10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

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

For quarterly period ended March 31, 2006 or

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

For the transition period from                      to                     

Commission file number 1-9860

BARR PHARMACEUTICALS, INC.

(Exact name of Registrant as specified in its charter)

Delaware	42-1612474
(State or Other Jurisdiction of	(I.R.S. — Employer
Incorporation or Organization)	Identification No.)

400 Chestnut Ridge Road, Woodcliff Lake, New Jersey 07677-7668
(Address of principal executive offices)

201-930-3300
(Registrant’s telephone number)

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (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 þ No o

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

Large accelerated filer þ Accelerated filer o Non-accelerated filer o

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

As of April 14, 2006 the registrant had 106,168,772 shares of $0.01 par value common stock outstanding.

BARR PHARMACEUTICALS, INC.

INDEX TO FORM 10-Q

		Page
		Number
Part I	Financial Information
Item 1.	Consolidated Financial Statements
	Consolidated Balance Sheets (unaudited) as of March 31, 2006 and June 30, 2005		3
	Consolidated Statements of Operations (unaudited) for the three months and nine months ended March 31, 2006 and 2005		4
	Consolidated Statements of Cash Flows (unaudited) for the nine months ended March 31, 2006 and 2005		5
	Notes to Consolidated Financial Statements (unaudited)		6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		19
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		27
Item 4.	Controls and Procedures		27
Part II	Other Information
Item 1.	Legal Proceedings		28
Item 6.	Exhibits		28
	Signatures		29
EX-10.1: EMPLOYMENT CONTRACT
EX-31.1: CERTIFICATION
EX-31.2: CERTIFICATION
EX-32: CERTIFICATION

2

Part 1. FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements

Barr Pharmaceuticals, Inc. and Subsidiaries
Consolidated Balance Sheets
(in thousands, except share amounts)
(unaudited)

	March 31,			June 30,
	2006			2005
Assets
Current assets:
Cash and cash equivalents	$	14,726		$	115,793
Marketable securities		577,499			527,462
Accounts receivable, net of reserves of $138,565 and $150,000, at
March 31, 2006 and June 30, 2005, respectively		188,052			152,599
Other receivables		36,474			21,411
Inventories, net		139,353			137,638
Deferred income taxes		25,759			30,224
Prepaid expenses and other current assets		12,803			8,229
Total current assets		994,666			993,356
Property, plant and equipment, net of accumulated depreciation of $154,433
and $129,617, at March 31, 2006 and June 30, 2005, respectively		274,444			249,485
Deferred income taxes		37,485			60,504
Marketable securities		20,585			53,793
Other intangible assets		425,905			98,343
Goodwill		47,929			17,998
Other assets		10,626			9,367
Total assets	$	1,811,640		$	1,482,846
Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable	$	40,558		$	49,743
Accrued liabilities		109,251			144,428
Current portion of long-term debt and capital lease obligations		5,136			5,446
Income taxes payable		13,039			13,353
Total current liabilities		167,984			212,970
Long-term debt and captial lease obligations		11,480			15,493
Other liabilities		33,132			20,413
Commitments & Contingencies
Shareholders’ equity:
Preferred stock, $1 par value per share; authorized 2,000,000; none issued		—			—
Common stock, $.01 par value per share; authorized 200,000,000; issued 109,135,216 and 106,340,470, at March 31, 2006 and June 30, 2005, respectively		1,091			1,063
Additional paid-in capital		565,209			454,489
Retained earnings		1,133,892			879,669
Accumulated other comprehensive loss		(458	)		(561	)
		1,699,734			1,334,660
Treasury stock at cost: 2,972,997 shares, at
March 31, 2006 and June 30, 2005		(100,690	)		(100,690	)
Total shareholders’ equity		1,599,044			1,233,970
Total liabilities and shareholders’ equity	$	1,811,640		$	1,482,846

SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

3

Barr Pharmaceuticals, Inc. and Subsidiaries
Consolidated Statements of Operations
(in thousands, except per share amounts)
(unaudited)

	Three Months Ended March 31,					Nine Months Ended March 31,
	2006		2005			2006		2005
Revenues:
Product sales	$	293,157	$	261,258		$	849,336	$	760,050
Alliance, development and other revenue		33,684		3,749			113,461		6,834
Total revenues		326,841		265,007			962,797		766,884
Costs and expenses:
Cost of sales		89,642		77,653			253,436		225,350
Selling, general and administrative		87,079		59,124			221,765		181,839
Research and development		37,705		35,488			103,711		95,139
Earnings from operations		112,415		92,742			383,885		264,556
Interest income		4,213		2,825			13,117		7,219
Interest expense		110		287			257		1,351
Other income (expense)		1,071		(260	)		478		(409	)
Earnings before income taxes		117,589		95,020			397,223		270,015
Income tax expense		41,493		33,675			143,000		97,148
Net earnings	$	76,096	$	61,345		$	254,223	$	172,867
Earnings per common share — basic	$	0.72	$	0.60		$	2.43	$	1.68
Earnings per common share — diluted	$	0.70	$	0.58		$	2.36	$	1.63
Weighted average shares		105,924		102,717			104,779		103,180
Weighted average shares — diluted		108,547		105,892			107,607		105,962

SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

4

Barr Pharmaceuticals, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
For the Nine Months Ended March 31, 2006 and 2005
(in thousands of dollars)
(unaudited)

	2006			2005
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings	$	254,223		$	172,867
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization		43,469			32,761
Stock-based compensation expense		20,827			—
Deferred income tax expense		27,425			—
Other		(915	)		(327	)
Tax benefit of stock incentive plans		—			33,516
Changes in assets and liabilities (net of business acquired):
(Increase) decrease in:
Accounts receivable and other receivables, net		(41,375	)		34,145
Inventories		19,511			5,757
Prepaid expenses		(3,030	)		3,642
Other assets		(62	)		6,560
Increase (decrease) in:
Accounts payable, accrued liabilities and other liabilities		(59,958	)		(50,429	)
Income taxes payable		(314	)		18,417
Net cash provided by operating activities		259,801			256,909
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment		(49,684	)		(42,863	)
Buy-out of product royalty		—			(19,250	)
Purchases of marketable securities		(1,601,541	)		(871,227	)
Sales of marketable securities		1,587,071			803,480
Acquisitions, net of cash acquired		(378,440	)		(27,250	)
Investment in venture funds and other		(3,096	)		(6,990	)
Net cash used in investing activities		(445,690	)		(164,100	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on long-term debt and capital leases		(5,098	)		(19,712	)
Purchase of treasury stock		—			(99,982	)
Tax benefit of stock incentives		26,983			—
Proceeds from exercise of stock options and employee stock purchases		62,937			13,098
Net cash provided by (used in) financing activities		84,822			(106,596	)
Decrease in cash and cash equivalents		(101,067	)		(13,787	)
Cash and cash equivalents at beginning of period		115,793			28,508
Cash and cash equivalents at end of period	$	14,726		$	14,721

SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

5

BARR PHARMACEUTICALS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of dollars, except per share amounts)
(unaudited)

1. Basis of Presentation

     The accompanying unaudited interim financial statements included in this Form 10-Q should be read in conjunction with the consolidated financial statements of Barr Pharmaceuticals, Inc. and its subsidiaries (the “Company”) and accompanying notes that are included in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2005.

     In management’s opinion, the unaudited financial statements reflect all adjustments (including those that are normal and recurring) that are necessary in the judgment of management for a fair presentation of such statements in conformity with accounting principles generally accepted in the United States (“GAAP”). In preparing financial statements in conformity with GAAP, the Company must make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses, and related disclosures at the date of the financial statements and during the reporting period. Actual results could differ from those estimates. Certain amounts in the consolidated statement of cash flows for the nine months ended March 31, 2005 have been reclassified to conform to the Company’s consolidated statement of cash flows for the nine months ended March 31, 2006. This reclassification has not had any effect on the Company’s consolidated statement of operations.

2. Recent Accounting Pronouncements

     In November 2005, the Financial Accounting Standards Board issued FASB Staff Position (FSP) FASB 115-1 and FASB 124-1, “The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments.” This FSP provides guidance on determining if an investment is considered to be impaired, if the impairment is other-than-temporary, and the measurement of an impairment loss. It also includes accounting considerations subsequent to the recognition of an other-than-temporary impairment and requires certain disclosures about unrealized losses that have not been recognized as other-than-temporary impairments. The guidance in this FSP amends Statement of Financial Accounting Standards (SFAS) No. 115, “Accounting for Certain Investments in Debt and Equity Securities” and is effective for reporting periods beginning after December 15, 2005. The adoption of this FSP has not had a material impact on the Company’s consolidated financial statements.

3. Stock-Based Compensation

     The Company adopted SFAS No. 123 (revised 2004), “Share-Based Payment” (SFAS 123R), effective July 1, 2005. SFAS 123R requires the recognition of the fair value of stock-based compensation in net earnings. The Company has three stock-based employee compensation plans, two stock-based non-employee director compensation plans and an employee stock purchase plan. Stock-based compensation consists of stock options, stock appreciation rights and the employee stock purchase plan. Stock options and stock appreciation rights are granted to employees at exercise prices equal to the fair market value of the Company’s stock at the dates of grant. Generally, stock options and stock appreciation rights granted to employees fully vest three years from the grant date and have a term of 10 years. Stock options granted to directors are generally exercisable on the date of the first annual shareholders’ meeting immediately following the date of grant. The Company recognizes stock-based compensation expense over the requisite service period of the individual grants, which generally equals the vesting period.

     Prior to July 1, 2005, the Company accounted for these plans under the intrinsic value method described in Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees,” and related Interpretations. The Company, applying the intrinsic value method, did not record stock-based compensation cost in net earnings because the exercise price of its stock options equaled the market price of the underlying stock on the date of grant. The Company has elected to utilize the modified prospective transition method for adopting SFAS 123R. Under this method, the provisions of SFAS 123R apply to all awards granted or modified after the

6

date of adoption. In addition, the unrecognized expense of awards not yet vested at the date of adoption, determined under the original provisions of SFAS 123, shall be recognized in net earnings in the periods after the date of adoption. The Company recognized stock-based compensation expense for the three and nine months ended March 31, 2006 in the amount of $6,933 and $20,827 respectively. The Company also recorded related tax benefits for the three and nine months ended March 31, 2006 in the amount of $2,254 and $5,637, respectively.

