denial of approval of such ANDAs during its investigation. Additionally, ~~noncompliance~~non-compliance with other applicable regulatory requirements may result in fines, perhaps significant in amount, and other sanctions imposed by courts and/or regulatory bodies, including the initiation of product seizures, product recalls, injunctive actions and criminal prosecutions. From time to time, we have voluntarily recalled our products and may do so in the future. In addition, administrative remedies may involve the refusal of the government to enter into supply contracts with, and/or to approve ~~new~~NDAs ~~drug~~and ~~applications~~ANDAs of, a non-complying entity. The FDA also has the authority to withdraw its approval of drugs in accordance with statutory procedures.

Because of the chemical ingredients of pharmaceutical products and the nature of the manufacturing process, the pharmaceutical industry is subject to extensive environmental laws and regulation and the risk of incurring liability for damages and/or the costs of remedying environmental problems. These requirements include regulation of the handling, manufacture, transportation, storage, use and disposal of materials, including the discharge of hazardous materials and pollutants into the environment. In the normal course of our business, we are exposed to risks relating to possible releases of hazardous substances into the environment, which could cause environmental or property damage or personal injuries, and which could result in (i) our noncompliance with such environmental and occupational health and safety laws and regulations and (ii) regulatory enforcement actions or claims for personal injury and property damage against us. If an unapproved or illegal environmental discharge or accident occurred or if we were to discover contamination caused by prior operations, including by prior owners and operators of properties we acquire, then we could be liable for cleanup, damages or fines, which could have a material adverse effect on our business, financial position, results of operations, and cash flow. In the future, we may be required to increase expenditures in order to remedy environmental problems and/or comply with changes in applicable environmental laws and regulations. We could also become a party to environmental remediation investigations and activities. These obligations may relate to sites that we currently or in the future may own or lease, sites that we formerly owned or operated, or sites where waste from our operations was disposed. Additionally, if we fail to comply with environmental regulations to use, discharge or dispose of hazardous materials appropriately or otherwise to comply with the provisions of our operating licenses, the licenses could be revoked, and we could be subject to criminal sanctions and/or substantial civil liability or be required to suspend or modify our manufacturing operations. We currently operate in New Jersey, New York, California, Connecticut and Michigan, which are often recognized for having very aggressive public health and environmental protection laws. We also operate in India, where environmental, health and safety regulations are developing and expanding, and we cannot determine how these laws will be implemented and the impact of such regulation on our Indian operations. We may in the future establish or acquire operations in other jurisdictions, subject to equally or more stringent laws and regulations. Stricter environmental, safety and health laws and enforcement policies could result in substantial costs and liabilities to us, and could subject our handling, manufacture, use, reuse or disposal of substances or pollutants to more rigorous scrutiny than is currently the case. Consequently, compliance with these laws could result in significant capital expenditures, as well as other costs and liabilities, which could materially adversely affect us.

As part of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003, companies are now required to file with the Federal Trade Commission (the “FTC”) and the DOJ certain types of agreements entered into between brand and generic pharmaceutical companies related to the manufacture, marketing and sale of generic versions of brand drugs. This requirement could affect the manner in which generic drug manufacturers resolve intellectual property litigation and other disputes with brand pharmaceutical companies and could result generally in an increase in private-party litigation against pharmaceutical companies or additional investigations or proceedings by the FTC or other governmental authorities. The potential for FTC investigations and litigation and private-party lawsuits associated with arrangements between brand and generic drug manufacturers could adversely affect our business. In recent years, the FTC has expressed its intention to take aggressive action to challenge settlements that include an alleged payment from the brand company to the generic company and to call on legislators to pass stronger laws prohibiting such settlements. In 2013, the U.S. Supreme Court held that certain of such settlements could violate anti-trust laws and must be evaluated under a “rule of reason” standard of review. We are, and we have been in the past, the subject of investigation and litigation by the FTC in which violations of antitrust laws have been alleged stemming from our settlement of a patent litigation with a brand pharmaceutical company. This litigation has also resulted in follow-on litigation against us by private plaintiffs alleging similar claims. We could be subject to similar investigations and litigation in the future, which would likely result in substantial costs and divert our management’s attention and resources and could have a material adverse effect on our business activities and condition (financial or otherwise). For more information on our material pending litigation, please see Item 3, “Legal Proceedings,” elsewhere in this Annual Report on Form 10-K. 25

WeAs part of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003, companies are ~~subject~~now required to file with the ~~effects~~Federal Trade Commission (the “FTC”) and the DOJ certain types of ~~changes~~agreements inentered ~~statutes~~into between brand and generic pharmaceutical companies related to the settlement of patent litigation or the manufacture, ~~regulations~~marketing and/ sale of generic versions of branded drugs. This requirement could affect the manner in which generic drug manufacturers resolve intellectual property litigation and other disputes with brand pharmaceutical companies and could result generally in an increase in private-party litigation against pharmaceutical companies or ~~interpretative~~additional ~~guidance~~investigations ~~that~~or ~~may~~proceedings by the FTC or other governmental authorities. The potential for FTC investigations and litigation and private-party lawsuits associated with arrangements between brand and generic drug manufacturers could adversely affect our business. ~~and/or~~In recent years, the FTC has expressed its intention to take aggressive action to challenge settlements that ~~could~~include ~~require~~an usalleged payment from the brand company to ~~devote~~the ~~increased~~generic ~~time~~company (so-called “pay for delay” patent litigation settlements) and ~~resources~~to call on legislators to ~~our~~pass ~~compliance~~stronger ~~efforts~~laws prohibiting such settlements. In 2013, ~~which~~the ~~may~~U.S. ~~not~~Supreme Court held that certain of such settlements could violate anti-trust laws and must be ~~successful~~evaluated under a “rule of reason” standard of review. ~~For~~ ~~example~~We are currently, and we have been in the ~~FDA~~past, ~~has~~and ~~proposed~~may ~~revisions~~be toin ~~regulations~~the ~~governing~~future, ~~generic~~the ~~drugs~~subject of investigation and litigation by the FTC in which violations of antitrust laws are alleged stemming from our settlement of patent litigation with ~~respect~~brand topharmaceutical ~~both~~companies ~~when~~and other activities. This litigation has also resulted, and ~~how~~may ain ~~labeling~~the ~~change~~future ~~would~~result, in follow-on litigation against us by private plaintiffs alleging similar claims. We could be ~~required~~subject to similar investigations and litigation in the future, which would likely result in substantial costs and divert our management’s attention and resources and could have ~~negative~~a ~~consequences~~material ~~for~~adverse effect on our business activities and condition (financial or otherwise). ~~The~~ ~~proposed~~For ~~revisions~~more ~~could~~information ~~create~~on aour material pending litigation, please see Item 3 - “Legal Proceedings”, elsewhere in this Annual Report on Form 10-K.

30We are subject to the effects of changes in statutes, regulations and/or interpretative guidance that may adversely affect our business and/or that could require us to devote increased time and resources to our compliance efforts, which may not be successful. For example, the FDA has proposed revisions to regulations governing generic drugs with respect to both when and how a labeling change would be required, which could have negative consequences for our business. The proposed revisions could create a regulatory framework whereby multiple, different labeling, including different warnings, could simultaneously exist in the marketplace for multiple generic versions of a drug, which could adversely affect our customers’ acceptance of our generic products or could place our products at a competitive disadvantage. Moreover, the proposed revisions could expose us to substantial new tort liability costs, which could cause us to withdraw or decline to pursue certain products. These or any other changes in statutes, regulations and/or interpretative guidance could have a material adverse effect on our business, condition (financial and other), prospects and results of operations.

~~regulatory~~Investigations ~~framework~~and ~~whereby~~litigation ~~multiple,~~concerning ~~different labeling, including different warnings, could simultaneously exist in~~ the ~~marketplace~~calculation ~~for multiple generic versions~~ of aaverage ~~drug,~~wholesale ~~which~~prices ~~could~~may adversely affect our customers’ acceptance of our generic products or could place our products at a competitive disadvantage. Moreover, the proposed revisions could expose us to substantial new tort liability costs, which could cause us to withdraw or decline to pursue certain products. These or any other changes in statutes, regulations and/or interpretative guidance could have a material adverse effect on our business~~, condition (financial and other), prospects and results of operations~~.

Investigations and litigations concerning the calculation of average wholesale prices may adversely affect our business.

Many government and third-party payors, including Medicare, Medicaid, HMOs and others, reimburse doctors and others for the purchase of certain prescription drugs based on a drug’s average wholesale price (“AWP”). In the past several years, state and federal government agencies have conducted ongoing investigations of manufacturers’ reporting practices with respect to AWP, in which the agencies have suggested that reporting of inflated AWPs by manufacturers have led to excessive payments for prescription drugs. For example, beginning in September 2003, we, along with numerous other pharmaceutical companies, had been named as a defendant in actions brought by the Attorneys General of Illinois, Kansas, Louisiana and Utah, as well as a state law qui tam action brought on behalf of the state of Wisconsin by Peggy Lautenschlager and Bauer & Bach, LLC, alleging generally that the defendants defrauded the state Medicaid systems by purportedly reporting or causing the reporting of AWP and/or “Wholesale Acquisition Costs” that exceeded the actual selling price of the defendants’ prescription drugs. These cases generally sought some combination of actual damages, and/or double damages, treble damages, compensatory damages, statutory damages, civil penalties, disgorgement of excessive profits, restitution, disbursements, counsel fees and costs, litigation expenses, investigative costs, injunctive relief, punitive damages, imposition of a constructive trust, accounting of profits or gains derived through the alleged conduct, expert fees, interest and other relief that the court may have deemed proper.

On ~~November~~January 2128, ~~2013~~2014, we ~~reached~~settled ~~an agreement in principle to resolve~~ the claims brought by the State of ~~Illinois~~Kansas for $281.58 million~~, including attorneys’ fees and costs~~. On ~~January~~February 285, 2014, we settled the claims brought by the State of ~~Kansas~~Utah for $12.81 million. On ~~February 5~~June 2, 2014, we settled the claims brought by the State of ~~Utah~~Illinois for $228.15 million. On ~~February~~For ~~17, 2014,~~ the ~~Dane~~status ~~County~~of ~~Circuit~~the ~~Court~~the ~~for~~pending ~~the~~Wisconsin state oflaw ~~Wisconsin~~qui ~~dismissed~~tam ~~the~~action ~~claim~~ brought by Peggy Lautenschlager and Bauer & Bach, LLC~~. During the year ended December 31~~, ~~2013,~~please wesee ~~recorded~~Item an3 ~~additional~~- ~~$25.7 million as~~ “~~Settlements~~Legal ~~and~~Proceedings ~~loss~~- ~~contingencies,~~Industry ~~net”~~Related on the consolidated statements of operations as we continued to periodically assess and estimate our remaining potential liability. A contingent liability of $32.4 million was recorded under the caption “Accrued legal settlementsMatters” onelsewhere ~~our consolidated balance sheet as of December 31, 2013,~~ in ~~connection~~this ~~with~~Annual ~~the~~Report ~~aforementioned~~on ~~agreements.~~Form 10-K.

We can give no assurance that we will be able to settle the current or future actions on terms that we deem reasonable, or that such settlements or adverse judgments, if entered, will not exceed the amount of any reserve. Accordingly, ~~future~~such actions could adversely affect us and may have a material adverse effect on our business, results of operations, financial condition and cash flows.

Investigations and litigations related to allegations that our sales and marketing practices caused providers of pharmacy services to substitute or switch prescriptions written for specific drug formulations may adversely affect our business.

At various times between 2006 and 2010, the Attorneys General of Florida, Indiana and Virginia and the United States Office of Personnel Management issued subpoenas to us, and the Attorneys General of Michigan, Tennessee, Texas, and Utah issued civil investigative demands to us. These demands pertained to allegations that certain of our sales and marketing practices caused providers of pharmacy services to substitute or switch prescriptions written for specific drug formulations under circumstances in which some state Medicaid programs at various times reimbursed the new dosage form at a higher rate than the dosage form being substituted. ~~The~~ ~~aforementioned subpoenas and civil investigative demands culminated in the federal and state law qui tam action brought on behalf of the United States and several states by Bernard Lisitza.~~ The DOJ intervened in this action on July 8, 2011 and filed a separate complaint against us on September 9, 2011, alleging claims for violations of the Federal False Claims Act and common law fraud. The states of Michigan and Indiana have also intervened as to claims arising under their respective state false claims acts, common law fraud, and unjust enrichment. See Item 3, “Legal Proceedings—Industry Related Matters.”

If the plaintiffs in any of these actions are ultimately successful, it could adversely affect us and may have a material adverse effect on our business, results of operations, financial condition and cash flows.26

Weaforementioned ~~are~~subpoenas ~~increasingly~~and ~~dependent~~civil investigative demands culminated in the federal and state law qui tam action brought on ~~information~~behalf ~~technology~~of the United States and ~~our~~several ~~systems~~states by Bernard Lisitza. The DOJ intervened in this action on July 8, 2011 and ~~infrastructure~~filed ~~face~~a ~~certain~~separate ~~risks~~complaint against us on September 9, ~~including~~2011, ~~cybersecurity~~alleging claims for violations of the Federal False Claims Act and ~~data~~common ~~leakage~~law ~~risks~~fraud. The states of Michigan and Indiana have also intervened as to claims arising under their respective state false claims acts, common law fraud, and unjust enrichment. See Item 3, “Legal Proceedings”, elsewhere in this Annual Report on Form 10-K.

~~Significant~~If ~~disruptions~~the toplaintiffs ~~our~~in ~~information~~any ~~technology~~of ~~systems~~these or ~~breaches~~future ofactions ~~information~~are ~~security~~ultimately ~~could adversely affect our business. In the ordinary course of business~~successful, ~~we collect, store and transmit large amounts of confidential information, and~~ it iscould ~~critical~~adversely ~~that~~affect weus ~~do so in a secure manner to maintain the confidentiality~~ and ~~integrity~~may ~~of such confidential information. We also~~ have ~~outsourced significant elements of our information technology infrastructure, and as~~ a ~~result~~material weadverse ~~are~~effect ~~managing~~on ~~independent vendor relationships with third parties who may or could have access to~~ our ~~confidential information. The size and complexity of our information technology systems~~business, ~~and~~results ~~those~~ of ~~our third party vendors with whom we contract~~operations, ~~make~~financial ~~such~~condition ~~systems potentially vulnerable to service interruptions~~ and ~~security~~cash ~~breaches from inadvertent or intentional actions by our employees, partners or vendors, or from attacks by malicious third parties~~flows. Maintaining the secrecy of this confidential, proprietary, and/or trade secret information is important to our competitive business position. While we have taken steps to protect such information and invested in information technology, there can be no assurance that our efforts will prevent service interruptions or security breaches in our systems or the unauthorized or inadvertent wrongful use or disclosure of confidential information that could adversely affect our business operations or result in the loss, dissemination, or misuse

31We are increasingly dependent on information technology, and our systems and infrastructure face certain risks, including cybersecurity and data leakage risks.

Significant disruptions to our information technology systems or breaches of information security could adversely affect our business. In the ordinary course of business, we collect, store and transmit large amounts of confidential information, and it is critical that we do so in a secure manner to maintain the confidentiality and integrity of such confidential information. We also have outsourced significant elements of our information technology infrastructure, and as a result we are managing independent vendor relationships with third parties who are responsible for maintaining significant elements of our information technology systems and infrastructure and who may or ~~sensitive~~could have access to our confidential information. The size and complexity of our information technology systems, and those of our third party vendors with whom we contract, make such systems potentially vulnerable to service interruptions and security breaches from inadvertent or intentional actions by our employees, partners or vendors, from attacks by malicious third parties, or from intentional or accidental physical damage to our systems infrastructure maintained by us or by third parties. Maintaining the secrecy of this confidential, proprietary, and/or trade secret information is important to our competitive business position. While we have taken steps to protect such information and invested in information technology, there can be no assurance that our efforts will prevent service interruptions or security breaches in our systems or the unauthorized or inadvertent wrongful use or disclosure of confidential information that could adversely affect our business operations or result in the loss, dissemination, or misuse of critical or sensitive information. A breach of our security measures or the accidental loss, inadvertent disclosure, unapproved dissemination, misappropriation or misuse of trade secrets, proprietary information, or other confidential information, whether as a result of theft, hacking, fraud, trickery or other forms of deception, or for any other cause, could enable others to produce competing products, use our proprietary technology or information, and/or adversely affect our business position. Further, any such interruption, security breach, loss or disclosure of confidential information, could result in financial, legal, business, and reputational harm to us and could have a material adverse effect on our business, financial position, results of operations and/or cash flow.

Our future success depends on our ability to attract and retain key employees and consultants.

Our future success depends, to a substantial degree, upon the continued service of the key members of our management team. The loss of the services of key members of our management team, or their inability to perform services on our behalf, could have a material adverse effect on our business, condition (financial and other), prospects and results of operations. Our success also depends, to a large extent, upon the contributions of our sales, marketing, scientific and quality assurance staff. We compete for qualified personnel against other brand ~~pharmaceutical~~and ~~manufacturers, as well as other~~ generic pharmaceutical manufacturers, who may offer more favorable employment opportunities. If we are not able to attract and retain the necessary personnel to accomplish our business objectives, we could experience constraints that would adversely affect our ability to sell and market our products effectively, to meet the demands of our strategic partners in a timely fashion, and to support research and development programs. In particular, sales and marketing efforts depend on the ability to attract and retain skilled and experienced sales, marketing and quality assurance representatives. Although we believe that we have been successful in attracting and retaining skilled personnel in all areas of our business, we cannot provide assurance that we can continue to attract, train and retain such personnel. Any failure in this regard could limit the rates at which we generate sales and develop or acquire new products.

We depend on our ability to protect our intellectual property and proprietary rights. We cannot be certain of our ability to keep confidential and protect such rights.

Our success depends on our ability to protect and defend the intellectual property rights associated with our current and future products. If we fail to protect our intellectual property adequately, competitors may manufacture and market products similar to, or that may be confused with, our products, and our generic competitors may obtain regulatory approval to make and distribute generic versions of our branded products. Some patent applications in the United States are maintained in secrecy or are not published until the resulting patents issue. ~~Because~~ the publication of discoveries or inventions tends to follow their actual discovery or invention by several months, we cannot be certain that we were the first to invent and reduce to practice any of our discoveries or inventions. We also cannot be certain that patents will be issued with respect to any of our patent applications or that any existing or future patents issued to or licensed by us will provide competitive advantages for our products or will not be challenged, invalidated, circumvented or held unenforceable in proceedings commenced by our competitors or other third parties. Furthermore, our patent rights may not prevent or limit our present and future competitors from developing, making, importing, using or commercializing products that are functionally similar to our products. We rely particularly on trade secrets, trademarks, unpatented proprietary expertise and continuing innovation that we seek to protect, in part, by registering and using marks, and, with regard to other intellectual property, by entering into confidentiality agreements with licensees, suppliers, employees, consultants and other parties. This is done in large part because few of our products are protected by patents. We cannot provide assurance that these agreements will not be breached or circumvented. We also cannot be certain that we will have recourse to adequate remedies in the event of a breach. Disputes may arise concerning the ownership of intellectual property or the applicability of confidentiality agreements. We cannot be sure that our trade secrets and proprietary technology will not be independently developed or otherwise become known by our competitors or, if patents are not issued with respect to internally-developed products, that we will be able to maintain the confidentiality of information relating to these products. In addition, efforts to ensure our intellectual property rights can be costly, time-consuming and/or ultimately unsuccessful.

of intellectual property or the applicability of confidentiality agreements. We cannot be sure that our trade secrets and proprietary technology will not be independently developed or otherwise become known by our competitors or, if patents are not issued with respect to internally-developed products, that we will be able to maintain the confidentiality of information relating to these products. In addition, efforts to ensure our intellectual property rights can be costly, time-consuming and/or ultimately unsuccessful.

Risks Related to Our Indebtedness

Our substantial indebtedness could adversely affect our ability to raise additional capital to fund our operations, limit our ability to react to changes in the economy or our industry and prevent us from meeting obligations on our indebtedness.

We currently have a substantial amount of indebtedness. As of December 31, 2014, on an as-adjusted basis giving effect to the funds borrowed to fund the Dividend Recapitalization, our total debt was $2,351 million (excluding original issue discount or upfront payments), with unused commitments of $150 million under the Senior Credit Facilities. We may also incur significant additional indebtedness in the future.

Subject to the limits contained in the credit agreement governing the Senior Credit Facilities and the indenture governing the Notes, as amended (the “Securities Act”), we may be able to incur substantial additional debt from time to time to finance working capital, capital expenditures, investments or acquisitions, or for other purposes. If we do so, the risks related to this high level of debt could intensify. Specifically, the high level of debt could have important consequences, including, but not limited to:


•	making it more difficult for us to satisfy its obligations with respect to our debt;


•	requiring a substantial portion of our cash flows to be dedicated to debt service payments instead of other purposes, thereby reducing the amount of cash flows available for working capital, capital expenditures, acquisitions and other general corporate purposes;


•	limiting our ability to obtain additional financing to fund future working capital, capital expenditures, acquisitions or other general corporate requirements;


•	increasing our vulnerability to general adverse economic and industry conditions;


•	exposing us to the risk of increased interest rates as certain of our borrowings, including borrowings under the Senior Credit Facilities, are at variable rates of interest;


•	limiting our flexibility in planning for and reacting to changes in the industry in which we compete;


•	placing us at a disadvantage compared to other, less leveraged competitors; and


•	increasing our cost of borrowing.

In addition, the indenture that governs the Notes and the credit agreement governing the Senior Credit Facilities contain restrictive covenants that limit our ability to engage in activities that may be in our long-term best interest. Our failure to comply with those covenants could result in an event of default which, if not cured or waived, could result in the acceleration of all our debt.

Our leveraged business model includes constituents (e.g., the Sponsor and debt holders) that by the nature of their relationship to our enterprise may have different points of view on the use of company resources as compared to our management. The financial and contractual obligations related to our debt also represent a natural constraint on any intended use of company resources.

The terms of the credit agreement governing the Senior Credit Facilities and the indenture governing the Notes restrict our current and future operations, particularly our ability to respond to changes or to take certain actions.

The indenture governing the Notes and the credit agreement governing the Senior Credit Facilities contain a number of restrictive covenants that impose significant operating and financial restrictions on us and may limit our ability to engage in acts that may be in our long-term best interest, including restrictions on our ability to:


•	incur additional indebtedness;


•	pay dividends or make other distributions or repurchase or redeem our capital stock;


•	prepay, redeem or repurchase certain debt;


•	make loans and investments;


•	sell assets;


•	incur liens;


•	enter into transactions with affiliates;


•	alter the businesses we conduct;


•	enter into agreements restricting our subsidiaries’ ability to pay dividends; and


•	consolidate, merge or sell all or substantially all of our assets.

In addition, the restrictive covenants in the credit agreement governing the Senior Credit Facilities require us to maintain a specified financial ratio if there are outstanding borrowings under the revolving credit facility portion of the Senior Credit Facilities. Our ability to meet those financial ratios can be affected by events beyond our control.

A breach of the covenants under the indenture governing the Notes or under the credit agreement governing the Senior Credit Facilities could result in an event of default under the applicable indebtedness. Such a default may allow the creditors to accelerate the related debt and may result in the acceleration of any other debt to which a cross-acceleration or cross-default provision applies which could have a material adverse effect on our business, operations and financial results. In addition, an event of default under the credit agreement governing the Senior Credit Facilities would permit the lenders under the Senior Credit Facilities to terminate all commitments to extend further credit under that facility. Furthermore, if we were unable to repay the amounts due and payable under the Senior Credit Facilities, those lenders could proceed against the collateral granted to them to secure that indebtedness which could force us into bankruptcy or liquidation. In the event our lenders or noteholders accelerate the repayment of the borrowings, we and our subsidiaries may not have sufficient assets to repay that indebtedness. Any acceleration of amounts due under the credit agreement governing the Senior Credit Facilities or the indenture governing the Notes or the exercise by the applicable lenders of their rights under the related security documents would likely have a material adverse effect on us. As a result of these restrictions, we may be:


•	limited in how we conduct our business;


•	unable to raise additional debt or equity financing to operate during general economic or business downturns; or


•	unable to compete effectively or to take advantage of new business opportunities.

These restrictions may affect our ability to grow in accordance with our strategy.

We may not be able to generate sufficient cash to service all of our indebtedness and may be forced to take other actions to satisfy our obligations under our indebtedness, which may not be successful.

Our ability to make scheduled payments on or refinance our debt obligations depends on our financial condition and operating performance, which are subject to prevailing economic and competitive conditions and to certain financial, business, legislative, regulatory and other factors beyond our control. We may be unable to maintain a level of cash flows from operating activities sufficient to permit us to pay the principal, premium, if any, and interest on our indebtedness.

If our cash flows and capital resources are insufficient to fund our debt service obligations, we could face substantial liquidity problems and could be forced to reduce or delay investments and capital expenditures or to dispose of material assets or operations, seek additional debt or equity capital or restructure or refinance our indebtedness. We may not be able to effect any such alternative measures on commercially reasonable terms or at all and, even if successful, those alternative actions may not allow us to meet our scheduled debt service obligations. The credit agreement governing the Senior Credit Facilities and the indenture governing the Notes restrict our ability to dispose of assets and use the proceeds from those dispositions and also restrict our ability to raise debt or equity capital to be used to repay other indebtedness when it becomes due. We may not be able to consummate those dispositions or to obtain proceeds in an amount sufficient to meet any debt service obligations when due.

Our inability to generate sufficient cash flows to satisfy our debt obligations, or to refinance our indebtedness on commercially reasonable terms or at all, would materially and adversely affect our financial position and results of operations and our ability to satisfy our obligations, including our indebtedness.

If we cannot make scheduled payments on our debt, we will be in default and, as a result:


•	our debt holders could declare all outstanding principal and interest to be due and payable;


•	the lenders under the Senior Credit Facilities could terminate their commitments to loan us money and foreclose against the assets securing the borrowings; and


•	we could be forced into bankruptcy or liquidation.

We will require a significant amount of cash to service our indebtedness. The ability to generate cash or refinance our indebtedness as it becomes due depends on many factors, some of which are beyond our control.

We are a holding company, and as such have no independent operations or material assets other than our ownership of equity interests in our subsidiaries, and our subsidiaries’ contractual arrangements with customers, and we will depend on our subsidiaries to distribute funds to us so that we may pay our obligations and expenses. Our ability to make scheduled payments on, or to refinance our respective obligations under, our indebtedness and to fund planned capital expenditures and other corporate expenses will depend on the ability of our subsidiaries to make distributions, dividends or advances to us, which in turn will depend on our subsidiaries' future operating performance and on economic, financial, competitive, legislative, regulatory and other factors and any legal and regulatory restrictions on the payment of distributions and dividends to which they may be subject. Many of these factors are beyond our control. We cannot assure our creditors that our business will generate sufficient cash flow from operations, that currently anticipated cost savings and operating improvements will be realized or that future borrowings will be available to us in an amount sufficient to enable us to satisfy our respective obligations under our indebtedness or to fund our other needs. In order for us to satisfy our obligations under our indebtedness and fund planned capital expenditures, we must continue to execute our business strategy. If we are unable to do so, we may need to reduce or delay our planned capital expenditures or refinance all or a portion of our indebtedness on or before maturity. Significant delays in our planned capital expenditures may materially and adversely affect our future revenue prospects. In addition, we cannot assure our creditors that we will be able to refinance any of our indebtedness on commercially reasonable terms or at all.

Despite our current level of indebtedness, we and our subsidiaries may still be able to incur substantially more debt. This could further exacerbate the risks to our financial condition described above.

We and our subsidiaries may be able to incur significant additional indebtedness in the future. Although the indenture governing the Notes and the credit agreement governing the Senior Credit Facilities contain restrictions on the incurrence of additional indebtedness, these restrictions are subject to a number of qualifications and exceptions, and the additional indebtedness incurred in compliance with these restrictions could be substantial. These restrictions also will not prevent us from incurring obligations that do not constitute indebtedness. If new debt is added to our current debt levels, the related risks that we and the guarantors now face could intensify.

Our variable rate indebtedness subjects us to interest rate risk, which could cause our debt service obligations to increase significantly.

Borrowings under the Senior Credit Facilities are at variable rates of interest and expose us to interest rate risk. The Senior Credit Facility includes a London Inter-Bank Offered Rates (“LIBOR”) floor of 1.00%, which at December 31, 2014 is in excess of LIBOR which at December 31, 2014 was 0.25% for an interest period of three months. The interest period can be set at one, two, three, or six months as selected by us, in accordance with the terms of the Senior Credit Facilities. If the three month LIBOR spot rate were to increase or decrease by 0.125% from current rates, interest expense would not change due to application of the 1.00% floor previously mentioned. If the specified LIBOR rate were to increase above 1.00%, our debt service obligations on the variable rate indebtedness would increase even though the amount borrowed remained the same, and our net income and cash flows, including cash available for servicing our indebtedness, would correspondingly decrease. An increase of 0.125% over the 1.00% floor previously mentioned would result in an approximate increase of $1.0 million in our annual interest expense associated with the Senior Credit Facilities.

During 2013 and 2014, we entered into derivatives to hedge the variable cash flows associated with existing variable-rate debt under the credit agreement governing the Senior Credit Facilities beginning as of September 30, 2013. Our objective in using interest rate derivatives is to add certainty to interest expense amounts and to manage our exposure to interest rate movements, specifically to protect us from variability in cash flows attributable to changes in LIBOR interest rates. To accomplish this objective, we entered into interest rate caps. Interest rate caps designated as cash flow hedges involve the receipt of variable-rate amounts from a counterparty if LIBOR exceeds the strike rate in exchange for the company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount. As of December 31, 2014, we had eight outstanding interest rate caps with two counterparties with various termination dates and notional amounts, which we deemed to be effective for accounting purposes. The derivatives had a combined notional value of $750.0 million, all with effective dates as of either September 30, 2013 or 2014 and with termination dates each September 30th beginning in 2015 and ending in 2018. Consistent with the terms of the credit agreement governing the Senior Credit Facilities, the interest rate caps have a strike of 1% which matches the LIBOR floor of 1.0% on the debt. The premium is deferred and paid over the life of the instrument. The effective annual interest rate related to these interest rate caps was a fixed weighted average rate of approximately 4.8% at December 31, 2014. These instruments are designated for accounting purposes as cash flow hedges of interest rate risk related to the credit agreement governing the Senior Credit Facilities. In addition, amounts reported in “Accumulated other comprehensive loss” on our consolidated balance sheet related to derivatives will be reclassified to interest expense as interest payments are made on our variable-rate debt under credit agreement governing the Senior Credit Facilities. Approximately 35% of our total outstanding debt at December 31, 2014 remains subject to variability in cash flows attributable to changes in LIBOR interest rates. During the next twelve months, we estimate that $5.8 million will be reclassified from “Accumulated other comprehensive loss” on our consolidated balance sheet at December 31, 2014 to interest expense.

In the future, we may enter into additional interest rate swaps that involve the exchange of floating for fixed rate interest payments in order to reduce interest rate volatility. However, we may not maintain interest rate swaps with respect to all of our variable rate indebtedness, and any swaps we enter into may not fully mitigate our interest rate risk.

A lowering or withdrawal of the ratings assigned to the Notes or our other debt by rating agencies may increase our future borrowing costs and reduce our access to capital.

The Notes and the term loans under our Senior Credit Facilities have been rated by Moody’s and Standard & Poor’s and may in the future be rated by additional rating agencies. On February 9, 2015, Standard & Poor’s affirmed our Corporate Credit Rating and outlook at B/Stable, while Moody’s affirmed our Corporate Family Rating at B2 and changed our rating outlook to stable from negative. These actions were taken after each rating agency reassessed our risk profile in conjunction with the Dividend Recapitalization and the related additional borrowings. Any ratings assigned to our debt could be lowered or withdrawn entirely by a rating agency if, in that rating agency’s judgment, future circumstances relating to the basis of the rating, such as adverse changes, so warrant. Any such fluctuation in the ratings of the Company may impact our ability to access debt markets in the future or increase the cost of future debt which could have a material adverse effect on the operations and financial condition of the Company.

ITEM 1B. Unresolved Staff Comments

None.

ITEM 2. Properties

Location	Use	Square feet	Owned/Leased	Expiration of Lease
Spring Valley, NY	Manufacturing	120,000	Owned
Chestnut Ridge, NY	Manufacturing	120,000	Owned
Spring Valley, NY	Quality, Administrative	34,000	Owned
Chestnut Ridge, NY	Quality, Administrative	40,000	Owned
Spring Valley, NY	Research	55,000	Leased	December 2014
Chestnut Ridge, NY	Future Administrative and Manufacturing	135,000	Owned
Suffern, NY	Distribution	190,000	Leased	July 2017
Chestnut Ridge, NY	Research	57,000	Leased	December 2024
Montebello, NY	Distribution	190,000	Leased	January 2024
Woodcliff Lake, NJ	Administrative	61,000	Leased	March 2016
Parsippany, NJ	Administrative	19,000	Leased	July 2021
Irvine, CA	Administrative, Quality, Manufacturing	40,500	Leased	March 2016
Irvine, CA	Manufacturing, Warehouse	40,700	Leased	December 2017
Irvine, CA	Research	26,800	Leased	August 2018
Chennai, India	Manufacturing, Research	60,000	Owned
Rochester, MI	Manufacturing	140,000	Owned
Rochester, MI	Warehouse	44,000	Owned
Rochester, MI	Quality, Research	65,000	Owned
Rochester, MI	Utilities	11,650	Owned
Rochester, MI	Administrative	59,500	Owned
Chennai, India	Manufacturing, Research, Administrative	95,000	Owned
Watford, UK	Administrative	1,000	Leased	November 2015

InWe ~~January~~believe ~~2014,~~that weour ~~purchased~~owned aand ~~building~~leased ~~with~~properties ~~100,000~~are ~~square~~sufficient ~~feet~~in ofsize, ~~space~~scope inand ~~Spring~~nature ~~Valley,~~to NYmeet ~~that~~our ~~will~~anticipated ~~house~~needs ~~certain~~for ~~functions~~the inreasonably ~~the~~foreseeable future. See “Management’s Discussion and weAnalysis ~~extended~~of ~~the~~Financial ~~lease~~Condition ~~for~~and ~~our~~Results ~~Suffern,~~of NYOperations-Financial ~~distribution~~Condition” ~~center~~and ~~until~~Notes ~~January~~to ~~2024~~Consolidated Financial Statements — Note 19 — “Commitments, Contingencies and Other Matters. ”

InPar ~~February~~Pharmaceutical ~~2014,~~is inmanaged ~~conjunction~~and/or ~~with~~served ~~our~~out ~~acquisition~~ of ~~JHP~~all ~~Pharmaceuticals,~~the weproperties ~~acquired~~noted anabove. Par ~~80-acre~~Specialty ~~site~~is inmanaged ~~Rochester, MI that houses a manufacturing facility with a 171,000 square foot structure, a 44,000 square foot warehouse~~ and/or aserved ~~20,000~~out ~~square~~of ~~foot~~certain ~~research and development building, among other structures, as well as leased office space~~ of ~~approximately~~the ~~19,000~~New ~~square~~York ~~feet~~and inNew ~~Parsippany,~~Jersey ~~NJ,~~properties ~~under~~noted ~~a lease that expires in July 2021~~above.

We believe that our owned and leased properties are sufficient in size, scope and nature to meet our anticipated needs for the reasonably foreseeable future. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations-Financial Condition” and Notes to Consolidated Financial Statements — Note 18 — “Commitments, Contingencies and Other Matters.”

Par Pharmaceutical is managed and/or served out of all the properties noted above. Strativa is managed and/or served out of certain of the New York and New Jersey properties noted above.

ITEM 3. Legal Proceedings

Our legal proceedings are complex and subject to significant uncertainties. As such, we cannot predict the outcome or the effects of the legal proceedings described below. While we believe that we have valid claims and/or defenses in the litigations described below, litigation is inherently unpredictable, and the outcome of these proceedings could include substantial damages, the imposition of substantial fines, penalties, and injunctive or administrative remedies. For proceedings where losses are both probable and reasonably estimable, we have accrued for such potential loss as set forth below. Such accruals have been developed based upon estimates and assumptions that have been deemed reasonable by management, but the assessment process relies heavily on estimates and assumptions that may ultimately prove to be inaccurate or incomplete, and unknown circumstances may exist or unforeseen events occur that could lead us to change those estimates and assumptions. Unless otherwise indicated below, at this time we are not able to estimate the possible loss or range of loss, if any, associated with these legal proceedings. In general, we intend to continue to vigorously prosecute and/or defend these proceedings, as appropriate; however, from time to time, we may settle or otherwise resolve these matters on terms and conditions that we believe are in the best interests of the Company. Resolution of any or all claims, investigations, and legal proceedings, individually or in the aggregate, could have a material adverse effect on our results of operations and/or cash flows in any given accounting period or on our overall financial condition.

Patent ~~Related~~related ~~Matters~~matters

On April 28, 2006, CIMA Labs, Inc. (“CIMA”) and Schwarz Pharma, Inc. (“Schwarz Pharma”) filed separate lawsuits against us in the U.S. District Court for the District of New Jersey. CIMA and Schwarz Pharma each have alleged that we 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. On July 10, 2008, the ~~United~~U.S. ~~States~~ Patent and Trademark Office (“USPTO”) rejected all claims pending in both the '‘392 and '‘981 patents. On September 28, 2009, the USPTO'’s Patent Trial and Appeal Board (“PTAB”) affirmed the Examiner's rejection of all claims in the '981 patent, and on March 24, 2011, the PTAB affirmed the rejections pending for both patents and added new grounds for rejection of the '981 patent. On June 24, 2011, the plaintiffs re-opened prosecution on both patents at the USPTO. On May 13, 2013, the PTAB reversed outstanding rejections to the currently pending claims of the '392 patent reexamination application and affirmed a conclusion by the Examiner that testimony offered by the patentee had overcome other rejections. On September 20, 2013, a reexamination certificate was issued for the ’392 patent, and on January 9, 2014, a reexamination certificate was issued for the ’981 patent, each incorporating narrower claims than the respective originally-issued patent. We intend to vigorously defend this lawsuit and pursue our counterclaims.

Unimed and Laboratories Besins Iscovesco (“Besins”) filed a lawsuit on August 22, 2003 against Paddock Laboratories, Inc. in the U.S. District Court for the Northern District of Georgia alleging patent infringement as a result of Paddock's submitting an ANDA with a Paragraph IV certification seeking FDA approval of testosterone 1% gel, a generic version of Unimed Pharmaceuticals, 31

(“PTAB”) affirmed the Examiner’s rejection of all claims in the ‘981 patent, and on March 24, 2011, the PTAB affirmed the rejections pending for both patents and added new grounds for rejection of the ‘981 patent. On June 24, 2011, the plaintiffs re-opened prosecution on both patents at the USPTO. On May 13, 2013, the PTAB reversed outstanding rejections to the currently pending claims of the ’392 patent reexamination application and affirmed a conclusion by the Examiner that testimony offered by the patentee had overcome other rejections. On September 20, 2013, a reexamination certificate was issued for the ’392 patent, and on January 9, 2014, a reexamination certificate was issued for the ’981 patent, each incorporating narrower claims than the respective originally-issued patent. We intend to vigorously defend this lawsuit and pursue our counterclaims.

Unimed and Laboratories Besins Iscovesco filed a lawsuit on August 22, 2003 against Paddock Laboratories, Inc. in the U.S. District Court for the Northern District of Georgia alleging patent infringement as a result of Paddock’s submitting an ANDA with a Paragraph IV certification seeking FDA approval of testosterone 1% gel, a generic version of Unimed Pharmaceuticals, Inc.’s Androgel®. On September 13, 2006, we acquired from Paddock all rights to the ANDA, and the litigation was resolved by a settlement and license agreement that permits us to launch the generic version of the product no earlier than August 31, 2015, and no later than February 28, 2016, assuring our ability to market a generic version of Androgel® well before the expiration of the patents at issue. On January 30, 2009, the Bureau of Competition for the FTC filed a lawsuit against us in the U.S. District Court for the Central District of California, subsequently transferred to the Northern District of Georgia, alleging violations of antitrust laws stemming from our court-approved settlement, and several distributors and retailers followed suit with a number of private plaintiffs’ complaints beginning in February 2009. On February 23, 2010, the District Court granted our motion to dismiss the FTC’s claims and granted in part and denied in part our motion to dismiss the claims of the private plaintiffs. On September 28, 2012, the District Court granted our motion for summary judgment against the private plaintiffs’ claims of sham litigation. On June 10, 2010, the FTC appealed the District Court’s dismissal of the FTC’s claims to the U.S. Court of Appeals for the 11th Circuit. On April 25, 2012, the Court of Appeals affirmed the District Court’s decision. On June 17, 2013, the Supreme Court of the United States reversed the Court of Appeals’ decision and remanded the case to the U.S. District Court for the Northern District of Georgia for further proceedings. On October 23, 2013, the District Court issued an order on indicative ruling on a request for relief from judgment, effectively remanding to the District Court the appeal of the grant of our motion for summary judgment against the private plaintiffs’ claims and holding those claims in abeyance while the remaining issues pending before the Court are resolved. We believe we have complied with all applicable laws in connection with the court-approved settlement and intend to continue to vigorously defend these actions.

On September 13, 2007, Santarus, Inc. and The Curators of the University of Missouri (“Missouri”) filed a lawsuit against us in the U.S. District Court for the District of Delaware alleging infringement of U.S. Patent Nos. 6,699,885; 6,489,346; and 6,645,988 because we submitted an ANDA with a Paragraph IV certification seeking FDA approval of 20 mg and 40 mg omeprazole/sodium bicarbonate capsules. On December 20, 2007, Santarus and Missouri filed a second lawsuit alleging infringement of the patents because we submitted an ANDA with a Paragraph IV certification seeking FDA approval of 20 mg and 40 mg omeprazole/sodium bicarbonate powders for oral suspension. The complaints generally sought (i) a finding of infringement, validity, and/or enforceability; and (ii) a permanent injunction be entered, terminating at the expiration of the patents-in-suit. On October 20, 2008, plaintiffs amended their complaint to add U.S. Patent Nos. 6,780,882 and 7,399,722. On April 14, 2010, the District Court ruled in our favor, finding that the plaintiffs’ patents were invalid as being obvious and without adequate written description. On July 1, 2010, we launched our 20 mg and 40 mg generic omeprazole/sodium bicarbonate capsules product. Santarus and Missouri appealed the District Court’s decision to the U.S. Court of Appeals for the Federal Circuit, and we cross-appealed the District Court’s decision of enforceability of plaintiffs’ patents. On September 4, 2012, the Court of Appeals reversed the District Court’s finding of invalidity and remanded to the District Court for further proceedings, and we ceased further distribution of our 20 mg and 40 mg generic omeprazole/sodium bicarbonate capsules product. Santarus was acquired by Salix Pharmaceuticals, Inc. on January 2, 2014. On September 22, 2014, we entered into a settlement agreement with Salix, Santarus and Missouri to resolve all claims relating to this matter, and the dismissal stipulation was entered on September 26, 2014. As part of the settlement, Salix, Santarus and Missouri released all claims against us in exchange for a payment of $100 million. We recorded a charge of $91.0 million in the third quarter of 2014 in addition to the $9.0 million previously accrued.

On April 29, 2009, Pronova BioPharma ASA (“Pronova”) filed a lawsuit against us in the U.S. District Court for the District of Delaware. The complaint alleges infringement of U.S. Patent Nos. 5,502,077 and 5,656,667 because we submitted an ANDA with a Paragraph IV certification seeking FDA approval of omega-3-acid ethyl esters oral capsules. On May 29, 2012, the District Court ruled in favor of Pronova in the initial case, and we appealed to the U.S. Court of Appeals for the Federal Circuit on June 25, 2012. On September 12, 2013, the Court of Appeals ruled in our favor, reversing the lower District Court decision. On March 5, 2014, judgment in our favor was formally entered in the District Court. On April 16, 2014, Pronova petitioned for writ of certiorari to the U.S. Supreme Court, which was denied on October 6, 2014.

On August 10, 2011, Avanir Pharmaceuticals, Inc. et al. (“Avanir”) filed a lawsuit against us in the U.S. District Court for the District of Delaware. The complaint alleges infringement of U.S. Patent Nos. 7,659,282 and RE38,115 because we submitted an ANDA with a Paragraph IV certification seeking FDA approval of oral capsules of 20 mg dextromethorphan hydrobromide and 10 mg quinidine sulfate. The complaint generally seeks (i) a finding of infringement, validity, and/or enforceability; and (ii) a permanent injunction be entered, terminating at the expiration of the patents-in-suit. Our case was consolidated with those of other defendants, Actavis, Impax, and Wockhardt. On September 12, 2012, Avanir filed an additional complaint against us, adding U.S. Patent No. 8,227,484 to the case. A bench trial was held from September 9-13 and October 15, 2013. On April 30, 2014, a decision was entered in favor of Avanir. On August 20, 2014, the Court issued an order requiring that Avanir delist the ‘115 patent, leaving only the

‘484 and ‘282 to be addressed on appeal. We filed our notice of appeal following resolution of the delisting claim on September 12, 2014. We intend to prosecute our appeal of this decision vigorously.

On September 1, 2011, we, along with EDT Pharma Holdings Ltd. (now known as Alkermes Pharma Ireland Limited) (Elan), filed a complaint against TWi Pharmaceuticals, Inc. (“TWi”) of Taiwan in the U.S. District Court for the District of Maryland alleging infringement of U.S. Patent No. 7,101,576 because TWi filed an ANDA with a Paragraph IV certification seeking FDA approval of a generic version of Megace® ES. Our complaint seeks (i) a finding of infringement, validity, and/or enforceability; and (ii) a permanent injunction be entered, terminating at the expiration of the patents-in-suit. A bench trial was held from October 7-15, 2013. On February 21, 2014, the District Court issued a decision in favor of TWi, finding all asserted claims of the ‘576 patent invalid for obviousness, and we appealed to the U.S. Court of Appeals for the Federal Circuit. On August 12, 2014, the District Court granted our motion for preliminary injunction enjoining TWi’s launch of its generic product pending disposition of the case on appeal, requiring us to post a $10.0 million bond. On December 3, 2014, the Federal Circuit reversed the District Court’s decision, remanding for further findings of fact. On March 9, 2015, the District Court granted our motion for preliminary injunction enjoining TWi’s launch of its generic product pending disposition of the case on remand, requiring us to post a $6.0 million bond. We intend to continue to vigorously pursue our case.

On April 4, 2012, AR Holding Company, Inc. filed a lawsuit against us in the U.S. District Court for the District of Delaware. The complaint alleges infringement of U.S. Patent Nos. 7,619,004; 7,601,758; 7,820,681; 7,915,269; 7,964,647; 7,964,648; 7,981,938; 8,093,296; 8,093,297; and 8,097,655 (subsequently adding U.S. Patent Nos. 8,415,395 and 8,415,396) because we submitted an ANDA with a Paragraph IV certification seeking FDA approval of oral tablets of 0.6 mg colchicine. On November 1, 2012, Takeda Pharmaceuticals was substituted as the plaintiff and real party-in-interest in the case. On August 30, 2013, Takeda filed a second complaint in view of the same filing adding to the dispute U.S. Patent Nos. 7,906,519; 7,935,731; 7,964,648; 8,093,297; and 8,093,298. The complaint generally seeks (i) a finding of infringement, validity, and/or enforceability; and (ii) a permanent injunction be entered, terminating at the expiration of the patents-in-suit. On August 30, 2013, Takeda filed a new complaint against us in view of our change of the ANDA’s labeled indication. We intend to defend these actions vigorously.