     SFAS 123R requires the Company to present pro forma information for periods prior to the adoption as if it had accounted for all stock-based compensation under the fair value method of that statement. For purposes of pro forma disclosure, the estimated fair value of the awards at the date of grant is amortized to expense over the requisite service period, which generally equals the vesting period. The following table illustrates the effect on net earnings and earnings per share as if the Company had applied the fair value recognition provisions of SFAS 123R to its stock-based employee compensation for the periods indicated.

	Three Months Ended		Nine Months Ended
	March 31, 2005		March 31, 2005
Net earnings, as reported	$	61,345	$	172,867
Deduct:
Total stock-based employee compensation expense determined under fair value based methods for all awards, net of related tax effects		4,331		15,940
Pro forma net earnings	$	57,014	$	156,927
Earnings per share:
Basic — as reported	$	0.60	$	1.68
Basic — pro forma	$	0.56	$	1.52
Diluted — as reported	$	0.58	$	1.63
Diluted — pro forma	$	0.54	$	1.48

     For all of the Company’s stock-based compensation plans, the fair value of each grant was estimated at the date of grant using the Black-Scholes option-pricing model. Black-Scholes utilizes assumptions related to volatility, the risk-free interest rate, the dividend yield (which is assumed to be zero, as the Company has not paid any cash dividends) and employee exercise behavior. Expected volatilities utilized in the model are based mainly on the historical volatility of the Company’s stock price and other factors. The risk-free interest rate is derived from the U.S. Treasury yield curve in effect in the period of grant. The model incorporates exercise and post-vesting forfeiture assumptions based on an analysis of historical data. The expected life of the fiscal 2006 grants is derived from historical and other factors.

     The weighted-average fair value of the awards granted in the three and nine months ended March 31, 2006 was $26.21 and $18.55 per right, respectively, determined using the following assumptions:

7

	3 Months			9 Months
Average expected term (years)		5.0			5.0
Risk-free interest rate		4.35	%		3.75	%
Dividend yield		0.00	%		0.00	%
Expected volatility		36.85	%		36.85	%

     As of March 31, 2006, the aggregate intrinsic value of awards outstanding and exercisable was $215,411 and $158,166, respectively. In addition, the aggregate intrinsic value of awards exercised during the three and nine months ended March 31, 2006 was $30,873 and $98,089, respectively. The total remaining unrecognized compensation cost related to unvested awards amounted to $34,913. Unrecognized compensation costs related to the employee stock purchase plan amounted to $301 at March 31, 2006. The weighted average remaining requisite service period of the unvested awards was 24 months. The total fair value of awards vested during the three and nine months ended March 31, 2006 was $3,807 and $24,708, respectively.

4. Acquisitions and Business Combinations

     FEI Acquisition

     On November 9, 2005, the Company completed the acquisition of all of the outstanding equity interests of FEI Women’s Health, LLC (“FEI”). FEI is the owner of ParaGard^® T 380A (Intrauterine Copper Contraceptive) IUD, which is approved for continuous use for the prevention of pregnancy for up to 10 years. With this transaction the Company expanded its commitment of contraception beyond oral contraceptive products into a new arena and further strengthened its commitment to leadership in female healthcare by offering enhanced contraceptive options.

     In accordance with SFAS No. 141, “Business Combinations”, the Company used the purchase method to account for this transaction. Under the purchase method of accounting, the assets acquired and liabilities assumed from FEI are recorded at the date of acquisition, at their respective fair values. In connection with the acquisition the Company engaged a valuation firm to assist management in its determination of the fair value of certain assets and liabilities of FEI. The purchase price plus acquisition costs exceeded the fair values of acquired assets and assumed liabilities. This resulted in the recognition of goodwill in the amount of $29,619. The total purchase price, including acquisition costs of $4,810 less cash acquired of $4,372, was $289,428. The consolidated financial statements issued after completion of the acquisition reflect these values, but are not restated retroactively to reflect the historical financial position or results of operations of FEI. The operating results of FEI are included in the consolidated financial statements subsequent to the November 9, 2005 acquisition date.

     The preliminary fair values of the assets acquired and liabilities assumed on November 9, 2005 were as follows:

8

Current assets (excluding cash)	$	30,876
Property and equipment		1,955
Intangible assets		256,000
Goodwill		29,619
Other assets		4,677
Total assets acquired	$	323,127
Current liabilities		10,780
Other liabilities		22,919
Total liabilities assumed		33,699
Net assets acquired	$	289,428
Cash paid net of cash acquired	$	289,428

     The purchase price has been allocated based on an estimate of the fair value of assets acquired and liabilities assumed as of the date of acquisition. The final valuation of net assets is expected to be completed no later than one year from the acquisition date in accordance with GAAP. To the extent that the estimates need to be adjusted, the Company will do so.

     In accordance with the requirements of SFAS No. 142, “Goodwill and Other Intangible Assets", the goodwill associated with the acquisition will not be amortized. The intangible asset has a 20-year life and will be amortized over that period. Goodwill and the intangible asset resulting from this acquisition have been allocated to our proprietary reporting unit.

     The following unaudited pro forma financial information presents the combined results of operations of the Company and FEI as if the acquisition had occurred as of the beginning of the periods presented. The unaudited pro forma financial information is not necessarily indicative of what our consolidated results of operations actually would have been had we completed the acquisition at the dates indicated. In addition, the unaudited pro forma financial information does not purport to project the future results of operations of the combined company.

9

Barr Pharmaceuticals, Inc. and Subsidiaries
Pro Forma Condensed Combined Consolidated Statements of Operations
(in thousands, except per share amounts)
(unaudited)

	Three Months Ended			Nine Months Ended
	March 31,			March 31,
	2005			2006			2005
Revenues	$	277,122		$	985,935		$	804,362
Earnings from operations		87,937	(1)		391,365	(2)		247,744	(3)
Net earnings		57,375	(1)		250,470	(2)		159,830	(3)
Earnings per common share — basic	$	0.56		$	2.39		$	1.55
Earnings per common share — diluted	$	0.54		$	2.33		$	1.51
Weighted average shares		102,717			104,779			103,180
Weighted average shares — diluted		105,892			107,607			105,962

The unaudited pro forma financial information above reflects the following:

(1)	This amount includes amortization of $1,386 for the intangible asset that was acquired, an add back of $507 for interest expense paid before the acquisition, a charge for the amount of the step-up in inventory to fair value of $7,778, and a charge for reduced interest income of $1,348 relating to the reduction of available funds to be invested due to the acquisition.
(2)	This amount includes amortization of $4,274 for the intangible asset that was acquired, an add back of $671 for interest expense paid before the acquisition, a charge for the amount of the step-up in inventory to fair value of $20,741, and a charge for reduced interest income of $2,379 relating to the reduction of available funds to be invested due to the acquisition.
(3)	This amount includes amortization of $4,158 for the intangible asset that was acquired, an add back of $2,162 for interest expense paid before the acquisition, a charge for the amount of the step-up in inventory to fair value of $23,333 and a charge for reduced interest income of $3,562 relating to the reduction of available funds to be invested due to the acquisition.

     Mircette^® Acquisition

     On June 15, 2005, the Company entered into a non-binding Letter of Intent with Organon (Ireland) Ltd., Organon USA Inc. (“Organon”) and Savient Pharmaceuticals, Inc. (“Savient”) to acquire the New Drug Application (“NDA”) for Mircette^®, obtain a royalty-free patent license to promote Mircette in the United States and dismiss all pending litigation between the parties in exchange for a payment by the Company of $152,800. At the time of the signing of the Letter of Intent, because the proposed transaction included, as one of its components, a payment in settlement of litigation, it was presumed under GAAP to give rise to a “probable loss,” as defined in

10

SFAS No. 5, “Accounting for Contingencies”. In consultation with outside advisors and based on preliminary valuations of the assets the Company would acquire if the transaction closed on the terms then contemplated, the Company recorded a charge of $63,238 as of June 30, 2005 to reflect the proposed litigation settlement.

     On December 2, 2005, the Company and Organon finalized an agreement that gave the Company exclusive rights for Organon’s Mircette product. The agreement also terminated the ongoing patent litigation regarding the Company’s generic version of Mircette, which is marketed under the trade name Kariva^®. The agreement called for the Company to pay Organon $139,000 and Savient $13,750. Based on final valuations of the asset, the Company has recorded an intangible asset in the amount of $88,700 and recorded an additional charge of $813 for the difference between amounts recorded as a probable loss at June 30, 2005 and the final loss amount. The Company also incurred approximately $1,800 of additional legal and accounting costs related to the transaction during the first half of fiscal 2006. Additionally, the Company was reimbursed $11,000 from a third party for partial reimbursement of the Company’s recorded charge on this transaction. This reimbursement is reflected as a reduction of selling, general and administrative expenses.

5. Inventories, net

Inventories consist of the following:

	March 31,		June 30,
	2006		2005
Raw materials and supplies	$	74,333	$	79,120
Work-in-process		27,752		16,405
Finished goods		37,268		42,113
Total	$	139,353	$	137,638

     Inventories are presented net of reserves of $25,700 and $13,415 at March 31, 2006 and June 30, 2005, respectively. The work-in-process and finished goods amounts include inventory acquired in the FEI transaction that is stated at fair value. The amount included in these line items related to the acquired inventory was $8,882 as of March 31, 2006, including $8,289 for the step-up to fair value. Based on units sold from the closing date through March 31, 2006, the Company charged cost of sales for $12,452 of the initial $20,741 step-up adjustment.

6. Goodwill and Other Intangible Assets

     As a result of the FEI acquisition during the second quarter of fiscal 2006, the Company had recorded goodwill in the amount of $29,619. Additional transaction costs relating to employee severance were incurred during the three months ended March 31, 2006. Goodwill associated with the acquisition reflects these additional costs and is now stated at $29,931. Total goodwill at March 31, 2006 was $47,929.

     Intangible assets, excluding goodwill, which are comprised primarily of product licenses and product rights and related intangibles, consist of the following:

	March 31,			June 30,
	2006			2005
Product licenses	$	45,600		$	45,600
Product rights and related intangibles		415,496			70,796
		461,096			116,396
Less: accumulated amortization		(35,191	)		(18,053	)
Other intangible assets, net	$	425,905		$	98,343

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     Amortization expense for the three and nine months ended March 31, 2006 was $8,865 and $17,137. These amounts were recorded as selling, general and administrative expenses.