On October 25, 2012, Purdue Pharma L.P. (“Purdue”) and Transcept Pharmaceuticals (“Transcept”) filed a lawsuit against us in the U.S. District Court for the District of New Jersey. The complaint alleged infringement of U.S. Patent Nos. 8,242,131 and 8,252,809 because we submitted an ANDA with a Paragraph IV certification seeking FDA approval of zolpidem tartrate sublingual tablets 1.75 and 3.5 mg. The complaint generally seeks (i) a finding of infringement, validity, and/or enforceability; and (ii) a permanent injunction be entered, terminating at the expiration of the patents-in-suit. On November 24, 2014, we reached an agreement with Purdue and Transcept to stay our case contingent upon our agreement to be bound by the District Court’s decision in Transcept’s trial against Actavis and Novel Laboratories, which commenced December 1, 2014.

On December 19, 2012, Endo Pharmaceuticals and Grünenthal GmbH filed a lawsuit against us in the U.S. District Court for the Southern District of New York. The complaint alleges infringement of U.S. Patent Nos. 7,851,482; 8,114,383; 8,192,722; 8.309, 060; 8,309,122; and 8,329,216 because we submitted an ANDA with a Paragraph IV certification to the FDA for approval of oxymorphone hydrochloride extended release tablets 40 mg. The complaint generally seeks (i) a finding of infringement, validity, and/or enforceability; and (ii) a permanent injunction be entered, terminating at the expiration of the patents-in-suit. On November 7, 2014, Endo and Mallinckrodt sued us on the same filing in the U.S. District Court for the District of Delaware, adding U.S. Patent Nos. 8,808,737 and 8,871,779 to the case. On January 15, 2015, the case in the Southern District of New York was dismissed by stipulation. We intend to defend the action in the District of Delaware vigorously.

On January 8, 2013, we were substituted for Actavis as defendant in litigation then pending in the U.S. District Court for the District of Delaware. The action was brought by Novartis against Actavis for filing an ANDA with a Paragraph IV certification seeking FDA approval of rivastigmine transdermal extended release film 4.6 and 9.5 mg/24 hr. We assumed the rights to this ANDA. The complaint alleges infringement of U.S. Patents 5,602,176; 6,316,023; and 6,335,031 and generally seeks (i) a finding of infringement, validity, and/or enforceability; and (ii) a permanent injunction be entered, terminating at the expiration of the patents-in-suit. On August 22, 2013, Novartis filed an additional complaint in view of our submission of an ANDA supplement containing a Paragraph IV certification adding the 13.3 mg/24 hr. strength. A trial was held August 26-29, 2013, and a second bench trial directed to our non-infringement positions was held on May 1-2, 2014. On June 27, 2014, we filed a declaratory judgment action against Novartis in the same Court regarding all strengths, seeking judgment of non-infringement and invalidity on all asserted patents in view of all strengths embraced by our ANDA. On August 29, 2014, the Court in the first action entered judgment in our favor, finding that we do not infringe the asserted patents. On October 7, 2014, the Court entered judgment in our favor on the declaratory judgment complaint. On October 20, 2014 and October 30, 2014, Novartis filed notices of appeal to the U.S. Court of Appeals for the Federal Circuit from both the original case as well as the complaint initiated on the ANDA supplement. On November 7, 2014, Novartis filed an appeal from the declaratory judgment decision. We intend to defend these actions vigorously.

On February 7, 2013, Sucampo Pharmaceuticals, Takeda Pharmaceuticals, and R-Tech Ueno filed a lawsuit against us in the U.S. District Court for the District of Delaware. The complaint alleges infringement of U.S. Patent Nos. 6,414,016; 7,795,312; 8,026,393; 8,071,613; 8,097,653; and 8,338,639 because we submitted an ANDA with a Paragraph IV certification to the FDA for approval of lubiprostone oral capsules 8 mcg and 24 mcg. The complaint seeks (i) a finding of infringement; and (ii) a permanent injunction be entered, terminating at the expiration of the patents-in-suit. On July 3, 2013, an amended complaint was filed, adding U.S. Patent No. 8,389,542 to the case. On October 9, 2014, the parties entered into a settlement agreement resolving the dispute and

~~Inc.'s~~allowing ~~Androgel®. On September 13, 2006, we acquired from Paddock all rights to the ANDA, and the litigation was resolved by a settlement and license agreement that permits~~ us to launch ~~the~~our generic ~~version~~lubiprostone ~~of the~~ product noon ~~earlier than August 31, 2015, and no later than February 28, 2016, assuring our ability to market a generic version of Androgel® well before the expiration of the patents at issue. On~~ January 301, ~~2009~~2021, ~~the~~or ~~Bureau~~earlier ~~of Competition for the FTC filed a lawsuit against us~~ in ~~the~~certain Ucircumstances.S. ~~District~~The ~~Court~~consent for the Central District of California, subsequently transferred to the Northern District of Georgia, alleging violations of antitrust laws stemming from our court-approved settlement, and several distributors and retailers followed suit with a number of private plaintiffs' complaints beginning in February 2009. On February 23, 2010, the District Court granted our motion to dismiss the FTC's claims and granted in part and denied in part our motion to dismiss the claims of the private plaintiffs. On September 28, 2012, the District Court granted our motion for summary judgment ~~against~~terminating the ~~private~~case ~~plaintiffs'~~was ~~claims~~entered ~~of sham litigation. On June~~December 102, ~~2010, the FTC appealed the District Court's dismissal of the FTC's claims to the U~~2014.S. Court of Appeals for the 11th Circuit. On April 25, 2012, the Court of Appeals affirmed the District Court's decision. On June 17, 2013, the Supreme Court of the United States reversed the Court of Appeals’ decision and remanded the case to the U.S. District Court for the Northern District of Georgia for further proceedings. On October 23, 2013, the District Court issued an order on indicative ruling on a request for relief from judgment, effectively remanding to the District Court the appeal of the grant of our motion for summary judgment against the private plaintiffs’ claims and holding those claims in abeyance while the remaining issues pending before the Court are resolved. We believe we have complied with all applicable laws in connection with the court-approved settlement and intend to continue to vigorously defend these actions.

On ~~September 13~~May 15, ~~2007~~2013, ~~Santarus,~~Endo ~~Inc.~~Pharmaceuticals ~~and The Curators of the University of Missouri (“Missouri”)~~ filed a lawsuit against us in the U.S. District Court for the Southern District of ~~Delaware~~New York. The complaint alleges infringement of U.S. Patent Nos. 67,~~699~~851,~~885~~482; 68,~~489~~309,~~346~~122; and 68,~~645~~329,~~988~~216 ~~because~~as ~~we submitted an ANDA with~~ a ~~Paragraph IV~~result ~~certification seeking FDA approval~~ of 20our mgNovember ~~and~~2012 40acquisition mgfrom ~~omeprazole/sodium~~Watson ~~bicarbonate capsules. On December 20, 2007, Santarus and Missouri filed a second lawsuit against us in the U.S. District Court for the District~~ of ~~Delaware alleging infringement of the patents because we submitted~~ an ANDA with a Paragraph IV certification seeking FDA approval of 20non-tamper mgresistant ~~and~~oxymorphone 40hydrochloride mgextended ~~omeprazole/sodium~~release ~~bicarbonate powders for oral suspension~~tablets. The ~~complaints~~complaint generally ~~seek~~ seeks (i) a finding of infringement, validity, and/or enforceability; and (ii) a permanent injunction be entered, terminating at the expiration of the patents-in-suit. On March 4, 2008, the cases pertaining to our ANDAs for omeprazole capsules and omeprazole oral suspension were consolidated for all purposes. On April 14, 2010, the District Court ruled in our favor, finding that plaintiffs’ patents were invalid as being obvious and without adequate written description. Santarus appealed to the U.S. Court of Appeals for the Federal Circuit, and we cross-appealed the District Court’s decision of enforceability of plaintiffs’ patents. On July 1, 2010, we launched our generic Omeprazole/Sodium Bicarbonate product. On September 4, 2012, the Court of Appeals affirmed-in-part and reversed-in-part the District Court’s decision. On December 10, 2012, our petition for rehearing and rehearing en banc was denied without comment. A jury trial is now scheduled in the District Court for November 3, 2014. On March 1, 2013, we filed a motion for judgment on the pleadings seeking dismissal of the case. A contingent liability of $9 million was recorded on our consolidated balance sheet as of December 31, 2012 and December 31, 2013 for this matter. We ~~can~~intend give no assurance that the final resolution of this legal proceeding will not materially differ from our estimates and assumptions inherent in our best estimate of potential loss. We have ceased further distribution of our generic omeprazole/sodium bicarbonate 20 mg and 40 mg capsule product pending further developments. We will continue to ~~vigorously~~ defend this action vigorously.

On ~~September 20~~June 21, ~~2010~~2013, ~~Schering-Plough HealthCare Products~~we, ~~Santarus,~~along ~~Inc.,~~with ~~and~~Alkermes ~~the~~Pharma ~~Curators~~Ireland ofLimited ~~the~~(Elan), ~~University of Missouri~~ filed a ~~lawsuit~~complaint against usBreckenridge Pharmaceutical, Inc. in the U.S. District Court for the District of ~~New Jersey~~Delaware. ~~The~~ In the complaint, ~~alleges~~we allege infringement of U.S. Patent Nos. 6,~~699~~592,~~885;~~903 ~~6,489,346; 6,645,988;~~ and 7,~~399~~101,~~772~~576 because weBreckenridge ~~submitted~~filed an ANDA with a Paragraph IV certification seeking FDA approval of a ~~20mg/1100~~generic ~~mg omeprazole/sodium bicarbonate capsule, a~~ version of ~~Schering-Plough's Zegerid OTC~~Megace® ES. ~~The~~ Our complaint ~~generally~~ seeks (i) a finding of infringement, validity, and/or enforceability; and (ii) a permanent injunction be entered, terminating at the expiration of the patents-in-suit. ~~The~~ ~~case~~A ~~was~~stipulation ~~stayed pending the decision by the Court of Appeals on the prescription product appeal described in the preceding paragraph, and the parties agreed~~ to bestay ~~bound by such decision for purposes of~~ the ~~OTC~~proceedings ~~product litigation. The case~~ was ~~re-opened~~entered on ~~October 3, 2012, and a bench-trial was scheduled for January~~July 2622, ~~2015~~2014. On ~~February~~We ~~25,~~intend ~~2014,~~to ~~the~~prosecute ~~case~~this ~~was~~infringement ~~stayed~~case ~~pending standard antitrust review of a confidential settlement~~vigorously.

On ~~April 29~~September 23, ~~2009~~2013, ~~Pronova~~Forest ~~BioPharma~~Labs ~~ASA~~and Royalty Pharma filed a lawsuit against us in the U.S. District Court for the District of Delaware. The complaint alleges infringement of U.S. Patent Nos., 56,~~502~~602,~~077~~911; 7,888,342; and 57,~~656~~994,~~667~~220 because we submitted an ANDA with a Paragraph IV certification ~~seeking~~to the FDA for approval of ~~omega-3-acid ethyl esters oral capsules~~12. ~~On May 29~~5, ~~2012~~25, ~~the District Court ruled in favor of Pronova in the initial case~~50, and we100 ~~appealed~~mg tomilnacipran ~~the~~HCl Uoral tablets.S. ~~Court~~The ofcomplaint ~~Appeals~~seeks ~~for~~(i) a ~~the~~finding ~~Federal~~of ~~Circuit~~infringement; onand ~~June~~(ii) a ~~25,~~permanent ~~2012. An~~injunction ~~oral~~be ~~hearing was held on May 8~~entered, ~~2013,~~terminating ~~and~~at ~~on September 12, 2013,~~ the ~~Court~~expiration of ~~Appeals ruled in our favor, reversing~~ the ~~lower District Court decision~~patents-in-suit. On ~~October~~We ~~15,~~intend ~~2013,~~to ~~Pronova~~defend ~~filed~~this ~~petitions~~action ~~for panel and en banc rehearing, which were denied on January 16, 2014~~vigorously. ~~On March 5, 2014, judgment in our favor was formally entered in the District Court.~~

On ~~October~~August 20, 2013 and April 4, ~~2010~~2014, ~~UCB~~MonoSol ~~Manufacturing,~~RX ~~Inc.~~and Reckitt Benckiser filed alawsuits ~~verified~~against ~~complaint~~us in the ~~Superior~~U.S. District Court offor ~~New~~the ~~Jersey,~~District ~~Chancery~~of ~~Division,~~Delaware. ~~Middlesex,~~The ~~naming~~complaints ~~us,~~allege ~~our~~infringement ~~development partner Tris Pharma, and Tris Pharma's head~~ of ~~research~~U.S. ~~and~~Patent ~~development, Yu- Hsing Tu~~Nos. ~~The~~ ~~complaint~~8,017,150, ~~alleges~~8,475,832 ~~that Tris~~ and Tu8,603,514, ~~misappropriated~~because ~~UCB's~~we ~~trade~~submitted ~~secrets~~an ~~and,~~ANDA bywith ~~their~~a ~~actions,~~Paragraph ~~breached~~IV ~~contracts~~certification ~~and agreements~~ to ~~which~~the ~~UCB,~~FDA ~~Tris,~~for ~~and~~approval Tuof ~~were~~EQ ~~bound~~2/0. ~~The~~5, ~~complaint further alleges unfair competition against Tris~~8/2, Tu4/1, ~~and~~12/3 usmg ~~relating~~base tobuprenorphine ~~the~~HCl/naloxone ~~parties'~~HCl ~~manufacture~~sublingual ~~and~~films. ~~marketing~~The ofcomplaints ~~generic~~seek ~~Tussionex® seeking~~ (i) a ~~judgment~~finding of ~~misappropriation~~infringement; and ~~breach,~~ (ii) a permanent injunction ~~and~~be ~~disgorgement~~entered, terminating at the expiration of ~~profits~~the patents-in-suit. On ~~June 2~~December 31, ~~2011~~2014, the ~~court~~plaintiffs ~~granted~~filed ~~Tris's~~a ~~motion~~complaint ~~for~~on ~~summary~~the ~~judgment~~same ~~dismissing~~ANDA ~~UCB's claims~~filing, ~~and~~adding ~~UCB appealed~~U. AnS. ~~oral~~Patent ~~hearing~~Nos. ~~was~~8,900,497 ~~held~~and ~~on April~~ 8, ~~2013~~906,277. We intend to ~~vigorously~~ defend ~~the~~these ~~lawsuit~~actions vigorously.

On ~~August 10~~December 27, ~~2011~~2013, ~~Avanir~~Jazz Pharmaceuticals, ~~Inc. et al.~~ filed a lawsuit against us in the U.S. District Court for the District of New Jersey. The complaint alleges infringement of U.S. Patent Nos. 6,472,431; 6,780,889; 7,262,219; 7,851,506; 8,263,650; 8,324,275; 8,461,203; 7,668,730; 7,765,106; 7,765,107; 7,895,059; 8,457,988; and 8,589,182 because we submitted an ANDA with a Paragraph IV certification to the FDA for approval of 500mg/ml sodium oxybate oral solution. On August 15, 2014, October 10, 2014, and January 8, 2015, Jazz filed additional complaints against us in view of the same ANDA filing, adding U.S. Patent Nos. 8,731,963; 8,772,306; and 8,859,619, respectively, to the case. The complaints seek (i) a finding of infringement; and (ii) a permanent injunction be entered, terminating at the expiration of the patents-in-suit. We intend to defend these actions vigorously.

On January 21, 2014, Lyne Laboratories, Fresenius USA Manufacturing and Fresenius Medical Care Holdings filed a lawsuit against us in the U.S. District Court for the District of Massachusetts. The complaint alleges infringement of U.S. Patent Nos. 8,591,938 and 8,592,480 because we submitted an ANDA with a Paragraph IV certification to the FDA for approval of 169mg/5ml calcium acetate oral solution. The complaint seeks (i) a finding of infringement; and (ii) a permanent injunction be entered, terminating at the expiration of the patents-in-suit. The case has been settled on confidential terms with a stipulation of dismissal, which we expect will be entered by the Court presently.

On February 14, 2014 and August 15, 2014, Forest Laboratories, Inc., Forest Laboratories Holdings, Ltd., and Adamas Pharmaceuticals, Inc., filed lawsuits against us and our Anchen subsidiary in the U.S. District Court for the District of Delaware. The complaints allege infringement of U.S. Patent Nos. 8,039,009; 8,168,209; 8,173,708; 8,283,379; 8,329,752; 8,362,085; and 8,598,233 because we submitted ANDAs with Paragraph IV certifications to the FDA for approval of 7, 14, 21, and 28 mg memantine hydrochloride extended release capsules. The complaints seek (i) a finding of infringement and (ii) a permanent injunction be entered, terminating at the expiration of the patents-in-suit. On January 14, 2015, a joint stipulation of dismissal was entered in the case pursuant to a confidential settlement agreement between the parties.

On April 23, 2014, Hyperion Therapeutics filed a lawsuit against us in the U.S. District Court for the Eastern District of Texas. The complaint alleges infringement of U.S. Patent Nos. 8,404,215 and 8,642,012 because we submitted an ANDA with Paragraph IV certifications to the FDA for approval of 1.1 g/ml glyceryl phenylbutyrate oral liquid. The complaint seeks (i) a finding of infringement and (ii) a permanent injunction be entered, terminating at the expiration of the patents-in-suit. We intend to defend this action vigorously.

On June 20, 2014, Otsuka Pharmaceutical Co. filed a lawsuit against us in the U.S. District Court for the District of Delaware. The complaint alleges infringement of U.S. Patent Nos. 5,753,677 and 8,501,730 relating to our Paragraph IV certification accompanying our ANDA for approval of 15 and 30 mg tolvaptan oral tablets. The complaint seeks (i) a finding of infringement; and (ii) a permanent injunction be entered, terminating at the expiration of the patents-in-suit. We intend to defend this action vigorously.

On June 30, 2014, AstraZeneca filed a lawsuit against us in the U.S. District Court for the District of Delaware. The complaint alleges infringement of U.S. Patent No. 7,951,400 because we submitted an ANDA with a Paragraph IV certification to the FDA for approval of eq 2.5 mg and eq 5 mg saxagliptin hydrochloride oral tablets. The complaint seeks (i) a finding of infringement and (ii) a permanent injunction be entered, terminating at the expiration of the patents-in-suit. We intend to defend this action vigorously.

On July 17, 2014, Glycyx Pharmaceuticals and Salix filed a lawsuit against us in the U.S. District Court for the District of Delaware. The complaint alleges infringement of U.S. Patent Nos. 76,~~659~~197,~~282~~341 and ~~RE38~~8,~~155~~497,256 because we submitted an ANDA with a Paragraph IV certification ~~seeking~~to the FDA for approval of ~~oral~~1.1 ~~capsules~~g ofbalsalazide ~~20 mg~~disodium ~~dextromethorphan~~oral ~~hydrobromide and 10 mg quinidine sulfate~~tablets. The complaint ~~generally~~ seeks (i) a finding of infringement, ~~validity,~~ and~~/or~~ ~~enforceability; and~~ (ii) a permanent injunction be entered, terminating at the expiration of the patents-in-suit. ~~Our~~ ~~case was consolidated with those of other defendants, Actavis, Impax, and Wockhardt. A Markman ruling was entered December 3, 2012 and a bench trial was held from September 9-13 and October 15, 2013.~~ We intend to defend this action vigorously.

On ~~September~~August 16, ~~2011~~2014, ~~we,~~Prometheus ~~along~~Labs ~~with EDT Pharma Holdings Ltd. (now known as Alkermes Pharma Ireland Limited) (Elan),~~ filed a ~~complaint~~lawsuit against ~~TWi~~us ~~Pharmaceuticals, Inc. of Taiwan~~ in the U.S. District Court for the District of ~~Maryland~~Delaware. ~~and~~The ~~another~~ complaint ~~against~~alleges ~~TWi on September 2, 2011, in the U.S. District Court for the Northern District of Illinois. In both complaints, Elan and we allege~~ infringement of U.S. Patent No. 7 6,~~101~~284,~~576~~770 because ~~TWi~~we ~~filed~~submitted an ANDA with a Paragraph IV certification ~~seeking~~to the FDA for approval of ~~a generic version of Megace® ES~~0. On5 ~~February 6, 2012, we voluntarily dismissed our case in the Northern District of Illinois~~ and ~~proceeded~~1.0 ~~with~~mg ~~our~~alosetron ~~case~~hydrochloride ~~in the District of Maryland~~tablets. ~~Our~~ The complaint seeks (i) a finding of infringement, ~~validity,~~ and~~/or~~ ~~enforceability; and~~ (ii) a permanent injunction be entered, terminating at the expiration of the patents-in-suit. On ~~July~~ November 17, ~~2013~~2014, the ~~District~~court ~~Court~~stayed ~~granted in part and denied in part TWi's motion for summary judgment of invalidity and noninfringement and granted summary judgment in~~ our ~~favor~~case ~~dismissing~~pending ~~two of TWi's invalidity defenses. On September 25, 2013,~~ the ~~District~~outcome ~~Court entered a stipulation in which TWi conceded infringement~~ of the ~~’576~~appeal ~~patent. A~~of ~~bench trial was held from October 7-15, 2013. On February 21, 2014,~~ the ~~District~~first ~~Court~~Paragraph ~~issued~~IV afiler’s ~~decision~~victory in ~~favor of TWi, finding all asserted claims of~~ the ~~’576~~District ~~patent invalid for obviousness~~Court. We ~~intend to vigorously pursue an appeal of this decision and further intend to assert, in cooperation with Elan, other intellectual property against TWi.~~

On ~~October 28~~August 19, ~~2011~~2014, ~~Astra Zeneca~~Hospira, ~~Pozen,~~ Inc., ~~and KBI-E Inc.,~~ filed a ~~lawsuit~~declaratory ~~against~~judgment ~~our~~complaint ~~subsidiary,~~against ~~Anchen~~the ~~Pharmaceuticals,~~FDA in the U.S. District Court for the District of ~~New~~Maryland ~~Jersey. The~~in ~~complaint~~view ~~alleges~~of ~~infringement~~the ofFDA’s ~~U.S.~~approval ~~Patent~~of ~~No.~~our ~~6,926,907;~~ANDA ~~6,369,085;~~for ~~7,411,070;~~dexmedetomidine ~~and~~hydrochloride 7injection,~~745~~ ~~,466~~concentrate ~~because~~(100 ~~Anchen~~mcg/ml) ~~submitted~~vials anpursuant ~~ANDA~~to ~~with~~our asubmission ~~Paragraph~~and IVstatement ~~certification~~under ~~seeking~~section ~~FDA~~viii. ~~approval~~On ofAugust 20, ~~delayed-release~~2014, ~~oral~~we ~~tablets~~moved ofto ~~375/20~~intervene ~~and~~in ~~500/20~~the mgcase ~~naproxen/esomeprazole~~on ~~magnesium. The~~the ~~complaint~~side ~~generally~~of ~~seeks~~the ~~(i) a~~FDA. ~~finding~~On ~~of infringement~~August 25, ~~validity~~2014, ~~and/or~~we ~~enforceability;~~filed ~~and (ii)~~ a ~~permanent~~declaratory ~~injunction~~judgment becomplaint ~~entered~~against Hospira, ~~terminating~~Inc. atin ~~the~~view ~~expiration~~ of ~~the~~U.S. ~~patents-~~Patent No. 6,716,867 in~~-suit~~ the U. AS. ~~Markman~~District ~~ruling~~Court ~~was~~for ~~entered~~the onDistrict ~~May~~of 1,New ~~2013~~Jersey. On ~~October 15~~September 5, ~~2013~~2014, athe ~~draft~~Maryland ~~stipulation~~Court ruled in favor of ~~dismissal~~the ~~was~~FDA, ~~offered~~Par toand ~~plaintiffs~~joint inintervenor ~~light~~Mylan, ofInc. ~~our~~on ~~conversion~~summary ofjudgment, ~~our~~and ~~Paragraph~~Hospira, IVInc. ~~certification~~and toits aintervenor/co-complainant ~~Paragraph~~Sandoz ~~III~~appealed ~~certification~~that injudgment ~~our~~to ~~ANDA~~the U. AsS. Court of Appeals for the ~~date~~Fourth ofCircuit. ~~this~~On ~~Report~~October 29, ~~plaintiffs~~2014, ~~continue~~all parties stipulated jointly to ~~oppose~~a ~~the~~dismissal ~~entry~~of all of the ~~dismissal~~cases ~~stipulation. We~~(Maryland, ~~will~~New ~~continue~~Jersey, and the Fourth Circuit) pursuant to ~~defend~~a ~~this~~confidential ~~action~~settlement ~~vigorously~~agreement.