     Estimated amortization expense on product licenses and product rights and related intangibles for the years ending June 30, 2006 through 2010 is as follows:

2006	$	25,773
2007	$	34,133
2008	$	32,240
2009	$	24,082
2010	$	22,431

     The Company’s product licenses and product rights and related intangibles have weighted-average useful lives of approximately 10 and 18 years, respectively.

7. Segment Reporting

     The Company operates in two reportable business segments: Generic Pharmaceuticals and Proprietary Pharmaceuticals. Product sales and gross profit information for the Company’s operating segments consist of the following:

	Three Months Ended March 31,										Nine Months Ended March 31,
	2006					2005					2006					2005
			% of					% of					% of					% of
	$’s		sales			$’s		sales			$’s		sales			$’s		sales
Product sales:
Generic	$	200,370		68	%	$	189,418		73	%	$	616,632		73	%	$	561,276		74	%
Proprietary		92,787		32	%		71,840		27	%		232,704		27	%		198,774		26	%
Total product sales	$	293,157		100	%	$	261,258		100	%	$	849,336		100	%	$	760,050		100	%

			Margin					Margin					Margin					Margin
	$’s		%			$’s		%			$’s		%			$’s		%
Gross profit:
Generic	$	129,443		65	%	$	121,996		64	%	$	407,457		66	%	$	364,203		65	%
Proprietary		74,072		80	%		61,609		86	%		188,443		81	%		170,497		86	%
Total gross profit	$	203,515		69	%	$	183,605		70	%	$	595,900		70	%	$	534,700		70	%

8. Earnings Per Share

     The following is a reconciliation of the numerators and denominators used to calculate earnings per share (“EPS”) in the consolidated statements of operations:

12

	Three Months Ended				Nine Months Ended
	March 31,				March 31,
	2006		2005		2006		2005
Earnings per common share — basic:
Net earnings (numerator)	$	76,096	$	61,345	$	254,223	$	172,867
Weighted average shares (denominator)		105,924		102,717		104,779		103,180
Earnings per common share-basic	$	0.72	$	0.60	$	2.43	$	1.68
Earnings per common share — diluted:
Net earnings (numerator)	$	76,096	$	61,345	$	254,223	$	172,867
Weighted average shares		105,924		102,717		104,779		103,180
Effect of dilutive options and warrants		2,623		3,175		2,828		2,782
Weighted average shares — diluted (denominator)		108,547		105,892		107,607		105,962
Earnings per common share-diluted	$	0.70	$	0.58	$	2.36	$	1.63

	2006		2005		2006		2005
Not included in the calculation of diluted earnings per share because their impact is antidilutive:
Stock options outstanding		22		76		41		1,749

9. Comprehensive Income

     Comprehensive income is defined as the total change in shareholders’ equity during the period other than from transactions with shareholders. For the Company, comprehensive income is comprised of net earnings and the net changes in unrealized gains and losses on securities classified for SFAS No. 115 purposes as “available for sale.” Total comprehensive income for the three months ended March 31, 2006 and 2005 was $76,293 and $60,959, respectively, and for the nine months ended March 31, 2006 and 2005 was $254,326 and $171,676, respectively.

10. Commitments and Contingencies

Product Liability Insurance

     The Company uses a combination of self-insurance and traditional third-party insurance policies to cover product liability claims.

     The Company maintains third-party insurance that provides coverage, subject to specified co-insurance requirements, for the cost of product liability claims arising during the current policy period, which began on October 1, 2005 and ends on September 30, 2006, between an aggregate amount of $25,000 and $75,000. The Company is self-insured for up to the first $25,000 of costs incurred relating to product liability claims arising during the current policy period. In addition, the Company has obtained extended reporting periods under previous policies for claims arising prior to the current policy period. The current period and extended reporting period policies exclude certain products; the Company is responsible for all product liability costs arising from these excluded products.

     The Company continues to incur significant legal costs associated with its hormone therapy litigation (see below). As of March 31, 2006, these costs have been covered under extended reporting period policies that provide up to $25,000 of coverage. As of March 31, 2006, there was approximately $8,700 of coverage remaining under these policies. The Company has recorded a receivable for legal costs incurred and expected to

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be recovered under these policies. Once the coverage from these extended reporting period policies has been exhausted, future legal and settlement costs will be covered by a combination of self-insurance and other third-party insurance layers.

Indemnity Provisions

     From time-to-time, in the normal course of business, the Company agrees to indemnify its suppliers, customers and employees concerning product liability and other matters. For certain product liability matters, the Company has incurred legal defense costs on behalf of certain of its customers under these agreements. Except as described below, no amounts have been recorded in the financial statements with respect to the Company’s obligations under such agreements.

     In June 2005, the Company entered into an agreement with Teva Pharmaceuticals USA, Inc. which allowed Teva to manufacture and launch Teva’s generic version of Aventis’ Allegra^® product during the Company’s 180 day exclusivity period, in exchange for Teva’s obligation to pay the Company a specified percentage of Teva’s operating profit, as defined, on sales of the product. The agreement also provides that each company will indemnify the other for the portion of any patent infringement damages they might incur as a result of the underlying litigation, described below, so that the parties will share any such damage liability in proportion to their respective share of Teva’s operating profit. On September 1, 2005, Teva launched its generic version of Allegra and the Company, in accordance with Financial Accounting Standards Board Interpretation No. 45 “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others,” recorded a $4,057 liability to reflect the fair value of the indemnification obligation it has undertaken. This amount is included in other liabilities on the consolidated balance sheet as of March 31, 2006.

Litigation Settlement

     On October 22, 1999, the Company entered into a settlement agreement with Schein Pharmaceutical, Inc. (now part of Watson Pharmaceuticals, Inc.) relating to a 1992 agreement regarding the pursuit of a generic conjugated estrogens product. Under the terms of the settlement, Schein relinquished any claim to rights in Cenestin in exchange for a payment of $15,000 made to Schein in 1999. An additional $15,000 payment is required under the terms of the settlement if Cenestin achieves total profits, as defined, of greater than $100,000 over any five-year period prior to October 22, 2014. As of March 31, 2006, no liability has been accrued related to this settlement.

Litigation Matters

     The Company is involved in various legal proceedings incidental to its business, including product liability, intellectual property and other commercial litigation and antitrust actions. The Company records accruals for such contingencies to the extent that it concludes a loss is probable and the amount can be reasonably estimated. Additionally, the Company records insurance receivable amounts from third party insurers when appropriate.

     Many claims involve highly complex issues relating to patent rights, causation, label warnings, scientific evidence and other matters. Often these issues are subject to substantial uncertainties and therefore, the probability of loss and an estimate of the amount of the loss are difficult to determine. The Company’s assessments are based on estimates that the Company, in consultation with outside advisors, believes are reasonable. Although the Company believes it has substantial defenses in these matters, litigation is inherently unpredictable. Consequently, the Company could in the future incur judgments or enter into settlements that could have a material adverse effect on its consolidated financial statements in a particular period.

     Summarized below are the more significant matters pending to which the Company is a party. As of March 31, 2006, the Company’s reserve for the liability associated with claims or related defense costs for these matters is not material.

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     Patent Matters

       Desmopressin Acetate Suit

     In July 2002, the Company filed an Abbreviated New Drug Application (“ANDA”) seeking approval from the U.S. Food and Drug Administration (“FDA”) to market desmopressin acetate tablets, the generic equivalent of Aventis’ DDAVP^® product. The Company notified Ferring AB, the patent holder, and Aventis pursuant to the provisions of the Hatch-Waxman Act in October 2002. Ferring AB and Aventis filed a suit in the U.S. District Court for the Southern District of New York in December 2002 for infringement of one of the four patents listed in the Orange Book for desmopressin acetate tablets, seeking to prevent the Company from marketing desmopressin acetate tablets until the patent expires in 2008. In January 2003, the Company filed an answer and counterclaim asserting non-infringement and invalidity of all four listed patents. In January 2004, Ferring AB amended their complaint to add a claim of willful infringement.

     On February 7, 2005, the court granted summary judgment in the Company’s favor. Ferring AB and Aventis have appealed. On July 5, 2005, the Company launched its generic product. On February 15, 2006, the Court of Appeals for the Federal Circuit denied the appeal by Ferring AB and Aventis of the court’s granting of summary judgment in favor of the Company. Ferring AB and Aventis subsequently filed a petition for rehearing and rehearing en banc, which was denied on April 10, 2006.

       Fexofenadine Hydrochloride Suit

     In June 2001, the Company filed an ANDA seeking approval from the FDA to market fexofenadine hydrochloride tablets in 30 mg, 60 mg and 180 mg strengths, the generic equivalent of Aventis’ Allegra^® tablet products for allergy relief. The Company notified Aventis pursuant to the provisions of the Hatch-Waxman Act and, in September 2001, Aventis filed a patent infringement action in the U.S. District Court for the District of New Jersey-Newark Division, seeking to prevent the Company from marketing this product until after the expiration of various U.S. patents, the last of which is alleged to expire in 2017.

     After the filing of the Company’s ANDAs, Aventis listed an additional patent on Allegra in the Orange Book. The Company filed appropriate amendments to its ANDAs to address the newly listed patent and, in November 2002, notified Merrell Pharmaceuticals, Inc., the patent holder, and Aventis pursuant to the provisions of the Hatch-Waxman Act. Aventis filed an amended complaint in November 2002 claiming that the Company’s ANDAs infringe the newly listed patent.

     On March 5, 2004, Aventis and AMR Technology, Inc., the holder of certain patents licensed to Aventis, filed an additional patent infringement action in the U.S. District Court for the District of New Jersey — Newark Division, based on two patents that are not listed in the Orange Book.

     In June 2004, the court granted the Company summary judgment of non-infringement as to two patents. On March 31, 2005, the court granted the Company summary judgment of invalidity as to a third patent. Discovery is proceeding on the five remaining patents at issue in the case. No trial date has been scheduled.

     On August 31, 2005, the Company received final FDA approval for its fexofenadine tablet products. As referenced above, pursuant to an agreement between the Company and Teva, the Company selectively waived its 180 days of generic exclusivity in favor of Teva, and Teva launched its generic product on September 1, 2005.

     On September 21, 2005, Aventis filed a motion for a preliminary injunction or expedited trial. The motion asked the court to enjoin the Company and Teva from marketing their generic versions of Allegra tablets, 30 mg, 60 mg and 180 mg, or to expedite the trial in the case. The motion also asked the court to enjoin Ranbaxy Laboratories, Ltd. and Amino Chemicals, Ltd. from the commercial production of generic fexofenadine raw material. The preliminary injunction hearing concluded on November 3, 2005. On January 30, 2006, the Court denied the motion by Aventis for a preliminary injunction or expedited trial. Aventis has appealed the Court’s denial of its motion to the United States Court of Appeals for the Federal Circuit. Briefing in the appeal is scheduled to be completed by June 30, 2006, but no date for argument has been set.

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     Aventis also has brought a patent infringement suit against Teva in Israel, seeking to have Teva enjoined from manufacturing generic versions of Allegra tablets and is requesting damages for patent infringement.

     If the Company and Teva are unsuccessful in the litigation, the Company and Teva could be liable for Aventis’ lost profits on the sale of Allegra, which could potentially exceed the Company and Teva’s profits on the sale of the generic product.

  Product Liability Matters

       Hormone Therapy Litigation

     The Company has been named as a defendant in approximately 3,500 personal injury product liability cases brought against the Company and other manufacturers by plaintiffs claiming that they suffered injuries resulting from the use of certain estrogen and progestin medications prescribed to treat the symptoms of menopause. The cases against the Company involve either or both of the Company’s Cenestin products or the use of the Company’s medroxyprogesterone acetate product, which typically has been prescribed for use in conjunction with Premarin or other hormone therapy products. All of these products remain approved by the FDA and continue to be marketed and sold to customers. While the Company has been named as a defendant in these cases, fewer than a third of the complaints actually allege the plaintiffs took a product manufactured by the Company, and the Company’s experience to date suggests that, even in these cases, a high percentage of the plaintiffs will be unable to demonstrate actual use of a Company product. For that reason, approximately 2,800 of the 3,500 cases have been dismissed and, based on discussions with the Company’s outside counsel, several hundred more are expected to be dismissed in the near future.

     The Company believes it has viable defenses to the allegations in the complaints and is defending the actions vigorously.

  Antitrust Matters

       Invamed, Inc./Apothecon, Inc.

     In February 1998, Invamed, Inc. and Apothecon, Inc., both of which have since been acquired by Sandoz, Inc., which is a subsidiary of Novartis AG, named the Company and several others as defendants in lawsuits filed in the U.S. District Court for the Southern District of New York, alleging violations of antitrust laws and also charging that the Company unlawfully blocked access to the raw material source for warfarin sodium. The two actions have been consolidated. On May 10, 2002, the District Court granted summary judgment in the Company’s favor on all antitrust claims in the case, but found that the plaintiffs could proceed to trial on their allegations that the Company interfered with an alleged raw material supply contract between Invamed and the Company’s raw material supplier. Invamed and Apothecon appealed the District Court’s decision to the U. S. Court of Appeals for the Second Circuit. Trial on the merits was stayed pending the outcome of the appeal.

     On October 18, 2004, the Court of Appeals reversed the District Court’s grant of summary judgment and held that the plaintiffs have raised triable issues of material fact on their antitrust claims. Discovery has been completed and pre-trial motions have been filed. The trial is scheduled to begin on June 12, 2006.

     The Company believes that the suits filed by Invamed and Apothecon are without merit and is vigorously defending its position. The plaintiffs were seeking damages of approximately $120,000 as of December 31, 2000, and if successful on their underlying claims may seek to obtain treble damages.

       Ciprofloxacin (Cipro^®) Antitrust Class Actions

     The Company has been named as a co-defendant with Bayer Corporation, The Rugby Group, Inc. and others in approximately 38 class action complaints filed in state and federal courts by direct and indirect purchasers of Ciprofloxacin (Cipro) from 1997 to the present. The complaints alleged that the 1997 Bayer-Barr patent litigation settlement agreement was anti-competitive and violated federal antitrust laws and/or state antitrust and consumer

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protection laws. A prior investigation of this agreement by the Texas Attorney General’s Office on behalf of a group of state Attorneys General was closed without further action in December 2001.

     The lawsuits included nine consolidated in California state court, one in Kansas state court, one in Wisconsin state court, one in Florida state court, and two consolidated in New York state court, with the remainder of the actions pending in the U.S. District Court for the Eastern District of New York for coordinated or consolidated pre-trial proceedings (the “MDL Case”). On March 31, 2005, the Court in the MDL Case granted summary judgment in the Company’s favor and dismissed all of the federal actions before it. On June 7, 2005, plaintiffs filed notices of appeal to the U.S. Court of Appeals for the Second Circuit. The Court of Appeals has stayed consideration of the merits pending consideration of the Company’s motion to transfer the appeal to the United States Court of Appeals for the Federal Circuit as well as plaintiffs’ request for the appeal to be considered en banc. Merits briefing has not yet been completed because the proceedings are stayed pending en banc consideration of a similar case.

     On September 19, 2003, the Circuit Court for the County of Milwaukee dismissed the Wisconsin state class action for failure to state a claim for relief under Wisconsin law. Plaintiffs appealed, and briefing is currently underway. On October 17, 2003, the Supreme Court of the State of New York for New York County dismissed the consolidated New York state class action for failure to state a claim upon which relief could be granted and denied the plaintiffs’ motion for class certification. Plaintiffs have appealed that decision and briefing is complete. On April 13, 2005, the Superior Court of San Diego, California ordered a stay of the California state class actions until after the resolution of any appeal in the MDL Case. On April 22, 2005, the District Court of Johnson County, Kansas similarly stayed the action before it, until after any appeal in the MDL Case. The Florida state class action remains at a very early stage, with no status hearings, dispositive motions, pre-trial schedules, or a trial date set as of yet.

     The Company believes that its agreement with Bayer Corporation reflects a valid settlement to a patent suit and cannot form the basis of an antitrust claim. Based on this belief, the Company is vigorously defending itself in these matters.

       Tamoxifen Antitrust Class Actions

     To date approximately 31 consumer or third-party payor class action complaints have been filed in state and federal courts against Zeneca, Inc., AstraZeneca Pharmaceuticals L.P. and the Company alleging, among other things, that the 1993 settlement of patent litigation between Zeneca and the Company violated the antitrust laws, insulated Zeneca and the Company from generic competition and enabled Zeneca and the Company to charge artificially inflated prices for tamoxifen citrate. A prior investigation of this agreement by the U.S. Department of Justice was closed without further action. On May 19, 2003, the U.S. District Court dismissed the complaints for failure to state a viable antitrust claim. On November 2, 2005, the United States Court of Appeals for the Second Circuit affirmed the District Court’s order dismissing the cases for failure to state a viable antitrust claim. On November 30, 2005, Plaintiffs petitioned the United States Court of Appeals for the Second Circuit for a rehearing en banc. The Court of Appeals directed the Company to file a response to Plaintiffs’ petition, which the Company submitted on January 26, 2006. The Court has not yet ruled on the merits of the petition.

     The Company believes that its agreement with Zeneca reflects a valid settlement to a patent suit and cannot form the basis of an antitrust claim. Based on this belief, the Company is vigorously defending itself in these matters.

       Ovcon Antitrust Proceedings

     To date, the Company has been named as a co-defendant with Warner Chilcott Holdings, Co. III, Ltd., and others in complaints filed in federal courts by the Federal Trade Commission, 34 State Attorneys General and nine private class action plaintiffs claiming to be direct and indirect purchasers of Ovcon-35^®. These actions allege, among other things, that a March 24, 2004 Option and License Agreement between the Company and Galen Holdings PLC (known since January 2005 as Warner Chilcott Holdings Company, Limited) constitutes an unfair method of competition, is anticompetitive and restrains trade in the market for Ovcon-35^® and its generic equivalents. These cases, the first of which was filed by the FTC on or about December 2, 2005, remain at a very

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early stage, with discovery cut-off dates of December 22, 2006 for the FTC and state cases and March 2, 2007 for the private cases. No trial dates have been set.

     The Company believes that it has not engaged in any improper conduct and is vigorously defending itself in these matters.

       Provigil Antitrust Proceedings

     To date, the Company has been named as a co-defendant with Cephalon, Inc., Mylan Laboratories, Inc., Teva Pharmaceutical Industries, Ltd., Teva Pharmaceuticals USA, Inc., Ranbaxy Laboratories, Ltd., and Ranbaxy Pharmaceuticals, Inc. (the “Defendants”) in two separate complaints filed in the United States District Court for the Eastern District of Pennsylvania. These actions allege, among other things, that the agreements between Cephalon and the other individual Defendants to settle patent litigation relating to Provigil® constitute an unfair method of competition, are anticompetitive and restrain trade in the market for Provigil and its AB-rated generics in violation of the antitrust laws. These cases remain at a very early stage and no trial dates have been set.

     The Company believes that it has not engaged in any improper conduct and is vigorously defending itself in these matters.

       Medicaid Reimbursement Cases

       The Company, along with numerous other pharmaceutical companies, has been named as a defendant in separate actions brought by the states of Alabama, Hawaii, Illinois, Kentucky and Mississippi, the Commonwealth of Massachusetts, the City of New York, and numerous counties in New York. In each of these matters, the plaintiffs seek to recover damages and other relief for alleged overcharges for prescription medications paid for or reimbursed by their respective Medicaid programs. The Company believes that it has not engaged in any improper conduct and is vigorously defending itself in these matters.

       The Commonwealth of Massachusetts case and the New York cases, with the exception of the action filed by Erie County, New York, are currently pending in the U.S. District Court for the District of Massachusetts. Discovery is underway in the Massachusetts cases, but no trial dates have been set. In the New York cases, as well as the Erie County case, which is pending in state court in New York, briefing is underway on defendants’ motions to dismiss, with no trial dates set.

       The Alabama case was filed in Alabama state court, removed to the U.S. District Court for the Middle District of Alabama, and returned to state court. Discovery is underway, but no trial date has been set. The State of Hawaii case was filed in state court in Hawaii on April 26, 2006. This matter is at a very early stage with no trial date set as of yet. The Illinois and Kentucky cases were filed in Illinois and Kentucky state courts, removed to federal court, and then remanded back to their respective state courts. The defendants have filed motions to dismiss in both actions and no trial dates have been set. The State of Mississippi case was filed in state court and is at a very early stage with no trial date set.

     The Company believes that it has not engaged in any improper conduct and is vigorously defending itself in these matters.