On ~~March~~October 2810, ~~2012~~2014, ~~Horizon~~Novartis ~~Pharma~~Pharmaceuticals ~~Inc.~~Corporation and ~~Horizon~~Novartis ~~Pharma~~AG ~~USA Inc.~~ filed a lawsuit against us in the U.S. District Court for the District of Delaware. The complaint alleges infringement of U.S. Patent NoNos. 85,~~067~~665,~~033~~772; 6,004,973; and 6,455,518 because we submitted an ANDA with a Paragraph IV certification ~~seeking~~to the FDA for approval of ~~oral~~0.25, ~~tablets~~0.5, ofand 260.~~6/800~~75 mg ~~famotidine/ibuprofen~~everolimus tablets. The complaint ~~generally~~ seeks (i) a finding of infringement, ~~validity,~~ and~~/or~~ ~~enforceability; and~~ (ii) a permanent injunction be entered, terminating at the expiration of the patents-in-suit. On ~~October~~We ~~17,~~intend ~~2013, the case was dismissed pursuant~~ to adefend ~~confidential~~this ~~settlement~~action ~~agreement~~vigorously.

On ~~April~~November 419, ~~2012~~2014, ARwe ~~Holding Company, Inc.~~ filed a ~~lawsuit~~declaratory judgment action against usGlaxoSmithKline and Aptalis in the U.S. District Court for the Eastern District of ~~Delaware. The~~Pennsylvania, ~~complaint~~seeking ~~alleges~~declaratory judgment of non-infringement and invalidity of U.S. Patent ~~Nos~~No. 7,~~619~~919,~~004;~~115 ~~7,601,758;~~in ~~7,820,681;~~view ~~7,915,269;~~of ~~7,964,647;~~our 7April 11,~~964,648;~~ ~~7,981,938;~~2012 ~~8,093,296;~~submission ~~8,093,297;~~of ~~and 8,097,655 because we submitted~~ an ANDA with a Paragraph IV certification ~~seeking~~to the FDA seeking approval offor ~~oral~~lamotrigine ~~tablets~~orally ofdisintegrating ~~0.6~~tablets ~~mg colchicine. On November 1~~25, ~~2012~~50, ~~Takeda Pharmaceuticals was substituted as the plaintiff and real party-in-interest in the case. The complaint generally seeks (i) a finding of infringement~~100, ~~validity,~~ and~~/or~~ ~~enforceability;~~200 ~~and (ii) a permanent injunction be entered, terminating at the expiration of the patents-in-suit~~mg. On ~~August~~ January 30, ~~2013~~2015, ~~Takeda filed a new complaint against us in view of our change of~~ the ~~ANDA’s~~consent ~~labeled~~judgment ~~indication. A~~was ~~bench trial is scheduled for August 3, 2015~~entered. We ~~intend to defend this action vigorously.~~

OnUnder ~~August~~a 22Development and Supply Agreement between Pharmaceutics International, ~~2012~~Inc. (“PII”) and Par Sterile, wePII ~~were~~agreed ~~added~~to asdevelop aand ~~defendant~~manufacture, and Par Sterile agreed to ~~the~~market ~~action~~and ~~pending~~sell, ~~before~~certain ~~the~~pharmaceutical ~~U.S.~~products, ~~District~~including ~~Court~~zoledronic ~~for~~acid, the ~~Northern~~generic ~~District~~version of ~~California~~Zometa® ~~brought~~and byReclast®. ~~Takeda~~Under ~~Pharmaceuticals~~the Agreement, ~~originally~~the ~~against~~parties ~~Handa~~agreed ~~Pharmaceuticals. Takeda's~~to ~~complaints~~share ~~allege~~equally ~~infringement~~all mutually agreed expenses and costs of ~~U.S.~~Paragraph IV ~~Patent~~proceedings ~~Nos.~~related ~~6,462,058;~~to ~~6,664,276;~~the 6product,~~939,971;~~ ~~7,285,668;~~including ~~7,737,282;~~any costs and 7expenses related to any mutually agreed upon settlement. On February 20,~~790~~ 2013,~~755~~ ~~because~~Novartis ~~Handa~~Pharmaceuticals ~~submitted~~Corporation anfiled ~~ANDA~~a lawsuit against PII, along with aseveral ~~Paragraph~~other IVdefendants, ~~certification~~in tothe U.S. District Court for the ~~FDA~~District of New Jersey, for filing ANDAs with Paragraph IV certifications seeking FDA approval of ~~dexlansoprazole~~both ~~delayed~~zoledronic ~~release~~acid ~~capsules,~~eq 304 mg base/5 ml vials and 60zoledronic acid eq 5 mg base/100 ml bottles. The complaint ~~generally~~alleges, among other things, that the sale of generic versions of Reclast® and Zometa® would infringe one or more of U.S. Patent Nos. 8,324,189; 7,932,241; and 8,052,987 and seeks (i) a finding of infringement, validity, and/or enforceability; ~~and~~ (ii) a permanent injunction be entered, terminating at the expiration of the patents-in-suit~~. We~~; ~~assumed~~and ~~the~~(iii) damages ~~rights~~or toother ~~this~~monetary ~~ANDA~~relief ~~and~~in ~~are~~light ~~prosecuting~~of ~~the~~commercial ~~case~~manufacture, ~~vigorously. A~~use, ~~bench~~offers ~~trial~~to ~~was~~sell, ~~held~~or onsale ~~June~~of ~~5-13,~~the ~~2013~~ANDA products. On ~~April 26~~March 1, 2013, ~~we filed a declaratory judgment complaint in~~ the ~~U.S.~~ District Court ~~for~~denied ~~the~~Novartis’s ~~Northern~~request ~~District~~for ofa ~~California~~temporary inrestraining ~~view~~order ofagainst ~~U.S.~~PII ~~Patent Nos. 8,105,626~~ and ~~8,173,158, and another in~~ the ~~same~~other ~~court~~defendants. onOn ~~July 9~~March 4, 2013, ~~with~~Par ~~respect~~Sterile tobegan ~~U.S.~~distribution ~~Patent~~of ~~No.~~PII’s ~~8,461,187,~~generic inZometa® ~~each~~product ~~case~~and ~~against~~began ~~Takeda~~distribution ~~Pharmaceuticals,~~of ~~and~~the ~~asserting~~generic ~~that~~Reclast® ~~the~~product ~~patents~~ in ~~questions~~December 2013. ~~are~~On ~~not infringed~~December 3, ~~invalid~~2014, orin ~~unenforceable. A~~view ~~bench~~of ~~trial~~the ~~has~~foregoing, ~~been~~Novartis ~~set~~sued inPar ~~this~~Sterile ~~case~~in ~~for~~the ~~April~~same 13court, ~~2015. On~~seeking ~~October 17, 2013,~~ (i) a ~~decision~~finding ~~in favor~~ of ~~Takeda~~infringement, ~~was~~validity, ~~entered~~and/or inenforceability; ~~the~~(ii) a ~~original~~permanent ~~District~~injunction ~~Court~~be ~~case~~entered, ~~with~~terminating ~~respect~~at to the ~~’282~~expiration ~~and~~of ~~’276~~the patents~~. On~~-in-suit; ~~November~~and 6,(iii) damages ~~2013,~~or weother ~~filed~~monetary ~~our~~relief ~~appeal~~in light of ~~the~~commercial ~~original~~manufacture, ~~District~~use, ~~Court’s~~offers ~~judgment~~ to ~~the~~sell, ~~Court~~or sale of ~~Appeals for~~ the ~~Federal~~ANDA ~~Circuit~~products. We intend to ~~continue to~~ defend ~~and~~this ~~prosecute,~~action ~~as appropriate, these actions~~ vigorously.

On ~~October~~December 18, 252014, ~~2012~~and January 23, ~~Purdue~~2015, ~~Pharma~~Novartis ~~L.P.~~Pharmaceuticals Corporation and ~~Transcept~~Novartis ~~Pharmaceuticals~~AG filed alawsuits ~~lawsuit~~ against us in the U.S. District Court for the District of ~~New Jersey~~Delaware. The ~~complaint~~complaints ~~alleged~~allege infringement of U.S. Patent Nos. 85,~~242~~665,~~131~~772; 7,297,703; and 87,~~252~~741,~~809~~338 518 because we submitted an ANDA with a Paragraph IV certification ~~seeking~~to the FDA for approval of ~~zolpidem~~2.5, ~~tartrate~~5, ~~sublingual tablets 1~~7.755, and ~~3.5~~10 mg everolimus tablets. The ~~complaint~~complaints ~~generally~~seek ~~seeks~~ (i) a finding of infringement, ~~validity,~~ and~~/or~~ ~~enforceability; and~~ (ii) a permanent injunction be entered, terminating at the expiration of the patents-in-suit. ~~A Markman hearing is scheduled for May 8, 2014, and pre-trial briefs are due October 24, 2014.~~ We intend to defend ~~this~~these ~~action~~actions vigorously.

On January 16, 2015, Supernus Pharmaceuticals filed a lawsuit against us in the U.S. District Court for the District of New Jersey. The complaint alleges infringement of U.S. Patent Nos. 8,298,576; 8,298,580; 8,663,683; and 8,877,248 because we submitted an ANDA with a Paragraph IV certification to the FDA for approval of 25, 50, 100, and 200 mg topiramate extended release capsules. The complaint seeks (i) a finding of infringement and (ii) a permanent injunction be entered, terminating at the expiration of the patents-in-suit. We intend to defend this action vigorously.

On January 21, 2015, Tris Pharma, Inc., filed a lawsuit against us in the U.S. District Court for the District of Delaware. The complaint alleges infringement of U.S. Patent Nos. 8,062,667; 8,287,903; 8,465,765; 8,563,033; and 8,778,390 because we submitted an ANDA with a Paragraph IV certification to the FDA for approval of 5 mg/ml methylphenidate hydrochloride extended release oral suspension. The complaint seeks (i) a finding of infringement and (ii) a permanent injunction be entered, terminating at the expiration of the patents-in-suit. We intend to defend this action vigorously.

On ~~October~~February 2, 312015, ~~2012~~Cosmo Technologies, ~~Acura~~Ltd ~~Pharmaceuticals~~and Santarus, Inc. filed a lawsuit against us in the U.S. District Court for the District of Delaware. The complaint ~~alleged~~alleges infringement of U.S. Patent NoNos. 7,~~510~~410,~~726~~651; 7,431,943; 8,293,273; 8,784,888; 8,895,064; and RE43,799 because we submitted an ANDA with a Paragraph IV certification ~~seeking~~to the FDA for approval of ~~oxycodone~~9 mg ~~oral~~budesonide tablets ~~5 and 7~~.5 ~~mg.~~ The complaint ~~generally~~ seeks (i) a finding of infringement, ~~validity,~~ and~~/or~~ ~~enforceability; and~~ (ii) a permanent injunction be entered, terminating at the expiration of the patents-in-suit. On ~~October~~We 7,intend ~~2013, an order was entered~~ to ~~stay~~defend ~~the~~this ~~case~~action ~~pending the Court’s review of a confidential settlement agreement~~vigorously.

On ~~December 19~~February 20, ~~2012~~2015, ~~Endo~~Ferring Pharmaceuticals, Inc. and ~~Grunenthal~~Ferring International Center S.A. filed a lawsuit against us in the U.S. District Court for the ~~Southern~~ District of ~~New York~~Delaware. The complaint alleges infringement of U.S. Patent Nos. ~~7,851,482;~~ 8,~~114~~450,~~383;~~338 ~~8,192,722; 8.309, 060; 8,309,122;~~ and 8,~~329~~481,~~216~~083 because we submitted an ANDA with a Paragraph IV certification to the FDA for approval of ~~oxymorphone~~10/3.5/12 ~~hydrochloride~~g ~~extended~~sodium ~~release~~picosulfate/magnesium ~~tablets~~oxide/citric 40acid mgpackets for oral solution. The complaint ~~generally~~ seeks (i) a finding of infringement, ~~validity,~~ and~~/or~~ ~~enforceability; and~~ (ii) a permanent injunction be entered, terminating at the expiration of the patents-in-suit. We intend to defend this action vigorously.

On ~~January~~February 26, 82015, ~~2013~~Shire, weLLC ~~were~~filed ~~substituted~~a ~~for~~lawsuit ~~Actavis~~against asus ~~defendant~~ in ~~litigation then pending in~~ the U.S. District Court for the District of ~~Delaware~~New Jersey. The ~~action~~complaint ~~was~~alleges ~~brought~~infringement byof ~~Novartis~~U.S. ~~against~~Patent ~~Actavis~~Nos. ~~for~~RE41,148 ~~filing~~and RE42,096 because we submitted an ANDA with a Paragraph IV certification ~~seeking~~to the FDA for approval of ~~rivastigmine~~5, ~~transdermal~~10, ~~extended~~15, ~~release~~20, ~~film 4.6~~ and ~~9.5~~25 mg~~/24~~ ~~hr. The~~mixed ~~complaint~~amphetamine ~~alleges~~salts ~~infringement~~extended ofrelease Ucapsules.S. ~~Patents~~The ~~5,602,176;~~complaint ~~6,316,023; and 6,335,031 and generally~~ seeks (i) a finding of infringement, ~~validity,~~ and~~/or~~ ~~enforceability; and~~ (ii) a permanent injunction be entered, terminating at the expiration of the patents-in-suit. A ~~trial was held August 26-29, 2013, and a second bench trial directed to our non-infringement positions is scheduled to be held May 1, 2014.~~ We intend to defend this action vigorously.

On ~~January~~March 316, ~~2013~~2015, BioMarin ~~Merz~~Pharmaceutical ~~Pharmaceuticals~~Inc. and Merck & Cie filed a lawsuit against us in the U.S. District Court for the District of ~~Delaware~~New Jersey. The complaint alleges infringement of U.S. Patent Nos. 7,~~638~~566,~~552~~462; ~~and~~7,566,714; 7,~~816~~612,~~396~~073; 7,727,987; 8,003,126; 8,067,416; RE43,797; and 8,318,745 because we submitted an ANDA with a Paragraph IV certification to the FDA for approval of ~~glycopyrrolate~~100 mg sapropterin dihydrochloride oral ~~solution~~tablets. The complaint ~~generally~~ seeks (i) a finding of infringement, ~~validity,~~ and~~/or~~ ~~enforceability; and~~ (ii) a permanent injunction be entered, terminating at the expiration of the patents-in-suit. On We ~~November~~intend ~~13, 2013, the case was dismissed pursuant~~ to adefend ~~confidential~~this ~~settlement~~action ~~agreement~~vigorously.

OnIndustry ~~February~~related 7,matters 2013, Sucampo Pharmaceuticals, Takeda Pharmaceuticals, and R-Tech Ueno filed a lawsuit against us in the U.S. District Court for the District of Delaware. The complaint alleges infringement of U.S. Patent Nos. 6,414,016; 7,795,312; 8,026,393; 8,071,613; 8,097,653; and 8,338,639 because we submitted an ANDA with a Paragraph IV certification to the FDA for approval of lubiprostone oral capsules 8 mcg and 24 mcg. The complaint seeks (i) a finding of infringement; and (ii) a permanent injunction be entered, terminating at the expiration of the patents-in-suit. On July 3, 2013, an amended complaint was filed, adding U.S. Patent No. 8,389,542 to the case. A bench trial is scheduled for December 1, 2014. We intend to defend this action vigorously.

OnBeginning ~~May~~in 14September 2003, ~~2013~~we, ~~Bayer~~along ~~Pharma~~with AGnumerous other pharmaceutical companies, ~~Bayer~~have IPbeen ~~GMBH~~named as a defendant in actions brought by the Attorneys General of Illinois, Kansas, and ~~Bayer~~Utah, ~~Healthcare~~as ~~Pharmaceuticals~~well as a state law qui tam action brought on behalf of the state of Wisconsin by Peggy Lautenschlager and Bauer & Bach, ~~Inc.~~LLC, ~~filed~~alleging agenerally ~~lawsuit~~that ~~against~~the usdefendants indefrauded the ~~U.S.~~state ~~District~~Medicaid ~~Court~~systems ~~for~~by purportedly reporting or causing the ~~District~~reporting of ~~Delaware. The~~AWP ~~complaint~~and/or ~~alleges~~“Wholesale ~~infringement~~Acquisition Costs” that exceeded the actual selling price of ~~U.S.~~the ~~Patent~~defendants’ ~~Nos~~prescription drugs. 6During the year ended December 31,~~362~~ 2013,~~178~~ ~~and~~we recorded $25.7 million as “Settlements and loss contingencies,~~696,206~~ ~~because~~net” weon ~~submitted~~the anconsolidated ~~ANDA~~statements ~~with~~of aoperations ~~Paragraph~~as IVwe ~~certification~~continued to periodically assess and estimate our remaining potential liability. On January 28, 2014, we settled the ~~FDA~~claims ~~for~~brought ~~approval~~by ofthe ~~vardenafil~~State ~~hydrochloride~~of ~~orally~~Kansas ~~disintegrating~~for ~~tablets~~$1. ~~The~~8 million. ~~complaint~~On ~~seeks~~February ~~(i)~~5, a2014, ~~finding~~we ofsettled ~~infringement;~~the ~~and~~claims ~~(ii)~~brought aby ~~permanent~~the ~~injunction~~State beof ~~entered~~Utah for $2.1 million. On June 2, ~~terminating~~2014, atwe settled the ~~expiration~~claims ofbrought by the ~~patents-in-suit~~State of Illinois for $28. A5 million, ~~bench~~including ~~trial~~attorneys’ isfees ~~scheduled~~and costs. The amounts provided for ~~April~~2013 6represents the amounts settled, ~~2015~~less amounts previously accrued. We ~~intend~~Other tothan ~~defend~~as ~~this~~described ~~action~~below, ~~vigorously~~all of the above AWP cases against the Company have been concluded.

On ~~May 15~~February 17, ~~2013~~2014, ~~Endo~~the ~~Pharmaceuticals~~Dane ~~filed~~County aCircuit ~~lawsuit~~Court ~~against~~for usthe inState of Wisconsin dismissed the ~~U.S.~~state ~~District~~law ~~Court~~qui ~~for~~tam ~~the~~action ~~Southern~~brought ~~District~~on behalf of ~~New~~the ~~York. The~~state ~~complaint~~of ~~alleges~~Wisconsin ~~infringement~~by ofPeggy ~~U.S.~~Lautenschlager ~~Patent~~and ~~Nos.~~Bauer ~~7,851,482;~~& 8Bach,~~309,122;~~ ~~and~~LLC. 8On June 12,~~329~~ 2014,~~216~~ asthe aDane ~~result~~County ofCircuit ~~our~~Court ~~November~~denied ~~2012~~the ~~acquisition~~plaintiffs’ ~~from~~renewed ~~Watson~~motion ofto anamend ~~ANDA~~the ~~with~~complaint and issued a ~~Paragraph~~final IVorder ~~certification~~of ~~seeking~~dismissal ~~FDA~~on ~~approval~~the ofmerits, ~~non-tamper~~without ~~resistant~~prejudice. ~~oxymorphone~~The ~~hydrochloride~~plaintiffs ~~extended~~subsequently ~~release~~appealed ~~tablets. The~~the ~~complaint~~ruling, ~~generally~~and ~~seeks~~on ~~(i)~~September a22, ~~finding~~2014, the Wisconsin Court of ~~infringement,~~Appeals ~~validity,~~dismissed ~~and/or~~the ~~enforceability;~~plaintiffs’ ~~and~~appeal. ~~(ii)~~On August a11, ~~permanent~~2014, ~~injunction~~plaintiffs befiled ~~entered,~~a ~~terminating~~similar atAWP ~~the~~qui ~~expiration~~tam ofaction ~~the~~under ~~patents-~~seal in~~-suit. While~~ ~~Watson~~the ~~had~~Dane ~~settled~~County ~~patent~~Circuit ~~litigation~~Court, ~~relating~~and tothe ~~this~~State ~~product~~of inWisconsin ~~October~~declined ~~2010~~to intervene on December 19, ~~Endo~~2014. isOn ~~asserting~~January 13, ~~patents~~2015, ~~that~~the ~~issued~~Dane ~~after~~County ~~that~~Circuit ~~settlement~~Court ~~agreement~~unsealed ~~was~~the ~~executed~~complaint. We intend to vigorously defend this ~~action vigorously~~lawsuit.

OnThe ~~June~~Attorneys ~~19,~~General ~~2013~~of Florida, ~~Alza~~Indiana ~~Corporation~~ and ~~Janssen~~Virginia ~~Pharmaceuticals,~~and ~~Inc~~the U.S. ~~filed~~Office aof ~~lawsuit~~Personnel ~~against~~Management ~~us in~~ (the ~~U.S.~~“USOPM”) ~~District~~have ~~Court~~issued ~~for~~subpoenas, and the ~~District~~Attorneys General of ~~Delaware~~Michigan, Tennessee, Texas, and Utah have issued civil investigative demands, to us. The ~~complaint~~demands ~~alleges~~generally ~~infringement~~request documents and information pertaining to allegations that certain of ~~U.S.~~our ~~Patent~~sales ~~No.~~and 8marketing practices caused pharmacies to substitute ranitidine capsules for ranitidine tablets,~~163~~ fluoxetine tablets for fluoxetine capsules,~~798~~ asand atwo ~~result~~7.5 mg ofbuspirone ~~our~~tablets ~~November~~for ~~2012~~one ~~acquisition~~15 mg ~~from~~buspirone ~~Watson~~tablet, ofunder ancircumstances ~~ANDA~~in ~~with~~which some state Medicaid programs at various times reimbursed the new dosage form at a ~~Paragraph~~higher IVrate ~~certification~~than ~~seeking~~the ~~FDA~~dosage ~~approval~~form being substituted. We have provided documents in response to these subpoenas to the respective Attorneys General and the USOPM. The aforementioned subpoenas and civil investigative demands culminated in the federal and state law qui tam action brought on behalf of ~~methylphenidate~~the ~~hydrochloride~~United ~~extended~~States ~~release~~and ~~tablets~~several states by Bernard Lisitza. The complaint ~~generally~~was ~~seeks~~unsealed ~~(i)~~on August a30, ~~finding~~2011. ofThe ~~infringement,~~United ~~validity,~~States ~~and/or~~intervened ~~enforceability;~~in ~~and~~this ~~(ii)~~action on July 8, 2011 and filed a ~~permanent~~separate ~~injunction~~complaint beon ~~entered~~September 9, ~~terminating~~2011, atalleging ~~the~~claims ~~expiration~~for violations of the ~~patents-in-suit~~Federal False Claims Act and common law fraud. A ~~bench~~The ~~trial~~states isof ~~scheduled~~Michigan ~~for~~and ~~March~~Indiana 16have also intervened as to claims arising under their respective state false claims acts, ~~2015~~common law fraud, and unjust enrichment. We intend to vigorously defend ~~this~~these ~~action vigorously~~lawsuits.

On June 21, 2013, we, along with Alkermes Pharma Ireland Ltd., filed a complaint against Breckenridge Pharmaceutical, Inc. in the U.S. District Court for the District of Delaware. In the complaint, we allege infringement of U.S. Patent Nos. 6,592,903 and 7,101,576 because Breckenridge filed an ANDA with a Paragraph IV certification seeking FDA approval of a generic version of Megace® ES. Our complaint seeks (i) a finding of infringement, validity, and/or enforceability; and (ii) a permanent injunction be entered, terminating at the expiration of the patents-in-suit. A bench trial is scheduled for February 17, 2015. We intend to prosecute this infringement case vigorously.

On September 23, 2013, Forest Labs and Royalty Pharma filed a lawsuit against us in the U.S. District Court for the District of Delaware. The complaint alleges infringement of U.S. Patent Nos., 6,602,911; 7,888,342; and 7,994,220 because we submitted an

ANDA with a Paragraph IV certification to the FDA for approval of 12.5, 25, 50, and 100 mg milnacipran HCl oral tablets. The complaint seeks (i) a finding of infringement; and (ii) a permanent injunction be entered, terminating at the expiration of the patents-in-suit. We intend to defend this action vigorously.