      Breach of Contract Action

       On October 6, 2005, plaintiffs Agvar Chemicals Inc., Ranbaxy Laboratories, Inc. and Ranbaxy Pharmaceuticals, Inc. filed suit against the Company and Teva Pharmaceuticals USA, Inc. in the Superior Court of New Jersey. In their complaint, plaintiffs seek to recover damages and other relief, based on an alleged breach of an alleged contract requiring the Company to purchase raw material for the Company’s generic Allegra product from Ranbaxy, prohibiting the Company from launching its generic Allegra product without Ranbaxy’s consent and prohibiting the Company from entering into an agreement authorizing Teva to launch Teva’s generic Allegra product. The court has entered a scheduling order providing for the completion of discovery by March 7, 2007 but has not yet set a date for trial. The Company believes there was no such contract and is vigorously defending itself in this matter.

      Other Litigation

       As of March 31, 2006, the Company was involved with other lawsuits incidental to its business, including patent infringement actions, product liability, and personal injury claims. Management, based on the advice of legal counsel, believes that the ultimate outcome of these other matters will not have a material adverse effect on the Company’s consolidated financial statements.

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

     The following discussion and analysis addresses material changes in the results of operations and financial condition of Barr Pharmaceuticals, Inc. and subsidiaries for the periods presented. This discussion and analysis should be read in conjunction with the consolidated financial statements, the related notes to consolidated financial statements and Management’s Discussion and Analysis of Results of Operations and Financial Condition included in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2005, and the unaudited interim consolidated financial statements and related notes included in Item 1 of this report on Form 10-Q.

Business Development Activities

     On June 15, 2005, we entered into a non-binding Letter of Intent with Organon (Ireland) Ltd., Organon USA Inc. (“Organon”) and Savient Pharmaceuticals, Inc. (“Savient”) to acquire the New Drug Application (“NDA”) for the oral contraceptive product, Mircette^®, obtain a royalty-free patent license to promote Mircette in the United States and dismiss all pending litigation between the parties in exchange for a payment by us of up to $155.0 million. At the time of the signing of the Letter of Intent, because the proposed transaction included, as one of its components, a payment in settlement of litigation, it was presumed under GAAP to give rise to a “probable loss,” as defined in SFAS No. 5, “Accounting for Contingencies”. In consultation with outside advisors and based on preliminary valuations of the assets we would acquire if the transaction closed on the terms then contemplated, we recorded a charge of $63.2 million as of June 30, 2005 to reflect the proposed litigation settlement.

     On December 2, 2005, we finalized an agreement with Organon and Savient to acquire the exclusive rights to Mircette. The agreement terminated the ongoing patent litigation regarding our generic version of Mircette, which we market under the trade name Kariva. The agreement called for us to pay Organon $139.0 million and Savient $13.8 million. Based on final valuations of the assets acquired, we recorded an additional charge of $0.8 million for the difference between amounts recorded as a probable loss at June 30, 2005 and the final loss amount. We also incurred transaction costs (primarily legal and accounting fees) for the nine months ended March 31, 2006 of $1.8 million. Additionally, we received $11.0 million from a third party as partial reimbursement of the $64.0 million charge recorded in conjunction with this transaction. The $11.0 million reimbursement, together with the additional settlement charge of $0.8 million and the transactions costs of $1.8 million, have all been classified as selling, general and administrative expenses and have resulted in a net benefit of $8.4 million to selling, general and administrative expenses for the nine months ended March 31, 2006.

     On November 9, 2005, we completed the acquisition of FEI Women’s Health, LLC (“FEI”). FEI is the owner of ParaGard^® T 380A (Intrauterine Copper Contraceptive) IUD, which is approved for continuous use for the prevention of pregnancy for up to 10 years. FEI’s results are included in our financial statements subsequent to November 9, 2005. In conjunction with this transaction, we recorded an intangible asset of $256 million related to the rights to market and sell ParaGard, increased the cost of the acquired inventory by $20.7 million to state it at fair value and recorded goodwill of $29.9 million. The intangible asset is being amortized over 20 years while the $20.7 million adjustment to inventory is being charged to cost of sales as the acquired inventory is sold.

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Results of Operations

Comparison of the Three and Nine Months Ended March 31, 2006 and March 31, 2005

     The following table sets forth revenue data for the three and nine months ended March 31, 2006 and 2005 (dollars in millions).

	Three Months Ended March 31,									Nine Months Ended March 31,
					Change									Change
	2006		2005		$		%			2006		2005		$			%
Generic products:
Oral contraceptives	$	101.2	$	93.6	$	7.6		8	%	$	292.4	$	295.7	$	(3.3	)		-1	%
Other generic		99.1		95.9		3.2		3	%		324.2		265.6		58.6			22	%
Total generic products		200.3		189.5		10.8		6	%		616.6		561.3		55.3			10	%
Proprietary products		92.8		71.8		21.0		29	%		232.7		198.8		33.9			17	%
Total Product Sales		293.1		261.3		31.8		12	%		849.3		760.1		89.2			12	%
Alliance, development and other revenue		33.7		3.7		30.0		811	%		113.5		6.8		106.7			1569	%
Total revenues	$	326.8	$	265.0	$	61.8		23	%	$	962.8	$	766.9	$	195.9			26	%

     Revenues — Product Sales

     Generic Products

     Total generic product sales for the three months ended March 31, 2006 increased due to increases in sales of both our generic oral contraceptive products and our other generic products. For the nine months ended March 31, 2006, total generic products sales increased due to a significant increase in sales of our other generic products, which was slightly offset by lower sales of generic oral contraceptive products.

     Oral Contraceptives

     For the three months ended March 31, 2006, sales of generic oral contraceptives increased 8% over the prior year period. This increase was primarily attributable to an increase in market share of Tri-Sprintec during the quarter combined with continued strong sales of Kariva due to higher pricing and an increase in market share. We believe that the increase in market share of Tri-Sprintec was primarily related to temporary supply shortages encountered by one of our competitors. We understand that these supply shortages have been resolved and therefore expect our Tri-Sprintec market share and sales to decline in our fiscal fourth quarter as compared to the quarter ended March 31, 2006.

     For the nine months ended March 31, 2006, sales of generic oral contraceptives showed a slight decline of 1% compared to the prior year period. This decrease resulted from the continued impact of competition on certain of our larger generic oral contraceptive products, such as Aviane and Apri, resulting in lower pricing and reduced market share, as well as the continued decline in demand for several of these products. This decrease more than offset higher sales of Kariva and Tri-Sprintec due to reasons discussed above.

     Other Generic Products

     For the three months ended March 31, 2006, sales of other generic products increased 3% to $99.1 million from $95.9 million in the prior year period. This increase resulted from sales of Desmopressin, which we launched in July 2005, partially offset by lower sales of Mirtazapine, Didanosine, Warfarin Sodium and Claravis, and the continued decline in demand for certain of our other generic products. Mirtazapine sales were lower due to further price and volume erosion from competition. Revenues from Didanosine were lower during the period due to a decline in unit sales, while sales of Warfarin Sodium declined due to continued pricing pressure even as our market share has consistently increased. Claravis sales were lower during this three-month period in large part due to the decline in the overall compound usage and lower market share. As discussed in our prior Form 10-Q, sales of Claravis and other isotrentinoin products indicated for the treatment of severe acne have been negatively impacted by the implementation of iPledge, an enhanced risk management program that is designed to minimize fetal exposure to isotrentinoin which took effect on December 31, 2005.

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     For the nine months ended March 31, 2006, sales of other generic products increased 22% to $324.2 million from $265.6 million in the prior year. The significant growth during the nine-month period was due primarily to sales of Desmopressin, which we launched in July 2005 and to a lesser extent, contributions from Didanosine, which we launched in December 2004. Desmopressin sales, which were favorably impacted in the first half of the fiscal year by rapid generic substitution, declined sharply in the quarter ended March 31, 2006 due to the launch of a competing product in January 2006. We expect further sales declines in our fiscal fourth quarter as a result of this competition as well as new competition from a competing product that was approved and launched in April 2006. Partially offsetting the strong sales from Desmopressin and Didanosine during this nine-month period were lower sales of Mirtazapine, as discussed above, as well as reduced demand for Claravis for the reasons discussed above.

     Proprietary Products

     For the three months ended March 31, 2006, proprietary product sales increased 29% over the prior year period, primarily the result of (1) higher sales of Seasonale^®, (2) sales of the ParaGard IUD and Mircette oral contraceptive, which we acquired in November 2005 and December 2005, respectively, (3) higher sales of Cenestin due largely to customer buying patterns and (4) higher unit sales of our Plan B emergency contraceptive product. These increases more than offset decreases in revenues attributable to Loestrin/Loestrin FE, which experienced significant volume declines due to lower market share, and Nordette, which also experienced lower unit sales due to lower market share despite an increase in pricing.

     For the nine months ended March 31, 2006, proprietary product sales increased 17% over the prior year period. This increase is a result of significant increase in sales of Seasonale, combined with contributions from acquired products noted above and higher unit sales of Plan B. Partially offsetting these increases were lower sales of Loestrin/Loestrin FE due to decreasing market share and Cenestin due to customer buying patterns.

     Seasonale sales totaled $27.1 million for the three-month period ended March 31, 2006 and $78.8 million for the nine-month period then ended, representing 12% and 29% increases, respectively, over the comparable prior year periods. The significant increase in sales during the current periods resulted from higher unit sales due to higher prescriptions, which increased 27% over the prior year quarter and 33% over the prior year nine-month period, as well as higher pricing. Based on current prescription levels, we expect our fiscal 2006 sales of Seasonale to exceed $100 million.

     In June 2004, we received notification that a competitor had filed an ANDA containing a paragraph IV certification asserting that the patent covering Seasonale is invalid, unenforceable or would not be infringed by the competitor’s generic product. We did not initiate patent infringement litigation with respect to the competitor’s ANDA, and we do not expect to receive pediatric exclusivity with respect to Seasonale. As a result, the competitor’s application could receive FDA approval following the expiration of our New Product Exclusivity in September 2006.

     In July 2004, we submitted the patent covering Seasonale for reissue with the Patent and Trademark Office (“PTO”). We have not received a determination from the PTO regarding the reissuance but expect that the PTO will make a determination before the end of the current calendar year, however the patent covering Seasonale will remain in effect and continue to be listed in the FDA’s Orange Book while the PTO reviews the request for reissuance. If the patent covering Seasonale is reissued, it will have the same remaining term as the existing patent that expires in 2017.

     In addition to Seasonale our extended cycle oral contraceptive franchise includes Seasonique. We have filed with the FDA an NDA for Seasonique and in August 2005 received an approvable letter. In March 2006, the FDA notified us that it had determined that additional clinical studies would not be required to support the approval of Seasonique. Following this notification, we submitted product labeling that we expect to be approved in late May 2006. If Seasonique gains final FDA approval in late May, we expect to launch the product in the first quarter of fiscal 2007.

     Revenues — Alliance, Development and Other Revenue

     Alliance, development and other revenue consists mainly of revenue from profit-sharing arrangements, co-promotion agreements, standby manufacturing fees and reimbursements and fees we receive in conjunction with our agreement with the U.S. Department of Defense for the development of the Adenovirus vaccine. Alliance, development and other revenue increased substantially from the prior year primarily due to (1) our profit-sharing arrangement with Teva on sales of their generic Allegra^â product and (2) royalty payments and other fees under our Co-Promotion Agreement and License and Manufacturing Agreement with Kos Pharmaceuticals, Inc. (“Kos”) on Niaspan^â and Advicor^â, which we began receiving in the fourth quarter of fiscal 2005.

     Our 180-day exclusivity period on generic Allegra ended on February 28, 2006. As discussed above, pursuant to an agreement between the Company and Teva, we selectively waived our 180 days of generic exclusivity in favor of Teva, and Teva launched its generic Allegra product on September 1, 2005. By the end of April 2006, one competitor had received final approval from the FDA for their generic Allegra product. We are aware of several other companies that have filed ANDAs with Paragraph IV certifications for generic Allegra. Competition for generic Allegra has caused, and will continue to cause, Teva’s Allegra revenues to decrease and in turn, our royalties to decline. Additionally, our profit-sharing percentage in our arrangement with Teva decreased following the expiration of the exclusivity period on February 28, 2006, further reducing the amount of royalties we receive from Teva. As a result, our revenues from our profit-sharing arrangement with Teva are expected to decrease in our fiscal fourth quarter and thereafter.

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     Cost of Sales

     Cost of sales includes the cost of products we purchase from third parties, our manufacturing and packaging costs for products we manufacture, our profit-sharing or royalty payments made to third parties, including raw material suppliers, changes to our inventory reserves and stock-based compensation expense of certain departments. Amortization costs arising from the acquisition of product rights are included in selling, general and administrative expense.

     The following table sets forth cost of sales data, in dollars, as well as the resulting gross margins expressed as a percentage of product sales, for the three and nine months ended March 31, 2006 and 2005 (dollars in millions):

	Three Months Ended March 31,											Nine Months Ended March 31,
							Change											Change
	2006			2005			$		%			2006			2005			$		%
Generic products	$	70.9		$	67.4		$	3.5		5	%	$	209.2		$	197.1		$	12.1		6	%
Gross margin		64.6	%		64.4	%							66.1	%		64.9	%
Proprietary products	$	18.7		$	10.2		$	8.5		83	%	$	44.2		$	28.3		$	15.9		56	%
Gross margin		79.8	%		85.8	%							81.0	%		85.8	%
Total cost of sales	$	89.6		$	77.6		$	12.0		15	%	$	253.4		$	225.4		$	28.0		12	%
Gross margin		69.4	%		70.3	%							70.2	%		70.6	%
Charges inclued in proprietary products cost of sales for step-up inventory	$	7.8		$	—		$	7.8		100	%	$	12.5		$	—		$	12.5		100	%
Proprietary Gross margin effect		8.4	%		0.0	%							5.4	%		0.0	%
Total Gross margin effect		2.7	%		0.0	%							1.5	%		0.0	%

     Overall gross margins decreased for the three and nine months ended March 31, 2006 compared to the prior year periods due to the cost of sales charge associated with the acquisition of FEI and the inclusion of stock-based compensation expense in the current periods. As discussed above under “Business Development Activities,” in connection with acquiring FEI in November 2005, a $20.7 million adjustment to inventory is being charged to cost of sales as the acquired inventory is sold.

     Margins on our generic products increased for the three and nine months ended March 31, 2006 due mainly to the launches of new products, specifically Desmopressin and full period contributions from Didanosine, which carry higher margins than the average of our other generic products. The margin increase related to these products was slightly offset by stock-based compensation expense. We expect gross margins on our generic products to decline in our fiscal fourth quarter primarily due to lower pricing for Desmopressin resulting from the launch of an additional competing product in April 2006.

     Proprietary margins declined for the three and nine months ended March 31, 2006 due primarily to charges of $7.8 million and $12.5 million in the three and nine-month periods, respectively, to cost of sales as described above related to the FEI acquisition, and the inclusion of stock-based compensation expense in the current period. The remaining $8.2 million adjustment to inventory related to the FEI acquisition is expected to be amortized to cost of sales over the next two quarters.

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Selling, General and Administrative Expense

     The following table sets forth selling, general and administrative expense for the three and nine months ended March 31, 2006 and 2005 (dollars in millions):

	Three Months Ended March 31,									Nine Months Ended March 31,
					Change										Change
	2006		2005		$		%			2006			2005		$			%
Selling, general and administrative	$	87.1	$	59.1	$	28.0		47	%	$	221.8		$	181.8	$	40.0			22	%
Benefit included in selling, general and admin.	$	—	$	—	$	—		0	%	$	(8.4	)	$	—	$	(8.4	)		(100	)%

     Selling, general and administrative expenses for the current quarter increased by 47% over the prior year period. This increase reflects (1) higher selling and marketing costs of $12.1 million, (2) higher amortization expenses of $3.8 million, (3) stock-based compensation costs of $3.5 million which we did not have in the prior year period and (4) higher information technology costs of $3.5 million. Higher selling and marketing costs are primarily attributable to higher marketing costs for Seasonale as well as costs associated with the launch of Enjuvia^®, during our fiscal fourth quarter. The increase also includes higher sales force costs primarily related to the additional sales representatives acquired in the FEI acquisition. Higher amortization expenses are attributable to the increase in our intangible assets relating to the FEI and Mircette acquisitions that took place during the first half of fiscal 2006. Higher information technology costs are primarily related to consulting and training costs related to the implementation of our new SAP enterprise resource planning system.

     Selling, general and administrative expenses for the nine-month period increased by 22% over the prior year period. This increase reflects, for reasons discussed in connection with the quarterly comparison above, (1) higher selling and marketing costs of $16.1 million, (2) stock-based compensation costs of $10.1 million which we did not have in the prior year period, (3) higher information technology costs of $7.6 million and (4) higher amortization expenses of $5.3 million. Offsetting those increases was a net benefit of $8.4 million relating to the Mircette transaction as described in “Business Development Activities” above.

Research and Development

     The following table sets forth research and development expenses for the three and nine months ended March 31, 2006 and 2005 (dollars in millions):

	Three Months Ended March 31,									Nine Months Ended March 31,
					Change									Change
	2006		2005		$		%			2006		2005		$		%
Research and development	$	37.7	$	35.5	$	2.2		6	%	$	103.7	$	95.1	$	8.6		9	%

     The 6% increase in the three-month period resulted from $2.8 million in higher clinical studies, a $2.5 million write-off of acquired in-process research and development related to the purchase price of four ANDAs from Teva and Ivax (resulting from Teva’s acquisition of Ivax) and $1.4 million in stock-based compensation which we did not have in the prior year. These increases were partially offset by a decrease in third party development costs of $6.2 million.

     The 9% increase in the nine-month period resulted from a $6.1 million increase in clinical trial costs, $4.4 million in stock-based compensation which we did not have in the prior year, a $2.5 million write-off of acquired in-process research and development as discussed above and an increase of $2.2 million in raw materials expense. Offsetting these increases is a reimbursement of $5.0 million for previously incurred costs under a third party development agreement.

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Income Taxes

     The following table sets forth income tax expense and the resulting effective tax rate stated as a percentage of pre-tax income for the three and nine months ended March 31, 2006 and 2005 (dollars in millions):

	Three Months Ended March 31,											Nine Months Ended March 31,
							Change											Change
	2006			2005			$		%			2006			2005			$		%
Income tax expense	$	41.5		$	33.7		$	7.8		23	%	$	143.0		$	97.1		$	45.9		47	%
Effective tax rate		35.3	%		35.5	%							36.0	%		36.0	%

     The effective tax rate for the current quarter, which decreased to 35.3% from 35.5% in the prior year period, was favorably impacted by a combination of (1) a tax deduction related to the disqualifying exercise of incentive stock options that were previously expensed in our financial statements for which no tax benefit was taken, (2) the application of the revised tax rate expected for our fiscal year applied to the prior quarters and (3) a change in the mix of income among the states where the Company has manufacturing facilities. These drivers were partially offset by the expiration on December 31, 2005 of the federal tax credit for research and development activities.

     Our federal income tax return for fiscal year 2004 is currently under audit by the IRS. Prior periods have either been audited or are no longer subject to audit by the IRS.

Liquidity and Capital Resources

     Our primary source of cash is the collection of accounts and other receivables primarily related to product sales and our alliance, development and other revenues. Our primary uses of cash include financing inventory, research and development, marketing, capital projects and business development activities.

     Within the past 12 months, cash flows from operations have been more than sufficient to fund our cash needs. At March 31, 2006, our cash, cash equivalents and short-term marketable securities totaled $592.2 million, a decrease of $51.0 million from our position at June 30, 2005.

Operating Activities

     Our operating cash flows for the nine months ended March 31, 2006 were $259.8 million, compared with $256.9 million for the prior year period. Components of the $259.8 million of operating cash flows in the first nine months of fiscal year 2006 include (1) net earnings of $254.2 million, (2) a $41.4 million increase in accounts receivable and other receivables due in part to the revenue recognized under our agreement with Teva for the sale of generic Allegra and an overall increase in revenues, (3) a decrease in accounts payable and accrued liabilities of $60.0 million due mainly to the payment of the legal settlement with Organon for the Mircette acquisition, (4) the recording of stock-based compensation expense of $20.8 million, and (5) the reversal of $27.4 million in deferred taxes primarily related to the $64 million charge recorded in conjunction with the Mircette transaction. In addition, certain tax benefits, which totaled $27.0 million for the nine months ended March 31, 2006, were classified in operating activities prior to fiscal 2006 but are now classified in financing activities with the adoption of SFAS 123R as described in Note 3 to our consolidated financial statements above.

Investing Activities

     Net cash used in investing activities totaled $445.7 million for the first nine months of fiscal 2006 compared with $164.1 million in the prior year period. The cash used in investing activities in the current period consisted of our acquisitions of FEI and Mircette for a total of $378.4 million (net of cash acquired), capital expenditures of $49.7 million and the net purchase of marketable securities of $14.5 million. The prior year included net purchases of marketable securities of $67.7 million, capital expenditures of $42.9 million, buyout of a product

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royalty of $19.3 million and acquisitions of $27.3 million. We expect capital expenditures to be approximately $50-60 million for the fiscal year ending June 30, 2006.