On August 20, 2013, MonoSol RX and Reckitt Benckiser filed a lawsuit against us in the U.S. District Court for the District of Delaware. The complaint alleges infringement of U.S. Patent Nos., 8,017,150 and 8,475,832 because we submitted an ANDA with a Paragraph IV certification to the FDA for approval of EQ 2/0.5, 8/2, 4/1, 12/3 mg base buprenorphine HCl/naloxone HCl sublingual films. The complaint seeks (i) a finding of infringement; and (ii) a permanent injunction be entered, terminating at the expiration of the patents-in-suit. A three-day bench trial is scheduled for August 31, 2015. We intend to defend this action vigorously.

On October 22, 2013, Horizon Pharma and Jagotec AG filed a lawsuit against us in the U.S. District Court for the District of New Jersey. The complaint alleges infringement of U.S. Patent Nos., 6,488,960; 6,677,326; 8,168,218; 8,309,124; and 8,394,407 because we submitted an ANDA with a Paragraph IV certification to the FDA for approval of 2 and 5 mg prednisone delayed release oral tablets. The complaint seeks (i) a finding of infringement; and (ii) a permanent injunction be entered, terminating at the expiration of the patents-in-suit. On December 6, 2013, the case was dismissed pursuant to our ANDA withdrawal.

On November 26, 2013, Otsuka Pharmaceutical Co. filed a lawsuit against us in the U.S. District Court for the District of Delaware. The complaint alleges both improper notification as to the Paragraph IV certification accompanying our ANDA for approval of 15 and 30 mg tolvaptan oral tablets as well as infringement of U.S. Patent Nos. 5,753,677 and 8,501,730. The complaint seeks (i) a declaratory judgment of improper notice; (ii) a finding of infringement; and (iii) a permanent injunction be entered, terminating at the expiration of the patents-in-suit. On March 10, 2014, the District Court granted Otsuka’s motion for judgment on the pleadings, dismissing the case, as our initial notice letter preceded our acceptance for filing from FDA. At the appropriate time, we intend to resubmit the notice letter.

On December 27, 2013, Jazz Pharmaceuticals filed a lawsuit against us in the U.S. District Court for the District of New Jersey. The complaint alleges infringement of U.S. Patent Nos. 6,472,431; 6,780,889; 7,262,219; 7,851,506; 8,263,650; 8,324,275; 8,461,203; 7,668,730; 7,765,106; 7,765,107; 7,895,059; 8,457,988; and 8,589,182 because we submitted an ANDA with a Paragraph IV certification to the FDA for approval of 500mg/ml sodium oxybate oral solution. The complaint seeks (i) a finding of infringement; and (ii) a permanent injunction be entered, terminating at the expiration of the patents-in-suit. We intend to defend this action vigorously.

On January 23, 2014, Eli Lilly filed a lawsuit against us in the U.S. District Court for the Southern District of Indiana, and on January 24, 2014, Lilly, Daiichi Sankyo, and Ube Industries, Ltd. filed a lawsuit against us in the U.S. District Court for the District of New Jersey. The complaints allege infringement of U.S. Patent Nos. 8,404,703 and 8,569,325 because we submitted an ANDA with a Paragraph IV certification to the FDA for approval of EQ 5 mg and EQ 10 mg prasugrel hydrochloride oral tablets. The complaints seek (i) a finding of infringement and (ii) a permanent injunction be entered, terminating at the expiration of the patents-in-suit. We intend to defend these actions vigorously.

On February 14, 2014, Forest Laboratories, Inc., Forest Laboratories Holdings, Ltd., and Adamas Pharmaceuticals, Inc., filed a lawsuit against us and our Anchen subsidiary in the U.S. District Court for the District of Delaware. The complaint alleges infringement of U.S. Patent Nos. 8,039,009; 8,168,209; 8,173,708; 8,283,379; 8,329,752; 8,362,085; and 8,598,233 because we submitted ANDAs with Paragraph IV certifications to the FDA for approval of 7, 14, 21, and 28 mg memantine hydrochloride extended release capsules. The complaint seeks (i) a finding of infringement and (ii) a permanent injunction be entered, terminating at the expiration of the patents-in-suit. We intend to defend this action vigorously.

Industry Related Matters

Beginning in September 2003, we, along with numerous other pharmaceutical companies, have been named as a defendant in actions brought by the Attorneys General of Illinois, Kansas, and Utah, as well as a state law qui tam action brought on behalf of the state of Wisconsin by Peggy Lautenschlager and Bauer & Bach, LLC, alleging generally that the defendants defrauded the state Medicaid systems by purportedly reporting or causing the reporting of AWP and/or “Wholesale Acquisition Costs” that exceeded the actual selling price of the defendants’ prescription drugs. These cases generally seek some combination of actual damages, and/or double damages, treble damages, compensatory damages, statutory damages, civil penalties, disgorgement of excessive profits, restitution, disbursements, counsel fees and costs, litigation expenses, investigative costs, injunctive relief, punitive damages, imposition of a constructive trust, accounting of profits or gains derived through the alleged conduct, expert fees, interest and other

relief that the court deems proper. On November 21, 2013, we reached an agreement in principle to resolve the claims brought by the State of Illinois for $28,500 thousand, including attorneys’ fees and costs. On January 28, 2014, we settled the claims brought by the State of Kansas for $1,750 thousand. On February 5, 2014, we settled the claims brought by the State of Utah for $2,100 thousand. On February 17, 2014, the Dane County Circuit Court for the state of Wisconsin dismissed the claim brought by Peggy Lautenschlager and Bauer & Bach, LLC. During the year ended December 31, 2013, we recorded an additional $25,650 thousand as "Settlements and loss contingencies, net" on the consolidated statements of operations as we continue to periodically assess and estimate our remaining potential liability. A contingent liability of $32,367 thousand was recorded under the caption “Accrued legal settlements” on our consolidated balance sheet as of December 31, 2013, in connection with the aforementioned AWP actions. Subject to the successful finalization of the agreement in principle reached with the State of Illinois, all of our existing AWP cases will have been concluded.

The Attorneys General of Florida, Indiana and Virginia and the United States Office of Personnel Management (the “USOPM”) have issued subpoenas, and the Attorneys General of Michigan, Tennessee, Texas, and Utah have issued civil investigative demands, to us. The demands generally request documents and information pertaining to allegations that certain of our sales and marketing practices caused pharmacies to substitute ranitidine capsules for ranitidine tablets, fluoxetine tablets for fluoxetine capsules, and two 7.5 mg buspirone tablets for one 15 mg buspirone tablet, under circumstances in which some state Medicaid programs at various times reimbursed the new dosage form at a higher rate than the dosage form being substituted. We have provided documents in response to these subpoenas to the respective Attorneys General and the USOPM. The aforementioned subpoenas and civil investigative demands culminated in the federal and state law qui tam action brought on behalf of the United States and several states by Bernard Lisitza. The complaint was unsealed on August 30, 2011. The United States intervened in this action on July 8, 2011 and filed a separate complaint on September 9, 2011, alleging claims for violations of the Federal False Claims Act and common law fraud. The states of Michigan and Indiana have also intervened as to claims arising under their respective state false claims acts, common law fraud, and unjust enrichment. On July 13, 2012, we filed an Answer and Affirmative Defense to Indiana's Amended Complaint. We intend to vigorously defend these lawsuits.

Other

On March 19, 2009, we were served with a subpoena by the DOJ requesting documents related to Par Specialty’s marketing of Megace® ES. The subpoena indicated that the DOJ was investigating promotional practices in the sales and marketing of Megace® ES. We cooperated with the DOJ in this inquiry. On March 5, 2013, we entered into a settlement agreement with the DOJ that terminated the DOJ’s investigation. The settlement agreement provided for our payment of $45.0 million (plus interest and fees) and included a plea agreement with the New Jersey Criminal Division of the DOJ in which the Company admitted to a single count of

misdemeanor misbranding, a civil settlement with the DOJ, a state settlement encompassing forty-nine states (one state declined to participate due to the small amount of its potential recovery), and a release from each of these entities in favor of the Company related to the practices at issue in the terminated investigation. The Company accrued for the settlement in the period from January 1, 2012 through September 28, 2012 (Predecessor). The settlement was paid in 2013.

On August 6, 2014, we received a subpoena from the Office of the Attorney General of the State of Connecticut requesting documents related to our agreement with Covis Pharma S.a.r.l. to distribute an authorized generic version of Covis’s Lanoxin® (digoxin) oral tablets. We completed our response on October 28, 2014.

On December 5, 2014, we received a subpoena from the Antitrust Division of the DOJ requesting documents related to communications with competitors regarding our authorized generic version of Covis’s Lanoxin® (digoxin) oral tablets and our generic doxycycline products. We intend to cooperate fully with the Department of Justice’s inquiry.

On February 3, 2015, we received a Civil Investigative Demand from Office of the Attorney General of the State of Alaska instructing production of, among other documents, all production in the on-going lawsuit filed against us in 2009 by the Bureau of Competition for the FTC and currently on remand to the U.S. District Court for the Northern District of Georgia, described above under “Business-Legal proceedings-Patent related matters.” We intend to comply fully with the Civil Investigative Demand.

On February 9, 2015, we received a Civil Investigative Demand from the FTC instructing production of, among other documents, all documents related to our license agreement and manufacturing and supply agreement with Concordia Pharmaceuticals, Inc. relating to our sale of clonidine hydrochloride extended release tablets, the generic version of Concordia’s Kapvay®. We intend to comply fully with the Civil Investigative Demand.

We are, from time to time, a party to certain other litigations, including product liability litigations. We believe that these litigations are part of the ordinary course of our business and that their ultimate resolution will not have a material effect on our financial condition, results of operations or liquidity. We intend to defend or, in cases where we are the plaintiff, to prosecute these litigations vigorously.

3837

ITEM 4. Mine Safety Disclosures

Not applicable.

PART II

ITEM 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Market Information About Our Common Stock

Following the Acquisition on September 28, 2012, our common stock is privately held. Therefore there is no established trading market. Prior to September 28, 2012, the Company operated as a public company with its common stock traded on the New York Stock Exchange. Refer to Item 1. Business for details of the Acquisition.

Dividend Policy

With the exception of certain limited circumstances, payment of dividends is restricted under our Senior Credit Facilities and the indenture governing our Notes. See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations - Financial Condition - Financing.” We ~~have~~had never declared cash dividends with respect to our common stock ~~and~~through doDecember ~~not~~31, ~~expect~~2014. Refer to doNote so22, Subsequent Events, for a description of a cash dividend paid in ~~the~~February ~~future~~2015. We presently intend to ~~continue to~~ reinvest our earnings in the business, going forward.

3938

ITEM 6. Selected Financial Data

The following table sets forth selected consolidated financial data with respect to our operations. The data should be read in conjunction with “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements and notes thereto, located elsewhere in this Annual Report on Form 10-K. The statement of operations data for each of the periods presented, and the related balance sheet data have been derived from the audited consolidated financial statements.

	As of and for the Year Ended			~~As of and for the Period~~				As of and for the Period			~~As of and for the Years Ended~~			As of and for the Years Ended
	12/31/2013			September 29, 2012 to December 31, 2012			January 1, 2012 to September 28, 2012				12/31/2011			12/31/2010			12/31/2009
	12/31/2014			12/31/2013				September 29, 2012 to December 31, 2012			January 1, 2012 to September 28, 2012			12/31/2011			12/31/2010
	(In Thousands, Except Per Share Amounts)
Income Statement Data:	(Successor)			(Successor)			~~(Predecessor)~~	(Successor)			(Predecessor)			(Predecessor)			(Predecessor)
Revenues:
Net product sales	$	1,~~062~~278,~~453~~106		$	~~237~~1,~~338~~062,453		$	~~780,797~~$	237,338		$	~~887~~780,~~495~~797		$	~~980~~887,~~631~~495		$	1980,~~176,427~~631
Other product related revenues	3530,~~014~~515			835,~~801~~014			~~23,071~~	8,801			3823,~~643~~071			2838,~~243~~643			1628,~~732~~243
Total revenues	1,~~097~~308,~~467~~621			~~246~~1,~~139~~097,467			~~803,868~~	246,139			~~926~~803,~~138~~868			1926,~~008,874~~138			1,~~193~~008,~~159~~874
Cost of goods sold, excluding amortization expense	~~595~~643,~~166~~851			~~157~~595,~~893~~166			~~431,174~~	157,893			~~526~~431,~~288~~174			~~620~~526,~~904~~288			~~838~~620,~~167~~904
Amortization expense	~~184~~185,~~258~~655			42184,~~801~~258			~~30,344~~	42,801			1330,~~106~~344			1413,~~439~~106			2114,~~039~~439
Total cost of goods sold	~~779~~829,~~424~~506			~~200~~779,~~694~~424			~~461,518~~	200,694			~~539~~461,~~394~~518			~~635~~539,~~343~~394			~~859~~635,~~206~~343
Gross margin	~~318~~479,~~043~~115			45318,~~445~~043			~~342,350~~	45,445			~~386~~342,~~744~~350			~~373~~386,~~531~~744			~~333~~373,~~953~~531
Operating expenses:
Research and development	~~100~~119,~~763~~095			19100,~~383~~763			~~66,606~~	19,383			4666,~~538~~606			5046,~~369~~538			3950,~~235~~369
Selling, general and administrative	~~155~~181,~~164~~136			45155,~~525~~164			~~165,604~~	45,525			~~173~~165,~~378~~604			~~192~~173,~~504~~378			~~165~~192,~~135~~504
Intangible asset impairment	~~100~~146,~~093~~934			—100,093			~~5,700~~	—			5,700
Settlements and loss contingencies, net	2590,~~650~~107			1025,~~059~~650			~~45,000~~	10,059			~~190~~45,~~560~~000			3190,~~762~~560			~~307~~3,762
Restructuring costs	15,~~816~~413			~~241~~1,816			—	241			~~26,986~~—			—26,986			~~1,006~~—
Total operating expenses	~~383~~542,~~486~~685			75383,~~208~~486			~~282,910~~	75,208			~~437~~282,~~462~~910			~~246~~437,~~635~~462			~~205~~246,~~683~~635
Gain on sale of product rights and other				—			—				125			6,025			3,200
(Loss) gain on sale of product rights and other	(3,042		)	—				—			—			125			6,025
Operating (loss) income	(6566,~~443~~612		)	(2965,~~763~~443		)	~~59,440~~	(29,763		)	~~(50~~59,~~593~~440		)	~~132~~(50,~~921~~593		)	~~131~~132,~~470~~921
Gain on bargain purchase	—			~~5,500~~—			—	5,500			—			—			~~3,021~~—
Gain on marketable securities and other investments, net	(7,335		)	—			—				—			—			(2,598		)
Loss on debt extinguishment	(3,989		)	(7,335		)		—			—			—			—
Gain (loss) on marketable securities and other investments, net	1,122			—			—				237			3,459			(55		)
Gain on marketable securities and other investments, net	—			1,122				—			—			237			3,459
Interest income	8718			5087			~~424~~	50			~~736~~424			~~1,257~~736			21,~~658~~257
Interest expense	(95108,~~484~~427		)	(2595,~~985~~484		)	~~(9,159~~	(25,985	)	)	(29,~~676~~159		)	(2,~~905~~676		)	(82,~~013~~905		)
(Loss) income from continuing operations before provision for income taxes	(167,053		)	(50,198		)	50,705				(52,296		)	134,732			126,483
Other income	500			—				—			—			—			—
(Benefit) provision for income taxes	(61,182		)	(17,682		)	29,447				(5,996		)	41,980			48,883
(Loss) income from continuing operations before provision for income taxes	(178,510		)	(167,053		)		(50,198		)	50,705			(52,296		)	134,732
(Loss) income from continuing operations	(105,871		)	(32,516		)	21,258				(46,300		)	92,752			77,600
(Benefit) provision for income taxes	(72,993		)	(61,182		)		(17,653		)	29,530			(5,996		)	41,980
Discontinued operations:				—			—				—			—			—
(Loss) income from continuing operations	(105,517		)	(105,871		)		(32,545		)	21,175			(46,300		)	92,752
Provision (benefit) for income taxes	—			29			83				(20,155		)	21			672
Discontinued operations:								—			—			—			—
Income (loss) from discontinued operations	—			(29		)	(83		)		20,155			(21		)	(672		)
Provision (benefit) for income taxes	—			—				—			—			(20,155		)	21
Net (loss) income	(105,871		)	(32,545		)	21,175				(26,145		)	92,731			76,928
Income (loss) from discontinued operations	—			—				—			—			20,155			(21		)
Net (loss) income	(105,517		)	(105,871		)		(32,545		)	21,175			(26,145		)	92,731
Balance Sheet Data:
Working capital	$	~~206~~375,~~606~~246		$	97206,~~278~~606			$	97,278		$	~~271,709~~		$	~~365~~271,~~537~~709		$	~~263~~365,~~094~~537
Property, plant and equipment, net	~~127~~217,~~276~~314			~~131~~127,~~630~~276				131,630			~~97,790~~			7197,~~980~~790			7471,~~696~~980
Total assets	23,~~631~~007,~~495~~134			2,~~840~~637,~~613~~569				2,840,613			~~1,231,453~~			~~783~~1,~~232~~231,453			~~723~~783,~~827~~232
Long-term debt, less current portion	1,~~516~~904,~~057~~069			1,~~531~~516,~~813~~057				1,531,813			~~323,750~~			—323,750			—
Total stockholders’ equity	~~547~~561,~~362~~066			~~645~~548,~~095~~057				645,095			~~609,581~~			~~628~~609,~~444~~581			~~498~~628,~~653~~444

4039

ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with our Consolidated Financial Statements and related Notes to Consolidated Financial Statements contained elsewhere in this Annual Report on Form 10-K.

MERGER OVERVIEW

Par Pharmaceutical Companies, Inc. (the “Company,” “we,” “us” or “our”) was acquired on September 28, 2012 through a merger transaction with Sky Growth Acquisition Corporation, a wholly-owned subsidiary of Sky Growth Holdings Corporation (“Holdings”). Holdings and its subsidiaries were formed by investment funds affiliated with TPG Capital, L.P. (“TPG” and, together with certain affiliated entities, collectively, the “Sponsor”). The acquisition was accomplished through a reverse subsidiary merger of Sky Growth Acquisition Corporation with and into the Company, with the Company being the surviving entity (the “Merger”). Subsequent to the Merger, we became an indirect, wholly owned subsidiary of Holdings. After that time, we continued our operations as a specialty generic pharmaceutical company, except that we ceased to be a public company, and our common stock ceased to be traded on The New York Stock Exchange. Holdings is a holding company with no operations of its own and has no ability to service interest or principal payments other than through any dividends it may receive from the Company. We have prepared separate analysis of our consolidated operating results, financial condition and liquidity for 2013 (Successor) as compared to the combined 2012 (Predecessor period from January 1, 2012 through September 28, 2012 plus Successor period from September 29, 2012 through December 31, 2012).

To finance the Merger, the Sponsor arranged for an offering of $490 million in aggregate principal amount of 7.375% Senior Notes due 2020 (the “Notes”) by Sky Growth Acquisition Corporation. The proceeds from the Notes offering, together with the proceeds of our new senior secured credit facilities described below (the “Senior Credit Facilities”), the cash equity contributions by the Sponsor and the Company's cash on hand, were used to fund the consummation of the Merger, the repayment of certain outstanding indebtedness of the Company (Predecessor) and the payment of related fees and expenses. The Senior Credit Facilities were comprised of a $1,055 million senior secured term loan (“Term Loan Facility”) and a $150 million senior secured revolving credit facility (“Revolving Facility”) at December 31, 2013. We filed a Form S-4 Registration Statement to exchange our unregistered Notes issued in connection with the Merger for Notes that are registered with the SEC. Our Form S-4 Registration Statement was declared effective as of August 27, 2013. The exchange offer closed on September 30, 2013 and 100% of our Notes issued in connection with the Merger were tendered and exchanged for registered Notes.

The Merger had a significant impact on our financial condition and our results of operations are significantly different after September 28, 2012. For instance, as a result of the Merger, our borrowings and interest expense significantly increased. Also, the application of acquisition method accounting as a result of the Merger required that our assets and liabilities be adjusted to their fair value, which resulted in an increase in our depreciation and amortization expense. Excess of purchase price over the fair value of our net assets and identified intangible assets was allocated to goodwill. Further, the Merger impacted our organizational structure. These changes to our organizational structure and the impact of the Merger discussed above could significantly affect our income tax expense.

COMPANY OVERVIEW

Par Pharmaceutical Companies, Inc. ~~operates~~(the “Company,” “we,” “us” or “our”) is a leading U.S. pharmaceutical company specializing in developing, licensing, manufacturing, marketing and distributing generic drugs. As of December 31, 2014, we have a generics portfolio of approximately 95 products across an extensive range of dosage forms and delivery systems, including immediate and extended release oral solids (tablets, orally disintegrating tablets, capsules and powders), injectables, nasal sprays, ophthalmics and transdermal patches. Our focus is on high barrier-to-entry generic products that are difficult to formulate, difficult to manufacture or face complex legal and regulatory challenges. We operate primarily in the United States asin two business segments: Par Pharmaceutical, ~~our~~which includes generic products ~~division~~marketed (“under Par Pharmaceutical” orand ~~“Par”)~~sterile ~~engaged~~products inmarketed ~~the~~under ~~development~~Par Sterile, ~~manufacture~~ and ~~distribution~~Par ~~of generic pharmaceuticals~~Specialty, ~~and~~which ~~Strativa~~markets ~~Pharmaceuticals~~two ~~(“Strativa”)~~branded products, ~~our~~Nascobal® ~~branded~~Nasal ~~products~~Spray ~~division~~and Megace® ES.

~~The~~Our ~~introduction~~ability ofto ~~new~~generate ~~products~~economic atvalue ~~prices~~and ~~that~~create ~~generate~~ adequate ~~gross~~returns ~~margins~~for isour ~~critical~~owners todepends largely on our ability to ~~generate~~successfully ~~economic~~commercialize ~~value~~our ~~and~~existing ~~ultimately~~products ~~the~~and ~~creation~~to ofintroduce ~~adequate~~new ~~returns for our owners. Par Pharmaceutical, our generic~~ products ~~division,~~at ~~creates~~prices ~~economic~~that ~~value~~generate byadequate ~~optimizing~~gross ~~our~~margins. Our ~~current~~approach ~~generic~~to product ~~portfolio~~development ~~and~~is ~~our~~to ~~pipeline~~target ofhigh ~~potential~~barrier ~~high-value~~to entry, first-to-file ~~and~~or first-to-market generic ~~products~~product opportunities. When an abbreviated new drug application (“ANDA”) is filed with the U.S. Food and Drug Administration (“FDA”) for approval as a generic equivalent of a ~~brand~~branded drug, the filer must certify that (i) no patents are listed with the FDA covering the corresponding ~~brand~~branded product, (ii) the listed patents have expired, (iii) any patent listed with the FDA as covering the ~~brand~~branded product is about to expire, in which case the ANDA will not become effective until the expiration of such patent, or (iv) the patent listed as covering the ~~brand~~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 (commonly known as a Paragraph IV certification). WeA ~~and~~“first-to-file” ~~our~~ANDA ~~development~~refers ~~partners seek~~ to be the first ~~to file an~~ ANDA filed containing a Paragraph IV certification (areferencing ~~first-to-file~~the ~~ANDA)~~corresponding orbranded ~~ANDAs~~product ~~that~~patents, ~~will~~which ~~otherwise~~offers ~~allow~~the usopportunity tofor ~~introduce~~180 ~~the~~days ~~first~~of generic ~~version~~marketing ofexclusivity aif ~~brand~~the ~~product~~ANDA (ais approved by the FDA and we are successful in litigating the patent challenge. A “first-to-market” product), ~~because~~opportunity refers to a product that is the first marketed generic ~~manufacturer~~equivalent toof ~~receive~~a ~~regulatory~~branded ~~approval~~product for reasons apart from ~~the~~statutory ~~FDA~~marketing ~~for~~exclusivity, asuch as the generic ~~version~~equivalent of a ~~particular~~branded ~~brand~~ product that is ~~often~~difficult ~~able~~to formulate or manufacture. We generally focus on pursuing first-to-file ~~capture~~and first-to-market product opportunities, because the first generic equivalent of a branded product to be commercialized often captures a substantial share of the generic market.