Financing Activities

     Net cash provided by financing activities during the first nine months of 2006 was $84.8 million compared with net cash used of $106.6 million in the prior year period. The net cash provided in the current fiscal year primarily reflects proceeds from the exercise of stock options and employee stock purchases of $62.9 million and the tax benefit of stock incentive plans of $27.0 million which was included as a component of operating cash flows in the prior year. The cash generated by option exercises and employee stock purchases is dependent on the Company’s stock price, which generally increased during the first nine months of the fiscal year. The level of proceeds from stock option exercises realized in the first nine months of fiscal 2006 may or may not be repeated in subsequent periods. The net cash used in the prior year primarily reflected the use of $100.0 million to repurchase shares of our common stock under our share repurchase plan.

Sufficiency of Cash Resources

     We believe our current cash and cash equivalents, marketable securities, investment balances, cash flows from operations and un-drawn amounts of $175 million under our revolving credit facility are adequate to fund our operations and planned capital expenditures and to capitalize on strategic opportunities as they arise. We have and will continue to evaluate our capital structure as part of our goal to promote long-term shareholder value. To the extent that additional capital resources are required, we believe that such capital may be raised by additional bank borrowings, debt or equity offerings or other means.

Critical Accounting Policies

     The methods, estimates and judgments we use in applying the accounting policies most critical to our financial statements have a significant impact on our reported results. The Securities and Exchange Commission has defined the most critical accounting policies as the ones that are most important to the portrayal of our financial condition and results, and/or require us to make our most difficult and subjective judgments. Based on this definition, our most critical policies are the following: (1) revenue recognition and related provisions for estimated reductions to gross revenues; (2) inventories and related inventory reserves; (3) income taxes; (4) contingencies; and (5) accounting for acquisitions. Although we believe that our estimates and assumptions are reasonable, they are based upon information available at the time the estimates and assumptions were made. We review the factors that influence our estimates and, if necessary, adjust them. Actual results may differ significantly from our estimates.

     There are no updates to our Critical Accounting Policies from those described in our Annual Report on Form 10-K for the fiscal year ended June 30, 2005, as modified in our Quarterly Report on Form 10-Q for the quarter ended September 30, 2005. Please see the “Critical Accounting Policies” sections of those reports for a comprehensive discussion of our critical accounting policies.

Recent Accounting Pronouncements

     In November 2005, the FASB issued FSP FASB 115-1 and FASB 124-1, “The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments.” This FSP provides guidance on determining if an investment is considered to be impaired, if the impairment is other-than-temporary, and the measurement of an impairment loss. It also includes accounting considerations subsequent to the recognition of an other-than-temporary impairment and requires certain disclosures about unrealized losses that have not been recognized as other-than-temporary impairments. The guidance in this FSP amends SFAS No. 115, “Accounting for Certain Investments in Debt and Equity Securities” and is effective for reporting periods beginning after December 15, 2005. We are currently accounting for investments in accordance with this guidance, and therefore, the adoption of this FSP has not had a material impact on our consolidated financial statements.

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Forward-Looking Statements

     Except for the historical information contained herein, the statements made in this report constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. To the extent that any statements made in this report contain information that is not historical, these statements are essentially forward-looking. Forward-looking statements can be identified by their use of words such as “expects,” “plans,” “will,” “may,” “anticipates,” “believes,” “should,” “intends,” “estimates” and other words of similar meaning. These statements are subject to risks and uncertainties that cannot be predicted or quantified and, consequently, actual results may differ materially from those expressed or implied by such forward-looking statements. Such risks and uncertainties include, in no particular order:

• the difficulty in predicting the timing and outcome of legal proceedings, including patent-related matters such as patent challenge settlements and patent infringement cases;

• the difficulty of predicting the timing of FDA approvals;

• court and FDA decisions on exclusivity periods;

• the ability of competitors to extend exclusivity periods for their products;

• our ability to complete product development activities in the timeframes and for the costs we expect;

• market and customer acceptance and demand for our pharmaceutical products;

• our dependence on revenues from significant customers;

• reimbursement policies of third party payors;

• our dependence on revenues from significant products including royalties on products manufactured and marketed by third parties;

• the use of estimates in the preparation of our financial statements;

• the impact of competitive products and pricing on products, including the launch of authorized generics;

• the ability to launch new products in the timeframes we expect;

• the availability of raw materials;

• the availability of any product we purchase and sell as a distributor;

• the regulatory environment;

• our exposure to product liability and other lawsuits and contingencies;

• the cost of insurance and the availability of product liability insurance coverage;

• our timely and successful completion of strategic initiatives, including integrating companies and products we acquire and implementing our new enterprise resource planning system;

• fluctuations in operating results, including the effects on such results from spending for research and development, sales and marketing activities and patent challenge activities; and

• other risks detailed from time-to-time in our filings with the Securities and Exchange Commission.

     We wish to caution each reader of this report to consider carefully these factors as well as specific factors that may be discussed with each forward-looking statement in this report or disclosed in our filings with the SEC, as such factors, in some cases, could affect our ability to implement our business strategies and may cause actual results to differ materially from those contemplated by the statements expressed herein. Readers are urged to carefully review and consider these factors. We undertake no duty to update the forward-looking statements even though our situation may change in the future.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

     Our exposure to market risk for a change in interest rates relates primarily to our investment portfolio of approximately $605.0 million. We do not use derivative financial instruments.

     Our investment portfolio consists of cash and cash equivalents and market auction debt securities primarily classified as “available for sale.” The primary objective of our investment activities is to preserve principal while at the same time maximizing yields without significantly increasing risk. To achieve this objective, we maintain our portfolio in a variety of high credit quality debt securities, including U.S., state and local government and corporate obligations, certificates of deposit and money market funds. Over 87% of our portfolio matures in less than three months, or is subject to an interest-rate reset date that occurs within that time. The carrying value of the investment portfolio approximates the market value at March 31, 2006 and the value at maturity. Because our investments consist of cash equivalents and market auction debt securities, a hypothetical 100 basis point change in interest rates is not likely to have a material effect on our consolidated financial statements.

     None of our outstanding debt at March 31, 2006 bears interest at a variable rate. Any borrowings under our $175 million unsecured revolving credit facility will bear interest at a variable rate based on the prime rate, the Federal Funds rate or LIBOR. At March 31, 2006, no amounts were drawn under this facility.

Item 4. Controls and Procedures

Evaluation of disclosure controls and procedures

     The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including the Company’s Chairman and Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures. Management necessarily applied its judgment in assessing the costs and benefits of such controls and procedures, which, by their nature, can provide only reasonable assurance regarding management’s control objectives.

     At the conclusion of the period ended March 31, 2006, the Company carried out an evaluation, under the supervision and with the participation of its management, including the Chairman and Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures. Based upon that evaluation, the Chairman and Chief Executive Officer and Chief Financial Officer concluded that the disclosure controls and procedures were effective in alerting them in a timely manner to information relating to the Company required to be disclosed in this report.

Changes in internal controls

     In October 2005, the Company began migrating certain financial and sales processing systems to SAP, a new enterprise resource planning (ERP) platform. The migration of the Company’s remaining financial, operational, and inventory processes is on schedule to be completed by June 30, 2006. In addition to expanding and improving access to information, the new ERP system will provide a standard scalable information platform to accommodate business growth plans. In connection with the ERP system implementation, the Company is updating its internal controls over financial reporting, as necessary, to accommodate modifications to its business processes and to take advantage of enhanced automated controls provided by the system. During the implementation process to date, the Company believes it has taken the necessary steps to maintain internal control systems that provide reasonable assurance of the accuracy of financial information.

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings

Litigation Matters

     The disclosure under Note 10 — Commitments and Contingencies — Litigation Matters included in Part I of this report is incorporated in this Part II, Item 1 by reference.

Item 6. Exhibits

     (a) Exhibits.

Exhibit No.	Description
10.1	Employment Agreement, dated as of January 5, 2006, among Barr Pharmaceuticals, Inc., Duramed Pharmaceuticals Inc. and G. Frederick Wilkinson.
31.1	Certification of Bruce L. Downey pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of William T. McKee pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.0	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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SIGNATURES

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

	BARR PHARMACEUTICALS, INC.
Dated: May 8, 2006	/s/ Bruce L. Downey
	Bruce L. Downey
	Chairman of the Board and Chief Executive Officer
	/s/ William T. McKee
	William T. McKee
	Vice President, Chief Financial Officer, and Treasurer (Principal Financial Officer and Principal Accounting Officer)

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EX-10.1

Exhibit 10.1

EMPLOYMENT AGREEMENT

     AGREEMENT dated as of the 5^th day of January, 2006 between Barr Pharmaceuticals, Inc. (“BPI”) , a Delaware corporation having its principal executive offices at 400 Chestnut Ridge Road, Woodcliff Lake, New Jersey 07677, and Duramed Pharmaceuticals, Inc., a Delaware corporation having its principal executive offices at 1 Belmont Avenue, Bala Cynwd, PA 19004 (“DPI’), parties of the first part, and G. Frederick Wilkinson (the “Employee”).

     BPI and DPI and the Employee hereby agree as follows:

     1. Employment. The Company agrees to employ the Employee, and the Employee agrees to remain in the employ of the Company, during the term of this Agreement and on the other terms and conditions hereafter set forth. Subject to paragraph 13(d) below, where used in this Agreement, the “Company” means BPI or, commencing on the effective date of any assignment of BPI’s rights or obligations in accordance with paragraph 13(d) below, the Permitted Assignee (as such term is defined in that paragraph) to which such rights or obligations are so assigned.

     2. Term. The term of this Agreement shall commence on March 6, 2006 (the “Commencement Date”) and shall terminate at 5 P.M. on the third anniversary of the Commencement Date unless sooner terminated in accordance with the terms of this Agreement or extended as hereinafter provided. The term of this Agreement shall be extended, without further action by BPI or the Employee, on the date (the “Extension Effective Date”) which is six months before the third anniversary of the Commencement Date and on the date (also an “Extension Effective Date”) which is six months before each subsequent anniversary of the Commencement Date, for successive periods of twelve months each, unless either BPI or an Affiliate (as defined in paragraph 3(a) below) shall have given written notice to the Employee, or the Employee shall have given written notice to BPI, in the manner set forth in paragraph 13(e) or (f) below, prior to the Extension Effective Date in question, that the term of this Agreement that is in effect at the time such written notice is given is not to be extended or further extended, as the case may be. Examples that illustrate the intended operation of the preceding sentence appear in the Appendix to this Agreement.