~~Our~~Merger branded products division, Strativa Pharmaceuticals, seeks to develop, manufacture and distribute niche, proprietary pharmaceutical products. Our existing branded products are Nascobal® Nasal Spray and Megace® ES. Overview

Par Pharmaceutical Companies, Inc. was acquired on September 28, 2012 through a merger transaction with Sky Growth Acquisition Corporation, a wholly-owned subsidiary of Sky Growth Holdings Corporation (“Holdings”). Holdings changed its name to Par Pharmaceutical Holdings, Inc. in March 2015. Holdings and its subsidiaries were formed by investment funds affiliated with TPG Capital, L.P. (“TPG” and, together with certain affiliated entities, collectively, the “Sponsor”). The acquisition was accomplished through a reverse subsidiary merger of Sky Growth Acquisition Corporation with and into the Company, with the Company being the surviving entity (the “Merger”). Subsequent to the Merger, we became an indirect, wholly owned subsidiary of Holdings. After that time, we continued our operations as a specialty generic pharmaceutical company, except that we ceased to be a public company, and our common stock ceased to be traded on The New York Stock Exchange. Holdings is a holding company with no operations of its own and has no ability to service interest or principal payments other than through any dividends it may receive from the Company. We have prepared separate analyses of our consolidated operating results, financial condition and liquidity for 2014 (Successor) as compared to 2013 (Successor), and for 2013 (Successor) as compared to the combined 2012 (Predecessor period from January 1, 2012 through September 28, 2012 plus Successor period from September 29, 2012 through December 31, 2012).

To finance the Merger, the Sponsor arranged for an offering of $490 million in aggregate principal amount of 7.375% Senior Notes due 2020 (the “Notes”) by Sky Growth Acquisition Corporation. The proceeds from the Notes offering, together with the proceeds of our new senior secured credit facilities described below (the “Senior Credit Facilities”), the cash equity contributions by the Sponsor and the Company's cash on hand, were used to fund the consummation of the Merger, the repayment of certain outstanding indebtedness of the Company (Predecessor) and the payment of related fees and expenses. The Senior Credit Facilities were comprised of a $1,436 million senior secured term loan (“Term Loan Facility”) and a $150 million senior secured revolving credit facility (“Revolving Facility”) at December 31, 2014. We filed a Form S-4 Registration Statement to exchange our unregistered Notes issued in connection with the Merger for Notes that are registered with the SEC. Our Form S-4 Registration Statement was declared effective as of August 27, 2013. The exchange offer closed on September 30, 2013 and 100% of our Notes issued in connection with the Merger were tendered and exchanged for registered Notes.

The Merger had a significant impact on our financial condition, and our results of operations are significantly different after September 28, 2012. For instance, as a result of the Merger, our borrowings and interest expense significantly increased. Also, the application of acquisition method accounting as a result of the Merger required that our assets and liabilities be adjusted to their fair value, which resulted in an increase in our depreciation and amortization expense. Excess of purchase price over the fair value of our net assets and identified intangible assets was allocated to goodwill. Further, the Merger impacted our organizational structure. These changes to our organizational structure and the impact of the Merger discussed above could significantly affect our income tax expense.

Recent Developments

Our recent achievements ~~included~~include ~~significant~~our ~~product~~acquisition ~~launches,~~of ~~such~~Par ~~as fluvoxamine maleate ER~~Sterile, ~~lamotrigine,~~submitting ~~and~~30 ~~five~~new ~~relaunches~~ANDA offilings ~~products~~during ~~we acquired in November 2012 from Watson Pharmaceuticals~~2014, ~~Inc. (Watson)~~ and ~~Actavis~~launching ~~Group~~several ~~(Actavis)~~significant inproducts, ~~connection~~including ~~with their merger (the "Watson~~amlodipine/~~Actavis~~valsartan ~~Merger")~~tablets, ~~execution of several business development agreements~~dexmethylphenidate, and ~~passing~~omega-3-acid ~~all~~ethyl esters oral capsules.

41On February 20, 2014, we completed our acquisition of JHP Group Holdings, Inc. (“JHP”) and its subsidiaries, a privately-held, leading specialty pharmaceutical company that develops, manufactures and commercializes sterile injectable and aseptic products and operates principally through its operating subsidiary, JHP Pharmaceuticals, LLC, which has been renamed Par Sterile Products, LLC. The acquisition was accomplished through a reverse subsidiary merger of an indirect subsidiary of the Company with and into JHP, in which JHP was the surviving entity and became an indirect, wholly owned subsidiary of the Company (the “Par Sterile Acquisition”). The consideration for the Par Sterile Acquisition consisted of $487 million in cash, after finalization of certain customary working capital adjustments. We financed the Par Sterile Acquisition with proceeds received in connection with the debt financing provided by third party lenders of $395 million and an equity contribution of $110 million from certain investment funds associated with TPG.

~~FDA~~ ~~inspections. Generally,~~Among ~~products~~the ~~that~~primary reasons we ~~have~~acquired ~~developed~~Par ~~internally~~Sterile ~~contribute~~and ~~higher~~the ~~gross-margin~~factors ~~percentages~~that ~~than~~contributed ~~products~~to the preliminary recognition of goodwill were that wethe ~~sell~~Par ~~under~~Sterile ~~supply~~Acquisition immediately expanded our presence into the rapidly growing market for injectables and ~~distribution~~other ~~agreements~~sterile products. The result is a broader and more diversified product portfolio and an expanded development pipeline. Par Sterile marketed a portfolio of 14 specialty injectable products, ~~because~~including ~~under~~Aplisol® ~~such~~and ~~agreements~~Adrenalin®, weand ~~typically~~had ~~pay~~developed a ~~percentage~~pipeline of approximately 30 products, 17 of which had been submitted for approval to the ~~gross~~FDA orat ~~net~~the ~~profits~~time (of the Par Sterile Acquisition. Par Sterile targets products with limited competition due to difficulty in manufacturing and/or the product’s market size. With its high-barrier-to-entry products, Par Sterile represents a ~~percentage~~complement to our strategy and product line. Par Sterile also has a reputation for high-quality products and a strong record of ~~sales)~~regulatory compliance, which had driven its steady revenue growth prior to our ~~strategic partners~~acquisition. Our Par Sterile manufacturing facility in Rochester, Michigan, has the capability to manufacture small-scale clinical through large-scale commercial products.

In ~~July~~Our ~~2011,~~recent weachievements ~~received~~also aincluded ~~notice~~significant ~~letter~~product ~~from~~launches, aas ~~generic~~noted ~~pharmaceutical manufacturer advising that it has filed an ANDA with the FDA containing a Paragraph IV certification referencing Megace® ES~~above, ~~one~~execution of ~~our~~several ~~two~~business ~~current~~development ~~brand products~~agreements, and wepassing ~~subsequently~~all ~~received~~FDA ~~similar notices from two other generic manufacturers~~inspections. ~~We sued the first generic filer on its challenge to U.S. Patent 7~~Generally,~~101,576~~ ~~held~~products bythat ~~our~~we ~~licensor,~~have ~~Alkermes~~developed ~~Pharma~~internally ~~Ireland~~contribute ~~Limited~~higher ~~(Elan), which is the last~~gross-~~to-expire~~margin ~~patent~~percentages ~~listed~~than inproducts ~~the~~that ~~Orange~~we ~~Book~~sell ~~for~~under ~~Megace®~~supply ~~ES. On~~and ~~February~~distribution 21agreements, ~~2014,~~because ~~the~~under ~~U.S.~~such ~~District~~agreements, ~~Court~~we ~~for~~typically ~~the~~pay ~~District~~a percentage of ~~Maryland issued an opinion invalidating~~ the ~~’576~~gross ~~patent~~or onnet ~~obviousness~~profits ~~grounds. We~~(or are evaluating the Court’s decision and intend, in cooperation with Elan, to appeal that decision. The first generic filer has disclosed its intent to launch its ANDA product should it receive final FDA approval. Any such launch of a ~~generic~~percentage ~~version~~ of ~~Megace®~~sales) ESto ~~would have a material adverse impact on~~ our ~~brand~~strategic ~~sales of Megace® ES~~partners.

In January 2013, we initiated a restructuring of ~~Strativa~~Par Specialty Pharmaceuticals in anticipation of entering into a settlement agreement and corporate integrity agreement that terminated the U.S Department of Justice's investigation of ~~Strativa~~Par Specialty's marketing of Megace® ES, discussed below. We reduced our ~~Strativa~~Par Specialty workforce by approximately 70 people, with the majority of the reductions in the sales force. The remaining ~~Strativa~~Par Specialty sales force has been reorganized into a single sales team of approximately 60 professionals who will focus their marketing efforts principally on Nascobal® Nasal Spray. In connection with these actions, we incurred expenses for severance and other employee-related costs as well as the termination of certain contracts.

On March 5, 2013, we entered into the settlement agreement with the U.S. Department of Justice. The settlement agreement provided for a payment by the Company of an aggregate amount of approximately $45 million (plus interest and fees), which we paid in the second quarter of 2013, and included a plea agreement with the New Jersey Criminal Division of the Department of Justice in which the Company admitted to a single count of misdemeanor misbranding, a civil settlement with the U.S. Department of Justice, a state settlement encompassing 49 states (one state declined to participate due to the small amount of its potential recovery), and a release from each of these entities in favor of the Company related to the practices at issue in the terminated investigation.

~~Additionally,~~We wealso entered into a Corporate Integrity Agreement (CIA) with the Office of the Inspector General of the United States Department of Health and Human Services (OIG). In exchange for agreeing to enter into the CIA, we received assurance that the OIG will not exercise its ability to permissively exclude the Company from doing business with the Federal government. The CIA includes such requirements as enhanced training time, enhanced monitoring of certain functions, and annual reports to the OIG through an independent review organization. ~~Activities that are traditionally covered by a CIA that are currently dormant at the Company will not trigger additional obligations or cost unless and until we decide to engage in those activities.~~ Although our compliance activities increased under the CIA, we believe the terms to be reasonable and not unduly burdensome.

OnIn ~~November~~March 12010, ~~2013,~~the ~~our~~Patient ~~wholly-owned~~Protection ~~subsidiary,~~and ~~Par~~Affordable ~~Formulations~~Care ~~Private~~Act ~~Limited,~~(PPACA) ~~entered~~was signed into alaw. The ~~definitive~~legislation ~~agreement~~imposed toan ~~purchase~~annual ~~privately~~fee on companies in the pharmaceutical manufacturing sector for each calendar year beginning in 2011 and is payable no later than September 30 of the applicable calendar year. The fee is non-~~held~~tax ~~Nuray~~deductible ~~Chemicals~~and ~~Private~~is ~~Limited~~allocated across the industry based on the company's relative market share of applicable sales to government programs. The total annual fee is allocated among all manufacturers using the ratio of (~~"Nuray"~~i) the covered entity’s prescription drug sales, aas ~~Chennai~~defined, ~~India~~during ~~based~~the ~~API~~sales ~~developer~~year ~~and~~to ~~manufacturer~~(ii) the aggregate sales, as defined, for upall tocovered ~~$19~~entities ~~million~~during the same year. At the time this legislation was enacted, the accounting for the annual fees was generally recognized in ~~cash~~the calendar year in which the entity became obligated to pay the fee (which was determined to be the year subsequent to when the sales were incurred). Additionally, Accounting Standards Update 2010-27 provided guidance that the fee should be accounted for as an operating expense and ~~contingent~~spread ~~payments~~ratably over the year in which it comes due. ~~The~~On ~~closing~~July of28, 2014, the ~~acquisition~~Internal isRevenue ~~subject~~Service to(IRS) issued final regulations that provided guidance on the ~~receipt~~annual fee imposed by the PPACA. The regulations include an example calculation of ~~applicable~~the ~~regulatory~~pharmaceutical ~~approvals~~fee and other ~~customary~~references, ~~closing~~which ~~terms~~differ ~~and~~in ~~conditions~~some respects from how companies believed the fee would be determined based on previous guidance from authoritative sources in 2011. The ~~operating~~latest ~~results~~IRS ofregulations ~~Nuray~~suggested ~~will~~that bea ~~included~~company inis ~~our~~liable ~~consolidated~~for ~~financial~~the ~~results~~fee ~~from~~based on sales in the ~~date~~current year, instead of the ~~closing~~liability ofonly being due upon the ~~acquisition~~first asqualifying ~~part~~sale of the ~~Par~~following ~~Pharmaceutical~~fee ~~segment~~year. WeAs ~~will~~a ~~fund~~result of this change, generally accepted accounting practice changed to record the ~~purchase~~fee ~~from~~in ~~cash~~the onperiod ~~hand~~in which the sales occur. Pharmaceutical manufacturers, like us, that have recorded expense in 2014 only for the fee associated with 2013 sales needed to record a catch-up adjustment in the quarter that included July 28, 2014 (our calendar Q3

On January 21, 2014, we announced that we had entered into a definitive agreement to acquire JHP Group Holdings, Inc., the parent company of JHP Pharmaceuticals, LLC (“JHP”), a leading specialty pharmaceutical company that develops, manufactures and markets branded and generic sterile injectable products. JHP, which focuses on the U.S. sterile injectable drug market, manufactures and sells branded and generic aseptic injectable pharmaceuticals in hospital and clinical settings, and provides contract manufacturing services for global pharmaceutical companies. JHP currently markets a portfolio of 14 specialty injectable products, and has developed a pipeline of 34 products, 17 of which have been submitted for approval to the U.S. Food and Drug Administration. JHP’s sterile manufacturing facility in Rochester, Michigan, has the capability to manufacture small-scale clinical through large-scale commercial products. The purchase price paid by us was equal to $490 million in cash, subject to certain customary working capital adjustments. We funded this transaction and associated expenses with debt financing, which is subject to customary conditions. The transaction closed on February 20, 2014. 41

~~Par~~2014). Our ~~Pharmaceutical~~adjustment -recognized ~~Generic~~a ~~Products~~liability ~~Division~~ for the fee payable based on 2014 sales of approximately $0.7 million, after allocation to distribution agreement partners.

~~Our~~During ~~strategy~~the ~~for~~fourth ~~our~~quarter ~~generic~~of ~~products~~2014, ~~division~~we isinitiated toa ~~continue~~restructuring toin ~~differentiate~~our ~~ourselves~~Irvine bylocation, ~~carefully~~due ~~choosing~~to ~~product~~a ~~opportunities~~change ~~with~~in ~~expected~~our ~~minimal~~product ~~competition~~development strategy. We ~~target~~reduced ~~high-value,~~our ~~first-to-file~~workforce orby ~~first-to-market~~approximately ~~product~~44 ~~opportunities. By~~people, ~~leveraging~~with ~~our~~the ~~expertise~~majority inof ~~research~~the ~~and~~reductions ~~development,~~in ~~manufacturing~~the ~~and~~supply ~~distribution,~~chain and ~~business~~manufacturing ~~development,~~operations. weGoing ~~are~~forward ~~able~~our tosupply ~~effectively~~chain and ~~efficiently~~manufacturing ~~pursue~~operations ~~these~~in ~~opportunities~~our two locations, Chennai, India and ~~support~~Chestnut ~~our~~Ridge, ~~partners. Par~~New isYork, anwill ~~attractive~~pursue ~~business~~early ~~partner~~and ~~because~~mid-stage ofproduct-development. In ~~our~~connection ~~strong~~with ~~commercialization~~these ~~track~~actions, ~~record~~we ~~and~~incurred ~~presence~~expenses infor ~~the~~severance ~~generic~~and ~~trade~~other employee-related costs.

~~Our~~Par ~~key~~Pharmaceutical 2013 generic products (budesonide, propafenone, divalproex, bupropion ER, and lamotrigine) accounted for approximately 38% of total consolidated revenues and a significant percentage of total consolidated gross margins for the year ended December 31, 2013.

WePar ~~began~~Pharmaceutical ~~selling~~includes ~~divalproex,~~generic aproducts marketed under Par Pharmaceutical and generic ~~version~~and sterile products marketed under Par Sterile. The focus of ~~Depakote®~~Par Pharmaceutical is to develop, inlicense, ~~2011~~manufacture, ~~after~~market weand ~~completed~~distribute ~~our~~generic ~~acquisition~~prescription drugs in an extensive range of ~~Anchen~~dosage ~~Incorporated~~forms and ~~its~~delivery ~~subsidiary~~systems, ~~Anchen~~including ~~Pharmaceuticals~~immediate-release oral solids and alternate dosage forms, ~~Inc.~~such ~~(collectively~~as extended-release oral solids, ~~"Anchen")~~injectables, topicals, nasal sprays, ophthalmics, otics, films and transdermal patches. AWe ~~third~~target ~~party~~high-value, ~~manufactures~~first-to-file ~~this~~or first-to-market product ~~for~~opportunities. Par usPharmaceutical’s ~~and~~products weare ~~package~~primarily ~~the~~sold ~~product~~through wholesalers, retailers and mail order pharmacies. ~~Our~~Par ~~sales~~Sterile’s ~~volume~~products ~~and~~are ~~unit~~primarily ~~price~~sold ~~were~~through ~~benefited~~wholesalers, byoften ~~the~~via ~~exit~~an ofarrangement with a ~~competitor~~group ~~from~~purchasing ~~this~~organization, ~~market~~prior into ~~late~~being ~~June~~dispensed at hospitals and directly administered by physicians.

Our top 10 revenue 2014 generic products accounted for approximately 50% of total consolidated revenues and a significant percentage of total consolidated gross margins for the year ended December 31, 2014. The 2014 addition of Par Sterile to our business expanded our revenue base into the specialty sterile products market, and our expanded product pipeline will further diversify our revenue base in the future.

We believe we are well positioned with our customers because of our broad portfolio of products, strong commercialization track record and presence in the generic trade. In addition, our deep experience with product development, patent litigation strategy and our strong market presence allows us to partner with smaller development organizations. Generally, products that we have developed internally contribute higher gross-margin percentages than products that we sell under distribution agreements, because under such agreements, we typically pay a percentage of the gross or net profits (or a percentage of sales) to our development partners. As of the fourth quarter of 2014, we or our strategic partners had approximately 115 ANDAs pending with the FDA, which included 32 first-to-file opportunities and six potential first-to-market product opportunities. We expect our product development efforts, including projects with development partners, will yield new ANDA filings and ultimately product launches. However, such potential product launches may be delayed or may not occur due to various circumstances, including extended litigation with potentially adverse outcomes and obstacles such as citizens petitions that may delay or block our regulatory approval. No assurances can be given that we or any of our development partners will successfully complete the development of any products , that regulatory approvals will be granted for any such product, that we will be successful in challenging applicable patents on the corresponding branded product, or that any approved product will be produced in commercial quantities or sold profitably.

Par Specialty Pharmaceuticals

For Par Specialty, in the near term we plan to continue to invest in the marketing and sales of Nascobal® (cyanocobalamin, USP) Nasal Spray. In addition, we plan to continue to consider new strategic licenses and product acquisitions to expand our branded product portfolio.

Since the beginning of 2013, our brand field sales force of approximately 60 people have been focusing the majority of their detailing efforts on Nascobal® Nasal Spray. Nascobal® is a prescription vitamin B12 treatment indicated for maintenance of remission in certain pernicious anemia patients. We acquired the worldwide rights to Nascobal® from QOL Medical, LLC in 2009.

Prior to acquiring Nascobal®, we promoted Megace® ES (megestrol acetate) oral suspension as our primary branded product. We acquired FDA approval of our new drug application (“NDA”) for Megace® ES in 2005. Megace® ES is indicated for the treatment of anorexia, cachexia or any unexplained significant weight loss in patients with a diagnosis of AIDS and utilizes the Megace® brand name that we license from Bristol-Myers Squibb Company.

Since January 2013, we reduced our salesforce and curtailed our marketing of Megace® ES, as explained above under “Recent Developments.” We expect the sales decline trend for Megace® ES experienced over the last few years to continue or accelerate due to the effects of our reduced product detailing and an increasingly difficult reimbursement climate. In addition, in 2011 we sued a generic pharmaceutical manufacturer that filed an ANDA with a Paragraph IV certification seeking FDA approval of a generic version of Megace® ES on grounds of patent infringement, and we sued a second Paragraph IV filer in 2013. On February 21, 2014, the District Court issued a decision in favor of the first generic filer, finding all asserted patent claims invalid for obviousness, and we appealed to the U.S. Court of Appeals for the Federal Circuit. The first generic filer has received final FDA approval of its ANDA and announced its intent to launch its generic product. On August 12, 2014, the District Court granted our motion for preliminary injunction enjoining the first filer’s launch of its generic product pending disposition of the case on appeal, requiring us to post a $10.0 million bond. On December 3, 2014, the Federal Circuit reversed the District Court’s decision, remanding for further findings of fact. On March 9, 2015, the District Court granted our motion for preliminary injunction enjoining the first filer’s launch of its generic product pending disposition of the case on remand, requiring us to post a $6.0 million bond. Any such launch of a generic version of

~~2013. Two~~Megace® ~~additional~~ES ~~competitors~~would ~~entered~~have ~~the~~a ~~market~~material inadverse ~~the~~impact ~~third~~on ~~quarter~~our brand sales of ~~2013~~the product. ~~Any~~For ~~disruption~~more ininformation, ~~supply~~please ~~due~~see toNote ~~manufacturing~~19 or- ~~transportation issues~~Commitments, asContingencies ~~well~~and asOther ~~additional~~Matters: ~~competition,~~Legal ~~could have a negative effect on our revenues and gross margins~~Proceedings.

We began selling propafenone, the generic version of Rythmol® SR, in 2011. We were awarded 180 days of marketing exclusivity for being the first to file an ANDA containing a Paragraph IV certification for this product. We manufacture and distribute this product, and, as of December 31, 2013, we believe we were the single source generic supplier for this product. The market entry of any competition to this product will result in declines in sales volume and unit price, which would negatively impact our revenues and gross margins.

We began selling budesonide, the generic version of Entocort ® EC, in June 2011 as the authorized generic distributor pursuant to a supply and distribution agreement with AstraZeneca. We are one of two competitors in this market. We do not control the manufacturing of the product, and any disruption in supply due to manufacturing or transportation issues, as well as additional competition, could have a negative effect on our revenues and gross margins.

On November 17, 2011, we completed our acquisition of Anchen. The Anchen assets we acquired included five marketed generic products, including bupropion ER (generic version of Wellbutrin XL®). We have multiple competitors in the market for these products.

In January 2013, we launched lamotrigine, the generic version of Lamitctal® XR, upon FDA approval of our ANDA. We share profits with our development partner. We had one competitor in this market through December 31, 2013.

In addition, our investments in generic product development, including projects with development partners, are expected to yield new ANDA filings. These ANDA filings are expected to lead to product launches based on one or more of the following: expiry of the relevant 30-month stay period; patent expiry date; and expiry of regulatory exclusivity. However, such potential product launches may be delayed or may not occur due to various circumstances, including extended litigation, outstanding citizens petitions, other regulatory requirements set forth by the FDA, and stays of litigation. These ANDA filings would be significant mileposts for us, as we expect many of these potential products to be first-to-file/first-to-market opportunities with gross margins in excess of the average of our current portfolio. As of the fourth quarter of 2013, we or our strategic partners had approximately 73 ANDAs pending with the FDA, which included 27 first-to-file opportunities and four potential first-to-market product opportunities. No assurances can be given that we or any of our strategic partners will successfully complete the development of any of these potential products either under development or proposed for development, that regulatory approvals will be granted for any such product, that any approved product will be produced in commercial quantities or sold profitably.

Strativa Pharmaceuticals - Branded Products Division

For Strativa, in the near term we plan to continue to invest in the marketing and sales of our existing products (Nascobal® Nasal Spray and Megace® ES). In addition, in the longer term, we plan to continue to consider new strategic licenses and acquisitions to expand Strativa's presence in supportive care and adjacent commercial areas.

In July 2005, we received FDA approval for our first NDA and began marketing Megace® ES (megestrol acetate) oral suspension. Megace® ES is indicated for the treatment of anorexia, cachexia or any unexplained significant weight loss in patients with a diagnosis of AIDS and utilizes the Megace® brand name that we have licensed from Bristol-Myers Squibb Company. We promoted Megace® ES as our primary brand product from 2005 through March 2009. With the acquisition of Nascobal® in March 2009, Strativa increased its sales force and turned its focus on marketing both products. Refer to "Recent Developments" above for an update on related patent litigation.

As of January 31, 2013, we reduced our Strativa workforce by approximately 70 people in anticipation of entering into a settlement agreement terminating the U.S. Department of Justice's investigation into Strativa's sales and marketing practices of Megace® ES. In connection with the settlement, the Company entered into a corporate integrity agreement with the Office of Inspector General of the U.S. Department of Health & Human Services. We expect the sales decline trend for Megace® ES experienced over the last few years as a result of an increasingly difficult reimbursement climate to continue or accelerate as the effects of the reduction of product detailing after January 31, 2013 are experienced and/or when generic competition enters this market.

On March 31, 2009, we acquired the worldwide rights to Nascobal® (cyanocobalamin, USP) Nasal Spray from QOL Medical, LLC. As of January 31, 2013, our current brand field sales force of approximately 60 people are focusing the majority of their detailing efforts on Nascobal® Nasal Spray.

OTHER CONSIDERATIONS

Sales and gross margins of our products depend principally on ~~(i) our ability to introduce new generic and brand products and the introduction of other generic and brand products in direct competition with our products~~; (ii) the ability of generic competitors to quickly enter the market after our relevant patent or exclusivity periods expire, or during our exclusivity periods with authorized generic products, diminishing the amount and duration of significant profits we generate from any one product; (iii) the pricing practices of competitors and the removal of competing products from the market; (iv) the continuation of our existing license, supply and distribution agreements and our ability to enter into new agreements; (v) the consolidation among distribution outlets through mergers, acquisitions and the formation of buying groups; (vi) the willingness of generic drug customers, including wholesale and


i.	the extent of market penetration for our existing product line, the introduction of other products in direct competition with our products, and the pricing practices of our competitors;


ii.	our ability to successfully develop, procure regulatory approvals of, overcome legal challenges to, manufacture commercial quantities of, launch and commercialize our products;


iii.	our ability to select products for development that prove to be valuable in terms of market size, pricing dynamics and limited competition, such as first-to-file and first-to-market products;


iv.	our ability to obtain marketing exclusivity periods for our products, and the pace at which our competitors enter the market after any applicable exclusivity period ends or during our exclusivity period with authorized generic products or products with shared exclusivity, which may diminish the amount and duration of significant profits we are able to generate from any such product;


v.	our ability to obtain quality raw materials for our products at competitive prices, including the active pharmaceutical ingredients (“APIs”) necessary to manufacture our products;


vi.	the willingness of our customers to switch among generic drugs of different pharmaceutical manufacturers;


vii.	the consolidation our customer base through mergers, acquisitions and the formation of buying groups;


viii.	customer satisfaction with the breadth of our product line and with the level and quality of our customer service;


ix.	the continuation of our existing license, supply and distribution agreements and our ability to enter into new agreements; and


x.	the market acceptance of our current and future branded products and our ability to maintain patent protection of our branded products.

Net sales and gross margins derived from generic pharmaceutical products often follow a pattern based on regulatory and competitive factors that we believe to be unique to the generic pharmaceutical industry. As the patent protection for a branded product expires or is successfully challenged in court and the related exclusivity period terminates, the first generic manufacturer to receive regulatory approval from the FDA for a generic version of the product is often able to capture a substantial share of the generic market. However, the brand company may launch its own generic version of the product (an “authorized generic” product), directly or through a third party, in competition with the generic manufacturer’s version. As additional generic manufacturers receive regulatory approvals for their own generic versions of the product, the market share and the price of the generic products typically decline - often significantly and rapidly - depending on several factors, including the number and pricing strategy of competitors.

Net sales and gross margins derived from branded pharmaceutical products typically follow a different pattern. Sellers of branded products benefit from being the exclusive supplier to the market due to patent protections for the branded products. The benefits include significantly higher gross margins relative to sellers of generic pharmaceutical products. However, commercializing branded pharmaceutical products is more costly than generic pharmaceutical products. Sellers of branded pharmaceutical products often have increased infrastructure costs relative to sellers of generic pharmaceutical products and make significant investments in the development and/or licensing of these products without a guarantee that these expenditures will result in the successful development or launch of branded products that will prove to be commercially successful. Selling branded products also tends to require greater sales and marketing expenses to create a market for the products than is necessary with respect to the sale of generic products. The patents protecting a branded product's sales are also subject to attack by generic competitors. Specifically, after patent protections expire, or after a successful challenge to the patents protecting one of our branded products, generic products can be sold in the market at a significantly lower price than the branded version, and, where available, may be required or encouraged in preference to the branded version under third party reimbursement programs, or substituted by pharmacies for branded versions by law.

In addition to the substantial costs and uncertainty of product development, we incur significant legal costs in bringing our generic products to market. Litigation concerning patents and proprietary rights is often protracted and expensive, and the outcome of such suits is inherently uncertain. Pharmaceutical companies with patented branded products usually sue companies that seek approval to produce generic forms of their products for alleged patent infringement or other violations of intellectual property rights, which subjects the generic companies to expensive, protracted litigation that delays and may prevent the entry of such generic products into the market. In the case of an ANDA filed with a Paragraph IV certification, the overwhelming majority are subject to litigation by the brand company, because bringing suit triggers a 30-month statutory delay of FDA approval of the ANDA. Because we focus on developing first-to-file, Paragraph IV products, we are subject to a significant number of protracted and costly patent litigations, which can result in a substantial delay in, or prevent, the approval and sale of our generic products, which could have a material adverse effect on our business, financial condition, prospects and results of operations.

retail customers, to switch among drugs of different generic pharmaceutical manufacturers; (vii) our ability to procure approval of ANDAs and NDAs and the timing and success of our future new product launches; (viii) our ability to obtain marketing exclusivity periods for our generic products; (ix) our ability to maintain patent protection of our brand products; (x) the extent of market penetration for our existing product line; (xi) customer satisfaction with the level, quality and amount of our customer service; and (xii) the market acceptance of our current branded products and the successful development and commercialization of any future 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 we believe 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 brand company may license the right to distribute 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 those products 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.

Net sales and gross margins derived from brand pharmaceutical products typically follow a different pattern. Sellers of brand pharmaceutical products benefit from years of being the exclusive supplier to the market due to patent protections for the brand products. The benefits include significantly higher gross margins relative to sellers of generic pharmaceutical products. However, commercializing brand pharmaceutical products is more costly than generic pharmaceutical products. Sellers of brand pharmaceutical products often have increased infrastructure costs relative to sellers of generic pharmaceutical products and make significant investments in the development and/or licensing of these products without a guarantee that these expenditures will result in the successful development or launch of brand products that will prove to be commercially successful. Selling brand products also tends to require greater sales and marketing expenses to create a market for the products than is necessary with respect to the sale of generic products. The patents protecting a brand product's sales are also subject to attack by generic competitors. Specifically, after patent protections expire, or after a successful challenge to the patents protecting one of our brand products, generic products can be sold in the market at a significantly lower price than the branded version, and, where available, may be required or encouraged in preference to the branded version under third party reimbursement programs, or substituted by pharmacies for branded versions by law.

In addition to the substantial costs and uncertainty of product development, we typically incur significant legal costs in bringing certain generic products to market. Litigation concerning patents and proprietary rights is often protracted and expensive. Pharmaceutical companies with patented brand products routinely sue companies that seek approval to produce generic forms of their products for alleged patent infringement or other violations of intellectual property rights, which delays and may prevent the entry of such generic products into the market. In the case of an ANDA filed with a Paragraph IV certification, the overwhelming majority are subject to litigation by the brand company, because bringing suit triggers a 30-month statutory delay of FDA approval of the ANDA. Because the major portion of our current business involves the development, approval and sale of generic versions of brand products, many with a Paragraph IV certification, 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 our generic products, which could have a material adverse effect on our business, financial condition, prospects and results of operations.

RESULTS OF OPERATIONS

Results of operations, including segment net revenues, segment gross margin and segment operating ~~income~~ (loss) income information for our Par Pharmaceutical ~~Generic~~generic ~~Products~~products segment and our ~~Strativa~~Par ~~Branded~~Specialty ~~Products~~branded products segment are detailed below. Additionally, we have prepared discussion and analysis of the combination of the periods (a) September 29, 2012 to December 31, 2012 (Successor), and (b) January 1, 2012 to September 28, 2012 (Predecessor), on a combined basis (labeled “Total”) for purposes of ~~comparison~~comparing ~~with~~ 2013 ~~and~~with ~~2011~~2012. WeSuch ~~believe~~combination ~~this~~was ~~approach~~performed ~~provides~~by ~~the~~mathematical ~~most~~addition ~~meaningful~~and ~~method~~does ofnot ~~comparison~~comply towith ~~the~~GAAP. The ~~other~~data ~~periods~~is being presented infor ~~this~~analytical ~~Annual~~purposes ~~Report on Form 10-K~~only.

~~Revenues~~Please note that our discussion of certain financial information for the year ended December 31, 2012 includes data from the “Predecessor” period, which covers the period preceding the Merger (~~2013~~January ~~compared~~1, 2012 to September 28, 2012) and data from the “Successor” period, which covers the period from September 29, 2012 to December 31, 2012, on a combined basis. Although this presentation of financial information on a combined basis does not comply with U.S. generally accepted accounting principles (“GAAP”), we believe it provides a reasonable method of comparison to the other periods presented in this Annual Report on Form 10-K. The data is being presented for analytical purposes only. Combined operating results (i) have not been prepared on a pro forma basis as if the Merger occurred on the first day of the period, (ii) may not reflect the actual results we would have achieved absent the Merger and (iii) may not be predictive of future results of operations.

~~Total~~Revenues ~~revenues of our top selling products were as follows~~ ($2014 ~~amounts~~compared into ~~thousands~~2013):

	For the Year Ended			For the Period				For the Year Ended
	December 31, 2013			September 29, 2012 to December 31, 2012		January 1, 2012 to September 28, 2012		December 31, 2012		$ Change
Product	(Successor)			(Successor)		(Predecessor)		(Total)
Par Pharmaceutical
Budesonide (Entocort® EC)	$	198,834		$	36,710	$	103,762	$	140,472	$	58,362
Propafenone (Rythmol SR®)	70,508			19,623		53,825		73,448		(2,940		)
Metoprolol succinate ER (Toprol-XL®)	56,670			31,287		154,216		185,503		(128,833		)
Lamotrigine (Lamictal XR®)	54,577			—		—		—		54,577
Divalproex (Depakote®)	46,635			2,436		9,099		11,535		35,100
Rizatriptan (Maxalt®)	45,598			—		—		—		45,598
Bupropion ER (Wellbutrin®)	45,403			11,255		34,952		46,207		(804		)
Chlorpheniramine/Hydrocodone (Tussionex®)	33,518			17,403		30,706		48,109		(14,591		)
Modafinil (Provigil®)	27,688			16,956		88,831		105,787		(78,099		)
Diltiazem (Cardizem® CD)	27,212			3,702		—		3,702		23,510
Other	390,346			79,789		249,383		329,172		61,174
Other product related revenues	31,429			8,151		18,586		26,737		4,692
Total Par Pharmaceutical Revenues	$	1,028,418		$	227,312	$	743,360	$	970,672	$	57,746
Strativa
Megace® ES	39,510			10,910		38,322		49,232		(9,722		)
Nascobal® Nasal Spray	26,864			7,138		17,571		24,709		2,155
Other	(910		)	130		130		260		(1,170		)
Other product related revenues	3,585			649		4,485		5,134		(1,549		)
Total Strativa Revenues	$	69,049		$	18,827	$	60,508	$	79,335	$	(10,286	)

Total revenues of our top selling products were as follows ($ in thousands):

	For the Years Ended December 31,
	For the Year Ended
	2013		2012							Percentage of Total Revenues
	December 31, 2014		December 31, 2013		$ Change
($ in thousands)	(Successor)		(Total)		$ Change			% Change		2013		2012
Product	(Successor)		(Successor)
Revenues:
Par Pharmaceutical
Par Pharmaceutical	$	1,028,418	$	970,672	$	57,746		5.9	%	93.7	%	92.4	%
Budesonide (Entocort® EC)	$	142,853	$	198,834	$	(55,981	)
Strativa	69,049		79,335		(10,286		)	(13.0	)%	6.3	%	7.6	%
Bupropion ER (Wellbutrin®)	84,467		45,403		39,064
Total revenues	$	1,097,467	$	1,050,007	$	47,460		4.5	%	100.0	%	100.0	%
Propafenone (Rythmol SR®)	75,966		70,508		5,458
Amlodipine/Valsartan (Exforge®)	60,784		—		60,784
Divalproex (Depakote®)	59,052		46,635		12,417
Metoprolol succinate ER (Toprol-XL®)	46,251		56,670		(10,419		)
Clonidine ER (Kapvay®)	45,134		13,008		32,126
Lamotrigine (Lamictal XR®)	40,673		54,577		(13,904		)
Aplisol®	35,228		—		35,228
Modafinil (Provigil®)	2,123		27,688		(25,565		)
Chlorpheniramine/Hydrocodone (Tussionex®)	26,899		33,518		(6,619		)
Other	594,751		450,148		144,603
Other product related revenues	26,950		31,429		(4,479		)
Total Par Pharmaceutical Revenues	$	1,241,131	$	1,028,418	$	212,713
Par Specialty
Nascobal® Nasal Spray	$	32,332	$	26,864	$	5,468
Megace® ES	31,653		39,510		(7,857		)
Other and other product related revenues	3,505		2,675		830
Total Par Specialty Revenues	$	67,490	$	69,049	$	(1,559	)

	For the Period					For the Year Ended
	For the Years Ended December 31,
	September 29, 2012 to		January 1, 2012 to			December 31,
	2014			2013								Percentage of Total Revenues
	December 31, 2012		September 28, 2012			2012
($ in thousands)	(Successor)			(Successor)			$ Change			% Change		2014		2013
($ in thousands)	(Successor)		(Predecessor)			TOTAL
Revenues:
Revenues:
Par Pharmaceutical	$	1,241,131		$	1,028,418		$	212,713		20.7	%	94.8	%	93.7	%
Par Pharmaceutical	$	227,312	$	743,360		$	970,672
Par Specialty	67,490			69,049			(1,559		)	(2.3	)%	5.2	%	6.3	%
Strativa	18,827		60,508			79,335
Total revenues	$	1,308,621		$	1,097,467		$	211,154		19.2	%	100.0	%	100.0	%
Total revenues	$	246,139	$	803,868		$	1,050,007

Par Pharmaceutical

The increase in generic segment revenues in the year ended December 31, 2014 was primarily due to the launches of several products in 2014, coupled with products that benefited from competitor supply issues, including the following:


•	the launch of amlodipine/valsartan in September 2014;


•	increase in bupropion ER, which benefited from competitors that were not able to supply product to the market;


•	the acquisition of Aplisol, which was acquired with Par Sterile in February 2014; and


•	the launch of clonidine HCl ER in the fourth quarter of 2013;


•	divalproex, which benefited from a competitor exiting the market in June 2013 as the result of FDA compliance issues and the non-recurrence of a large contractual gross-to-net price adjustment to a major customer that occurred in the prior year.; and

•

Increase in "Other", primarily driven by the acquisition of Par Sterile, excluding Aplisol as noted below, in February 2014; the launch of omega-3-acid ethyl esters oral capsules in July 2014; the launch of entecavir in September 2014; and oxycodone, which we sold beginning in September 2014 pursuant to a settlement agreement under which we receive a limited quantity of supply to sell once annually over a four year period ending in 2017.

The increases noted above for the year ended December 31, 2014 were tempered by:


•	decline in revenue for budesonide, as the result of competition, which had a negative impact on both price and volume;


•	decline in revenue for modafinil as the result of competition, which had a negative impact on both price and volume;


•	decrease in lamotrigine, which experienced a higher level of competition in 2014 as compared to 2013 when it launched; and


•	on-going competition on metoprolol succinate ER, which had a negative impact on price.

Net product sales of contract-manufactured products (which are manufactured for us by third parties under contract) and licensed products (which are licensed to us from third-party development partners and also are generally manufactured by third parties) comprised a significant percentage of our total net product revenues for 2014 and for 2013. The significance of the percentage of our net product revenues is primarily driven by the launches/acquisitions of products like entecavir, budesonide, divalproex, metoprolol succinate ER, clonidine HCI ER, and digoxin. We are substantially dependent upon contract-manufactured and licensed products for our overall sales, and any inability by our suppliers to meet demand could adversely affect our future sales.

Par Specialty

The decrease in the Par Specialty segment revenues in the year ended December 31, 2014 as compared to the same period of 2013 was primarily due to a net product sales decline of Megace^® ES primarily as a result of decreased volume. These decreases were tempered by revenue growth of Nascobal^® primarily due to increased volume.

Revenues (2013 compared to 2012)

Total revenues of our top selling products were as follows ($ in thousands):



	For the Year Ended		For the Period				For the Year Ended
	December 31, 2013		September 29, 2012 to December 31, 2012		January 1, 2012 to September 28, 2012		December 31, 2012		$ Change
	(Successor)		(Successor)		(Predecessor)		(Total) (non-GAAP)
Product
Par Pharmaceutical
Budesonide (Entocort® EC)	$	198,834	$	36,710	$	103,762	$	140,472	$	58,362
Propafenone (Rythmol SR®)	70,508		19,623		53,825		73,448		(2,940		)
Metoprolol succinate ER (Toprol-XL®)	56,670		31,287		154,216		185,503		(128,833		)
Lamotrigine (Lamictal XR®)	54,577		—		—		—		54,577
Divalproex (Depakote®)	46,635		2,436		9,099		11,535		35,100
Rizatriptan (Maxalt®)	45,598		—		—		—		45,598
Buproprion ER (Wellbutrin®)	45,403		11,255		34,952		46,207		(804		)
Chlorpheniramine/Hydrocodone (Tussionex®)	33,518		17,403		30,706		48,109		(14,591		)
Modafinil (Provigil®)	27,688		16,956		88,831		105,787		(78,099		)
Diltiazem (Cardizem® CD)	27,212		3,702		—		3,702		23,510
Other	390,346		79,789		249,383		329,172		61,174
Other product related revenues	31,429		8,151		18,586		26,737		4,692
Total Par Pharmaceutical Revenues	$	1,028,418	$	227,312	$	743,360	$	970,672	$	57,746

Par Specialty
Megace® ES	$	39,510	$	10,910	$	38,322	$	49,232	$	(9,722	)
Nascobal® Nasal Spray	26,864		7,138		17,571		24,709		2,155
Other product related revenues	2,675		779		4,615		5,394		(2,719		)
Total Par Specialty Revenues	$	69,049	$	18,827	$	60,508	$	79,335	$	(10,286	)



	For the Years Ended December 31,
	2013		2012							Percentage of Total Revenues
($ in thousands)	(Successor)		(Total) (non-GAAP)		$ Change			% Change		2013		2012 (non-GAAP)
Revenues:
Par Pharmaceutical	$	1,028,418	$	970,672	$	57,746		5.9	%	93.7	%	92.4	%
Par Specialty	69,049		79,335		(10,286		)	(13.0	)%	6.3	%	7.6	%
Total revenues	$	1,097,467	$	1,050,007	$	47,460		4.5	%	100.0	%	100.0	%



	For the Period				For the Year Ended
	September 29, 2012 to		January 1, 2012 to		December 31,
	December 31, 2012		September 28, 2012		2012
($ in thousands)	(Successor)		(Predecessor)		(Total) (non-GAAP)
Revenues:
Par Pharmaceutical	$	227,312	$	743,360	$	970,672
Par Specialty	18,827		60,508		79,335
Total revenues	$	246,139	$	803,868	$	1,050,007

Par Pharmaceutical

The increase in generic segment revenues in the year ended December 31, 2013 was primarily due to the products that benefited from competitor supply issues coupled with launches of several products in 2013, including the following:


•	Increase in budesonide revenues, which benefited from a competitor's supply issues.

• The launch of lamotrigine in January 2013 coupled with a competitor exiting the market in the second quarter of 2013 due to FDA compliance issues.;

• The launch of rizatriptan in January 2013.;

• The increase in divalproex revenues, which benefited from a competitor exiting the market in June 2013 as the result of FDA compliance issues.;

• A full year of revenues from products acquired from the Watson/Actavis Merger in November 2012, primarily diltiazem, fentanyl patch (included in "Other"), and morphine (included in "Other").; and

• The net increase in "Other" is mainly driven by the launches of fluvoxamine maleate ER in first quarter of 2013, fenofibric acid in the third quarter of 2013, and the fourth quarter launches of clonidine HCl ER and dexmethylphenidate.;

The increases noted above in 2013 were tempered by:

• The decrease in sale volume for modafinil, which launched in April 2012 and experienced high sale volume upon launch and subsequently experienced significant competition at the end of its exclusivity period, which had a negative impact on both price and volume.; and


•	On-going competition on all SKUs (packaging sizes) of metoprolol succinate ER, which had a negative impact on both price and volume.

Net sales of contract-manufactured products (which are manufactured for us by third parties under contract) and licensed products (which are licensed to us from third-party development partners and also are generally manufactured by third parties) comprised a significant percentage of our total product revenues for 2013 and for 2012. The significance of the percentage of our product revenues is primarily driven by the launches of products like rizatriptan, modafinil, budesonide and metoprolol succinate ER. We are substantially dependent upon contract-manufactured and licensed products for our overall sales, and any inability by our suppliers to meet demand could adversely affect our future sales.

~~Strativa~~Par Specialty

The decrease in the ~~Strativa~~Par Specialty segment revenues in the year ended December 31, 2013 as compared to the same period of 2012 was primarily due to a net product sales decline of Megace® ES primarily as a result of decreased volume and a decrease in royalties earned from milestone payments pertaining to an agreement with Optimer Pharmaceuticals (“Optimer”) related to fidaxomicin. The decreases were partially offset by the continued growth of Nascobal® due to better pricing.

46Gross Revenues to Total Revenues

Revenues (2012 compared to 2011)

Total revenues of our top selling products were as follows ($ amounts in thousands):

	For the Period				For the Year Ended
	September 29, 2012 to December 31, 2012		January 1, 2012 to September 28, 2012		December 31, 2012		December 31, 2011		$ Change
	(Successor)		(Predecessor)		(Total)		(Predecessor)
Product
Par Pharmaceutical
Metoprolol succinate ER (Toprol-XL®)	$	31,287	$	154,216	$	185,503	$	250,995	$	(65,492	)
Budesonide (Entocort® EC)	36,710		103,762		140,472		70,016		70,456
Modafinil (Provigil®)	16,956		88,831		105,787		—		105,787
Propafenone (Rythmol SR®)	19,623		53,825		73,448		69,835		3,613
Chlorpheniramine/Hydrocodone (Tussionex®)	17,403		30,706		48,109		39,481		8,628
Sumatriptan succinate injection (Imitrex®)	1,884		36,004		37,888		64,068		(26,180		)
Other	95,298		257,430		352,728		310,220		42,508
Other product related revenues	8,151		18,586		26,737		29,977		(3,240		)
Total Par Pharmaceutical Revenues	$	227,312	$	743,360	$	970,672	$	834,592	$	136,080
Strativa
Megace® ES	$	10,910	$	38,322	$	49,232	$	58,172	$	(8,940	)
Nascobal® Nasal Spray	7,138		17,571		24,709		21,399		3,310
Other branded	130		130		260		3,309		(3,049		)
Other product related revenues	649		4,485		5,134		8,666		(3,532		)
Total Strativa Revenues	$	18,827	$	60,508	$	79,335	$	91,546	$	(12,211	)

	For the Years Ended December 31,
	2012		2011							Percentage of Total Revenues
($ in thousands)	(Total)		(Predecessor)		$ Change			% Change		2012		2011
Revenues:
Par Pharmaceutical	$	970,672	$	834,592	$	136,080		16.3	%	92.4	%	90.1	%
Strativa	79,335		91,546		(12,211		)	(13.3	)%	7.6	%	9.9	%
Total revenues	$	1,050,007	$	926,138	$	123,869		13.4	%	100.0	%	100.0	%

Par Pharmaceutical

The increase in generic segment revenues in 2012 was primarily due to the launches of modafinil in April 2012, budesonide in June 2011, olanzapine and fentanyl citrate in October 2011 (both included in “Other” above), coupled with revenues from the products acquired in the Anchen Acquisition on November 17, 2011, primarily bupropion ER, zolpidem and divalproex ER (all included in “Other” above); and increased market share for chlorpheniramine/hydrocodone due to lower than expected competition. Also, 2012 generic segment revenues were increased by the products acquired from Watson and Actavis in connection with their merger, including morphine, diltiazem and fentanyl patch (included in “Other” above), which we began distributing in the fourth quarter of 2012.

The 2012 revenue increases above were tempered by:

• On-going competition on all SKUs of metoprolol succinate ER. We expect metoprolol revenues to continue to decline in the future as competition increases in this market;

• Revenues for amlodipine and benazepril HCl (included in “Other” above), which launched in January 2011, decreased by $29.5 million as competition increased in 2012;

• Revenues for sumatriptan decreased as our existing inventory was depleted. Our supply agreement with GlaxoSmithKline expired in November 2011 and we have not secured a new supply of this product;

• Revenues for dronabinol (included in “Other” above) decreased by $7.9 million as competition increased in 2012;

• Revenues for omeprazole (included in “Other” above) decreased by $7.1 million due to our withdrawal from this market in September 2012 following an unfavorable court decision;

• In April 2011, the manufacturer of clonidine decided to discontinue manufacturing clonidine and the product was voluntarily withdrawn from the distribution channel. Because of these events, Par did not market clonidine in 2012, which resulted in a decrease of revenue of $5.6 million (included in “Other” above); and

• Revenues for tramadol ER (included in “Other” above) decreased by $5.4 million as competition increased in 2012.

Net sales of contract-manufactured products (which are manufactured for us by third parties under contract) and licensed products (which are licensed to us from third-party development partners and also are generally manufactured by third parties) comprised a significant percentage of our total product revenues for 2012 and for 2011. The percentage increase of our product revenues in 2012 from 2011 was primarily driven by the launch of modafinil in April 2012 and increased revenues of budesonide, tempered by increased revenues for products acquired in the Anchen Acquisition, primarily bupropion ER, zolpidem and divalproex ER, and a reduction in metoprolol revenue. We are substantially dependent upon contract-manufactured and licensed products for our overall sales, and any inability by our suppliers to meet demand could adversely affect our future sales.

Strativa

The decrease in the Strativa segment revenues in 2012 was primarily due to a net sales decline of Megace® ES primarily as a result of decreased volume coupled with a decrease in average net selling price as compared to 2011 and a decrease in royalties earned from milestone payments pertaining to an agreement with Optimer related to fidaxomicin. The decreases were partially offset by the continued growth of Nascobal® in 2012 due to higher volume and better pricing.

Gross Revenues to Total Revenues Deductions

Generic drug pricing at the wholesale level can create significant differences between our invoice price and net selling price. Wholesale customers purchase product from us at invoice price, then resell the product to specific healthcare providers on the basis of prices negotiated between us and the providers. The difference between the wholesalers’ purchase price and the typically lower healthcare providers’ purchase price is refunded to the wholesalers through a chargeback credit. We record estimates for these chargebacks as well as sales returns, rebates and incentive programs, and the sales allowances for all our customers at the time of sale as deductions from gross revenues, with corresponding adjustments to our accounts receivable reserves and allowances.

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

We recognize revenue for product sales when title and risk of loss have transferred to our customers and when collectability is reasonably assured. This is generally at the time that products are received by the customers. Upon recognizing revenue from a sale, we record estimates for chargebacks, rebates and incentives, returns, cash discounts and other sales reserves that reduce accounts receivable.

4847

Our gross revenues for the ~~year~~years ended December 31, 2014 (Successor), December 31, 2013 (Successor), the periods from September 29, 2012 to December 31, 2012 (Successor), January 1, 2012 to September 28, 2012 (Predecessor) with the percentage of gross revenues on a combined basis (labeled “Total”) for purposes of comparison with ~~2013~~2014 and ~~2011~~2013 ~~and for the year ended December 31, 2011 (Predecessor)~~ before deductions for chargebacks, rebates and incentive programs (including rebates paid under federal and state government Medicaid drug reimbursement programs), sales returns and other sales allowances were as follows:

	For the Year Ended					For the ~~Period~~Year Ended						For the Period			~~For the Year Ended~~
	December 31, 2013			Percentage of Gross Revenues		September 29, 2012 to December 31, 2012			January 1, 2012 to September 28, 2012			Percentage of Gross Revenues			December 31, 2011			Percentage of Gross Revenues
	December 31, 2014			Percentage of Gross Revenues		December 31, 2013				Percentage of Gross Revenues		September 29, 2012 to December 31, 2012			January 1, 2012 to September 28, 2012			Percentage of Gross Revenues
($ thousands)	(Successor)					(Successor)			~~(Predecessor)~~			(~~Total~~Successor)			(Predecessor)			(Total) (non-GAAP)
Gross revenues	$	23,~~327~~064,~~023~~079				$	~~527~~2,~~734~~327,023		$	~~1,436,704~~		$	527,734		$	1,~~500~~436,~~876~~704
Chargebacks	(~~630~~868,~~097~~511		)	2728.13	%	(~~132~~630,~~834~~097		)	~~(309,411~~	27.1	)%	~~22.5~~(132,834	%	)	(~~261~~309,~~335~~411		)	1722.45	%
Rebates and incentive programs	(~~290~~480,~~275~~949		)	1215.57	%	(69290,~~749~~275		)	~~(147,171~~	12.5	)%	~~11.0~~(69,749	%	)	(~~121~~147,~~144~~171		)	811.10	%
Returns	(3731,~~956~~361		)	1.60	%	(837,~~522~~956		)	~~(23,191~~	1.6	)%	~~1.6~~(8,522	%	)	(3023,~~312~~191		)	21.06	%
Cash discounts and other	(~~194~~292,~~068~~602		)	89.35	%	(46194,~~053~~068		)	~~(103,527~~	8.3	)%	~~7.6~~(46,053	%	)	(~~106~~103,~~318~~527		)	7.16	%
Medicaid rebates and rebates due under other US Government pricing programs	(7782,~~160~~035		)	32.37	%	(2477,~~437~~160		)	~~(49,536~~	3.3	)%	~~3.8~~(24,437	%	)	(5549,~~629~~536		)	3.78	%
Total deductions	(1,~~229~~755,~~556~~458		)	5257.83	%	(~~281~~1,~~595~~229,556		)	~~(632,836~~	52.8	)%	~~46.5~~(281,595	%	)	(~~574~~632,~~738~~836		)	3846.35	%
Total revenues	$	1,~~097~~308,~~467~~621		4742.27	%	$	~~246~~1,~~139~~097,467		$	~~803,868~~47.2	%	~~53.5~~$	%246,139		$	~~926~~803,~~138~~868		6153.75	%

The total gross-to-net adjustments as a percentage of gross revenues increased for the year ended December 31, ~~2013~~2014 compared to the year ended December 31, ~~2012~~2013 ~~(Total)~~ primarily due to:

• Chargebacks: the increase was primarily driven by ~~the~~customer ~~impact~~mix ofas ~~higher~~a ~~sales~~result of ~~products~~shift ~~with~~in ~~higher~~business ~~discount~~from ~~rates,~~non-wholesalers ~~including~~to ~~buproprion~~wholesalers ERin ~~and~~addition ~~diltiazem~~to ~~coupled~~a ~~with~~decrease ~~higher~~in ~~chargeback~~price ~~rates~~ for modafinil ~~and~~(higher ~~other~~volume ~~products~~and ~~due~~rate), totempered ~~competitive~~by ~~factors~~impact ~~in each~~ of ~~the related markets and a~~ higher ~~percentage~~sales of ~~our~~products ~~sales~~with ~~were~~lower todiscount ~~wholesalers~~rates, inincluding ~~2013~~amlodipine/valsartan ~~which~~and ~~resulted~~entecavir inand ~~more chargebacks, tempered by the~~ favorable impact of ~~the~~ divalproex ~~discount~~and ~~rate~~bupropion inER ~~2013~~price increases.

• Rebates and incentive programs: the increase was primarily driven by higher ~~rebatable~~divalproex ~~sales~~(volume and rate), ~~primarily~~bupropion ~~divalproex~~ER (volume and ~~modafinil~~rate), ~~partially~~lamotrigine ~~offset~~(rate) byand ~~lower~~budesonide ~~sales~~(rate), coupled with the impact of ~~metoprolol~~various wholesaler and retailer alliances.

• Returns: the decrease in the rate was ~~flat~~primarily driven by the non-recurrence of an increase to the rizatriptan returns reserve in the prior year following additional competition, coupled with ~~2012~~lower than expected returns for other products, primarily dronabinol, fluvoxamine and Megace® ES.

• Cash discounts and other: the increase in ~~cash~~rate ~~discounts~~was primarily due to customer mix, including the impact of various wholesaler and ~~other~~retailer ~~was~~alliances ~~driven~~coupled bywith ~~price~~pricing adjustments asfor aproducts that had competitive changes in their respective markets, primarily bupropion (price protection as result of ~~customer~~price ~~mix~~increase effective in June 2014), ~~including~~lamotrigine, ~~the~~metoprolol, ~~higher~~and ~~percentage~~amlodipine/valsartan, partially offset by impact of ~~our~~prior ~~sales~~year price protection related to ~~wholesalers~~a indivalproex ~~2013~~and cholestyramine price increase.

• Medicaid rebates and rebates due under other U.S. Government pricing programs: decrease ~~was~~as ~~primarily~~a ~~due~~percentage ~~to lower Medicaid from the non-recurrence~~ of ~~accruals~~gross ~~for~~revenues ~~certain~~primarily ~~fees and managed care rebates~~ due to ~~lower~~a ~~sales~~reduction ofin ~~Megace®~~the ~~ES,~~Medicaid ~~tempered~~accrual bybased ~~higher~~upon ~~expense~~additional available information related to ~~Medicare~~Managed ~~Part-D~~Medicaid ~~“donut~~utilization ~~hole”~~in ~~rebates~~California, (acoupled ~~50%~~with ~~discount~~lower onamounts ~~cost~~due ~~for~~under certain ~~Medicare~~U.S. ~~Part~~Government Dand ~~beneficiaries~~state ~~for~~pricing ~~certain~~programs ~~drugs~~ (e.g., ~~budesonide~~TriCare and ~~modafinil~~Medicaid) ~~purchased~~due ~~during~~to ~~the~~lower ~~Part~~utilization Dof ~~Medicare~~our ~~coverage~~subject ~~gap)~~drugs in(e.g., ~~the~~modafinil, ~~2013~~Megace® asES, ~~compared~~Nascobal®, toand ~~the prior year~~rizatriptan).

Gross-to-net deductions are discussed in the “Critical Accounting Policies and Use of Estimates” section below.

Gross Margin (2014 compared to 2013)



	For the Years Ended December 31,
	2014		2013					Percentage of Total Revenues
($ in thousands)	(Successor)		(Successor)		$ Change			2014		2013
Gross margin:
Par Pharmaceutical	$	436,078	271,396		$	164,682		35.1	%	26.4	%
Par Specialty	43,037		46,647		(3,610		)	63.8	%	67.6	%
Total gross margin	$	479,115	$	318,043	$	161,072		36.6	%	29.0	%

The increase in Par Pharmaceutical gross margin dollars for the year ended December 31, 2014 as compared to the prior year period was primarily due to gross margin dollars from Par Sterile products, which were acquired in February 2014; coupled with the September 2014 launch of amlodipine/valsartan; bupropion ER which benefited from competitors that were not able to supply product to the market; and the full year impact of the fourth quarter of 2013 launch of clonidine HCl ER. These increases were tempered by the revenue and associated gross margin dollar decline of modafinil.

Par Specialty gross margin dollars decreased for the year ended December 31, 2014, primarily due to the revenue decline of Megace^® ES.

Gross Margin (2013 compared to 2012)

	For the Years Ended December 31,
	2013		2012					Percentage of Total Revenues
($ in thousands)	(Successor)		(Total) (non-GAAP)		$ Change			2013		2012 (non-GAAP)
Gross margin:
Par Pharmaceutical	$	271,396	330,114		$	(58,718	)	26.4	%	34.0	%
Strativa	46,647		57,681		(11,034		)	67.6	%	72.7	%
Par Specialty	46,647		57,681		(11,034		)	67.6	%	72.7	%
Total gross margin	$	318,043	$	387,795	$	(69,752	)	29.0	%	36.9	%



	For the Period				For the Year Ended
	September 29, 2012 to		January 1, 2012 to		December 31,
	December 31, 2012		September 28, 2012		2012
($ in thousands)	(Successor)		(Predecessor)		(Total) (non-GAAP)
Gross margin:
Par Pharmaceutical	$	33,776	$	296,338	$	330,114
Par Specialty	11,669		46,012		57,681
Total gross margin	$	45,445	$	342,350	$	387,795

The decrease in Par Pharmaceutical gross margin dollars for the year ended December 31, 2013 as compared to the prior year period was primarily due to increased amortization of intangible assets associated with the Merger (an increase of approximately $116 million for the Company) coupled with the revenue declines of modafinil and metoprolol tempered by the launches of lamotrigine and fluvoxamine maleate ER in the first quarter of 2013 and the increase in divalproex gross margin dollars, which benefited from a competitor exiting the market in June 2013.

Par Specialty gross margin dollars decreased for the year ended December 31, 2013, primarily due to increased amortization of intangible assets associated with the Merger coupled with the revenue decline of Megace^® ES.

	For the Period				For the Year Ended
	September 29, 2012 to		January 1, 2012 to		December 31,
	December 31, 2012		September 28, 2012		2012
($ in thousands)	(Successor)		(Predecessor)		TOTAL
Gross margin:
Par Pharmaceutical	$	33,776	$	296,338	$	330,114
Strativa	11,669		46,012		57,681
Total gross margin	$	45,445	$	342,350	$	387,795

Research and Development (2014 compared to 2013)

The decrease in Par Pharmaceutical gross margin dollars for the year ended December 31, 2013 as compared to the prior year period was primarily due to increased amortization of intangible assets associated with the Merger (an increase of approximately $116 million for the company) coupled with the revenue declines of modafinil and metoprolol tempered by the launches of lamotrigine and fluvoxamine maleate ER in the first quarter of 2013 and the increase in divalproex gross margin dollars, which benefited from a competitor exiting the market in June 2013.



	For the Years Ended December 31,
	2014		2013							Percentage of Total Revenues
($ in thousands)	(Successor)		(Successor)		$ Change			% Change		2014		2013
Research and development:
Par Pharmaceutical	$	118,205	$	99,177	$	19,028		19.2	%	9.5	%	9.6	%
Par Specialty	890		1,586		(696		)	(43.9	)%	1.3	%	2.3	%
Total research and development	$	119,095	$	100,763	$	18,332		18.2	%	9.1	%	9.2	%

~~Strativa~~Par ~~gross~~Pharmaceutical: ~~margin dollars decreased for the year ended December 31, 2013, primarily due to increased amortization of intangible assets associated with the Merger coupled with the revenue decline of Megace® ES.~~

~~Gross~~The ~~Margin~~net ~~(2012~~increase ~~compared~~in toPar ~~2011)~~Pharmaceutical research and development expense for the year ended December 31, 2014 was driven by:

	For the Years Ended December 31,
	2012		2011					Percentage of Total Revenues
($ in thousands)	(Total)		(Predecessor)		$ Change			2012		2011
Gross margin:
Par Pharmaceutical	330,114		$	320,313	$	9,801		34.0	%	38.4	%
Strativa	57,681		66,431		(8,750		)	72.7	%	72.6	%
Total gross margin	$	387,795	$	386,744	$	1,051		36.9	%	41.8	%


•	$8.9 million of higher employment related and other costs due to the Par Sterile Acquisition;

~~The~~• ~~increase~~$5.6 inmillion ~~Par~~increase ~~Pharmaceutical gross margin dollars for 2012 is primarily due to the launch of modafinil~~ in ~~April~~outside ~~2012~~development ~~coupled~~costs with launches of budesonide in June 2011, olanzapine in October 2011, and fentanyl citrate in October 2011, together with the operating results from the products acquired in the Anchen Acquisition during the fourth quarter of 2011, primarily ~~bupropion~~driven ERby ~~and~~payment ~~zolpidem~~related ~~and~~to ~~the~~one ~~positive~~new ~~impact~~agreement ofpartially ~~the~~offset ~~products acquired from Watson and Actavis in connection with their merger in the fourth quarter of 2012, primarily morphine. These increases were tempered~~ by lower ~~sumatriptan~~payments ~~revenues~~for ~~and gross margins as~~ existing ~~inventory~~development was depleted during 2012 and amlodipine and benazepril HCI due to competition coupled with increased amortization of intangible assets associated with the Anchen Acquisition in 2011 and the Merger (approximately $59 million) and certain inventory write-offs in 2012 (approximately $13 million). agreements;

~~Strativa~~• ~~gross~~$2.5 ~~margin~~million ~~dollars decreased for 2012, primarily due to a net sales decline~~ of ~~Megace®~~higher ESexpense asfor ~~compared~~consulting ~~to 2011~~ and aadvisory ~~decrease~~services ~~in royalties earned from milestone payments pertaining to an agreement with Optimer~~ related to ~~fidaxomicin. These decreases were tempered by~~ the ~~increase~~Par inSterile ~~gross~~Acquisition; ~~margin associated with Nascobal® Nasal Spray due to higher volume~~ and ~~better pricing.~~


•	$2.3 million in incremental user fees due to 30 ANDA filings; tempered by


•	$2.6 million decrease in biostudy, clinical trial and material costs related to ongoing internal development of generic products.

Par Specialty:

Par Specialty research and development principally reflects FDA filing fees for the year ended December 31, 2014 and December 31, 2013.

Research and Development (2013 compared to 2012)

	For the Years Ended December 31,
	2013		2012							Percentage of Total Revenues
($ in thousands)	(Successor)		(Total) (non-GAAP)		$ Change			% Change		2013		2012 (non-GAAP)
Research and development:
Par Pharmaceutical	$	99,177	$	84,353	$	14,824		17.6	%	9.6	%	8.7	%
Strativa	1,586		1,636		(50		)	(3.1	)%	2.3	%	2.1	%
Par Specialty	1,586		1,636		(50		)	(3.1	)%	2.3	%	2.1	%
Total research and development	$	100,763	$	85,989	$	14,774		17.2	%	9.2	%	8.2	%



	For the Period				For the Year Ended
	September 29, 2012 to		January 1, 2012 to		December 31,
	December 31, 2012		September 28, 2012		2012
($ in thousands)	(Successor)		(Predecessor)		(Total) (non-GAAP)
Research and development:
Par Pharmaceutical	$	19,242	$	65,111	$	84,353
Par Specialty	141		1,495		1,636
Total research and development	$	19,383	$	66,606	$	85,989

	For the Period				For the Year Ended
	September 29, 2012 to		January 1, 2012 to		December 31,
	December 31, 2012		September 28, 2012		2012
($ in thousands)	(Successor)		(Predecessor)		TOTAL
Research and development:
Par Pharmaceutical	$	19,242	$	65,111	$	84,353
Strativa	141		1,495		1,636
Total research and development	$	19,383	$	66,606	$	85,989

Par Pharmaceutical:

The increase in Par Pharmaceutical research and development expense for the year ended December 31, 2013 was driven by: a $15.4 million increase in biostudy, clinical trial and material costs related to ongoing internal development of generic products.

•Par ~~a $15.4 million increase in biostudy, clinical trial and material costs related to ongoing internal development of generic products.~~Specialty:

~~Strativa:~~Par Specialty research and development principally reflects FDA filing fees for the year ended December 31, 2013 and December 31, 2012.

~~Strativa research and development principally reflects FDA filing fees for the year ended December 31, 2013 and December 31, 2012.~~50

~~Research~~Selling, General and ~~Development~~Administrative (~~2012~~2014 compared to ~~2011~~2013)

	For the Years Ended December 31,
	2012		2011							Percentage of Total Revenues
	2014		2013							Percentage of Total Revenues
($ in thousands)	(~~Total~~Successor)		(~~Predecessor~~Successor)		$ Change			% Change		~~2012~~2014		~~2011~~2013
Research and development:
Selling, general and administrative:
Par Pharmaceutical	$	84134,~~353~~393	$	44114,~~712~~383	$	3920,~~641~~010		8817.75	%	810.78	%	511.41	%
Strativa	1,636		1,826		(190		)	(10.4	)%	2.1	%	2.0	%
Par Specialty	46,743		40,781		5,962			14.6	%	69.3	%	59.1	%
Total research and development	$	85,989	$	46,538	$	39,451		84.8	%	8.2	%	5.0	%
Total selling, general and administrative	$	181,136	$	155,164	$	25,972		16.7	%	13.8	%	14.1	%

~~Par~~The ~~Pharmaceutical:~~net increase in selling, general and administrative expenditures for the year ended December 31, 2014 principally reflects:

~~The~~• ~~net~~$12.0 ~~increase~~million inof ~~Par~~higher ~~research~~employment ~~and~~related ~~development~~costs ~~expense~~due ~~for~~to ~~the~~Par ~~year~~Sterile ~~ended December 31~~Acquisition, ~~2012~~combined ~~was~~with ~~driven~~higher ~~by:~~accrued bonus;

• a $148.70 million of ~~incremental~~higher ~~employment-related~~expense ~~costs~~for ~~primarily~~consulting ~~resulting~~and ~~from~~advisory ~~the~~services ~~November~~related ~~17,~~to ~~2011~~acquisitions ~~Anchen Acquisition~~ and ~~the~~other ~~February~~business ~~17,~~development ~~2012 Edict Acquisition~~activities;

• a $116.6 million ~~increase~~of inexpense ~~outside~~related ~~development~~to ~~costs~~additional ~~driven~~borrowings byand anrepricing ~~upfront~~of ~~payment~~our ~~for~~Term anLoan ~~exclusive~~Facility ~~acquisition~~plus ~~and~~associated ~~license~~transaction ~~agreement~~fees ~~coupled~~of ~~with~~$0.5 ~~milestone payments under existing product development agreements~~million; and

• a $104.20 million increase in ~~biostudy,~~direct ~~clinical~~Par ~~trial~~Specialty selling and ~~materials~~marketing costs ~~related~~driven toby ~~ongoing~~Nascobal; ~~internal~~tempered ~~development of generic products;~~by

• a $25.81 million inof ~~incremental~~lower ~~drug~~legal ~~registry~~expenses ~~fees~~primarily ~~and user fees~~ due to ~~new~~decreased ~~generic~~corporate ~~drug~~ related ~~legislation effective in the fourth quarter of 2012~~activities.

Strativa:

The decrease in Strativa research and development principally reflects lower FDA filing fees for the year ended December 31, 2012 as compared to the year ended December 31, 2011.

Selling, General and Administrative (2013 compared to 2012)

	For the Years Ended December 31,
	2013		2012							Percentage of Total Revenues
($ in thousands)	(Successor)		(Total) (non-GAAP)		$ Change			% Change		2013		2012 (non-GAAP)
Selling, general and administrative:
Par Pharmaceutical	$	94114,~~377~~383	$	140,213	$	(4525,~~836~~830	)	(3218.74	)%	911.21	%	14.4	%
Strativa	60,787		70,916		(10,129		)	(14.3	)%	88.0	%	89.4	%
Par Specialty	40,781		70,916		(30,135		)	(42.5	)%	59.1	%	89.4	%
Total selling, general and administrative	$	155,164	$	211,129	$	(55,965	)	(26.5	)%	14.1	%	20.1	%



For the Period		For the Year Ended
September 29, 2012 to	January 1, 2012 to	December 31,
December 31, 2012	September 28, 2012

Filing Compare · PAR PHARMACEUTICAL COMPANIES, INC.