     3. Positions and Responsibilities; Place of Performance.

          (a) (i) Throughout the term of this Agreement, the Employee agrees to remain in the employ of the Company, and the Company agrees to employ the Employee, as the President and Chief Operating Officer of DPI, reporting to the President and Chief Operating Officer of BPI (the “COO”). As the President and Chief Operating Officer of DPI, the Employee shall be responsible for directing, managing and overseeing all commercial and developmental proprietary pharmaceutical activities conducted by BPI or any Affiliate (as defined below), including sales, marketing, managed care, clinical trials and medical affairs related to such activities, and including any such activities conducted by DPI on behalf of BPI or any Affiliate, but excluding business

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development to the extent responsibility therefor is shared on the date of this Agreement with other members of management and excluding shared services such as regulatory affairs, regulatory quality control, information technology and systems, finance and human resources, subject only to the authority of the COO, the Chairman and CEO of BPI (the “CEO”) and the Board of Directors of BPI (the “BPI Board”), and, except for the aforementioned exclusions, shall have all of the powers, authority, duties and responsibilities usually incident to the position and role of a President and Chief Operating Officer of companies that are comparable in size, character and performance to DPI, and such other reasonable duties, consistent with the position of such a President and Chief Operating Officer, as may be lawfully assigned to him by the COO, the CEO or the BPI Board. As used in this paragraph 3(a) and elsewhere in this Agreement, the term “Affiliate” means any “person” (as such term is used in sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as amended) that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, BPI. For the purposes of the preceding sentence, the word “control” (by itself and as used in the terms “controlling”, “controlled by” and “under common control with”) means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a “person”, whether through the ownership of voting securities, by contract, or otherwise.

               (ii) Pursuant to the terms of the Employee’s previous employment agreement with his former employer, the Employee’s responsibilities set forth in subparagraph 3(a)(i) above shall expressly exclude Oral Micronized Progesterone and Progesterone Ring, both of which are currently under development by the Company, during the first year of the Employee’s employment. This limitation on the Employee’s responsibilities, however, shall automatically expire after the first anniversary of the Employee’s employment. This limitation on responsibility shall have no effect on the Employee’s compensation or benefits under this Agreement.

               (iii) The Employee agrees to serve as an officer and member of the board of directors of BPI and any Affiliate if he is elected or appointed to serve as such during the term of this Agreement, without additional compensation beyond that provided in this Agreement. Nothing in this Agreement shall be interpreted or construed to constitute an agreement, representation or warranty by BPI or DPI that the Employee will be elected or appointed to the board of directors of BPI or any Affiliate.

          (b) In connection with his employment by Company, the Employee shall be based at the principal executive offices of BPI in the greater New York City metropolitan area but agrees to travel, to the extent reasonably necessary to perform his duties and obligations under this Agreement, to Company facilities and other destinations elsewhere at the Company’s expense.

          (c) During the term of this Agreement, the Employee shall serve the Company on an exclusive basis (it being understood that the Employee’s engaging in activities on behalf of BPI or an Affiliate shall be deemed serving the Company for this purpose) and shall devote all his business time, attention, skill and efforts to the faithful

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performance of his duties hereunder; provided that the Employee may engage in community service and charitable activities and, with the approval of the BPI Board, may serve as a member of the board of directors of other companies (and retain remuneration for such service) if such activities and service do not materially interfere with the performance of his duties and responsibilities hereunder.

     4. Compensation. For all services rendered by the Employee in any capacity during the term of this Agreement, and for his undertakings with respect to confidential information, non-solicitation and disparaging remarks set forth in sections 6 and 7 below, the Employee shall be entitled to the following:

          (a) a salary, payable in installments not less frequent than monthly, at the annual rate of six hundred thousand dollars ($600,000), with such increases in such rate, if any, as the Compensation Committee of the BPI Board may approve from time to time during the term of this Agreement in accordance with BPI’s regular administrative practices applicable to senior officers from time to time during the term of this Agreement (the annual salary rate as increased from time to time during the term of this Agreement being hereafter referred to as the “Base Salary”);

          (b) participation in BPI’s annual executive incentive or bonus plan as in effect from time to time, with the opportunity to receive an award in accordance with the terms and conditions of such plan, for each fiscal year of BPI that commences or terminates during the term of this Agreement, of up to 50% of the Employee’s Base Salary earned during such year (or such higher percentage as the BPI Board or a committee of the BPI Board may allow from time to time during the term of this Agreement), it being understood that any award for the fiscal year of BPI in which the term of this Agreement commences or terminates pursuant to the terms hereof shall be prorated based on the portion of such fiscal year that coincides with the term of this Agreement and shall be made at the same time as awards (if any) are made to other participants with respect to such fiscal year. The Employee recognizes and agrees that the BPI Board may defer the payment of any portion of his annual bonus to the extent that, and for such period of time and on such terms and subject to such conditions as, may be reasonably necessary to avoid a loss by BPI or an Affiliate of a tax deduction with respect to such portion of his annual bonus under section 162(m) of the Internal Revenue Code and to avoid any inclusion of such portion of his annual bonus or any other amount in the Employee’s gross income pursuant to section 409A(a)(l)(A) of the Internal Revenue Code. Any such deferred amount shall be non-forfeitable, shall constitute an unfunded, unsecured obligation of the Company, and until paid shall be deemed invested in such hypothetical investments as the Employee may select from among the hypothetical investment options that are available from time to time during the deferral period under BPI’s excess 401(k) plan or, if no such investment options are available at the time in question under that plan, then from among the same hypothetical investment options that were available under BPI’s excess 401(k) plan on the date hereof or a reasonable facsimile thereof;

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          (c) participation in BPI’s stock and incentive award plan as from time to time in effect, with an initial grant under such plan of stock appreciation rights (“SARs”) with respect to a total of 75,000 shares of BPI common stock, subject to the terms and conditions of the plan, such other terms and conditions consistent with the terms of such plan as the Board or a committee of the Board granting the options (the Administrator”) may impose, and the following terms and conditions:

     (i) the exercise price at which the SARs may be exercised shall be the fair market value of the shares on the date on which the SARs are granted (the “Grant Date”); and

     (ii) the SARs shall become exercisable in five equal annual installments of 15,000 SARs each commencing on the first anniversary of the Grant Date and continuing on each of the four succeeding anniversaries of the Grant Date, provided in the case of each such installment that the Employee’s full-time employment by the Company continues until the anniversary date in question; and

     (iii) to the extent not therefore exercisable, the SARs shall become exercisable on the date, if any, on which a Change in Control (as defined in BPI’s Stock Incentive and Award Plan as in effect on the date of this Agreement) occurs, if the Employee’s full-time employment by the Company continues until that date, provided that, if such Change in Control occurs less than six months after the Grant Date, the Employee agrees in writing (if requested to do so by the Administrator) to remain in the employ of the Company or a subsidiary at least through the date which is six months after the Grant Date with substantially the same title, duties, authority, reporting relationships and compensation as on the day immediately preceding such Change in Control; and

     (iv) the SARs shall expire on the tenth anniversary of the Grant Date unless the Employee’s employment terminates before that date, in which case the SARs shall expire upon such termination of employment or within such period of time thereafter as the Administrator may specify in the instrument evidencing the grant of the SARs; and

     (v) any amount payable by BPI in respect of any exercise of the SARs shall be paid in the form of BPI common stock, and will not be paid in the form of cash.

The Employee will be eligible to participate in annual grants under BPI’s stock and incentive award plan commencing with the grant anticipated in July 2006. The time at which any such grants are to be made, and the type, amount and terms and conditions of any such grants, shall be determined by the Compensation Committee of the Board in its sole discretion;

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          (d) the business and personal use of an automobile at Company expense including, without limitation, payment or reimbursement of automobile insurance and maintenance expenses in accordance with BPI’s automobile policy applicable to senior officers on the Commencement Date or, in lieu of the business and personal use of an automobile at Company expense, a $1,500 monthly cash allowance; and

          (e) participation in all health, welfare, savings and other employee benefit and fringe benefit plans (including vacation pay plans or policies and life and disability insurance plans) in which other senior officers of BPI or DPI participate during the term of this Agreement, subject in all events to the terms and conditions of such plans as in effect from time to time. Nothing in this paragraph (e) shall preclude BPI or any Affiliate from amending or terminating any such plan at any time. The plans covered by this paragraph (e) shall not include the annual incentive or stock incentive plans, which are covered by paragraphs (b) and (c) above.

     5. Termination of Employment.

          (a) Termination by BPI or an Affiliate without Good Cause or by the Employee for Good Reason.

               (i) If the Employee’s employment with the Company is terminated by BPI or an Affiliate without Good Cause (except as an incident of assigning the rights to Employee’s services to a Permitted Assignee in accordance with paragraph 13(d) below) or is terminated by the Employee for Good Reason, in either case during the term of this Agreement and other than at the expiration of the term of this Agreement as the same may have been extended in accordance with the provisions of section 2 above (any such employment termination being hereafter referred to as a “Compensable Termination”), the Company shall pay the Employee the portion of his Base Salary accrued through the date of the Compensable Termination and any other amounts to which he is entitled by law or pursuant to the terms of any compensation or benefit plan or arrangement in which he participated prior to the Compensable Termination and, in addition, subject to compliance by the Employee with the provisions of sections 6 and 7 below, relating to confidential information, non-solicitation and disparaging remarks, the Company shall, as liquidated damages or severance pay or both (whichever characterization(s) will serve to validate the payments), and as additional consideration for the Employee’s undertakings under sections 6 and 7 below, pay the Employee the following:

                      (A) his annual bonus for the fiscal year of BPI preceding the fiscal year of BPI in which the Compensable Termination occurs, if unpaid at the time of the Compensable Termination, the amount of such bonus to be determined by the Compensation Committee of the BPI Board on a basis consistent with the prior bonus determinations with respect to the Employee or, in the event a Change in Control or Potential Change in Control (as defined in section 11 below) occurred before the Compensable Termination, consistent with the bonus determinations with respect to the

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Employee prior to the Change in Control or Potential Change in Control, unless the Board or a committee of the Board made no bonus determinations with respect to the Employee before the Compensable Termination or, if applicable, before the Change in Control or Potential Change in Control, in which case consistent with the Board’s or Board committee’s bonus determinations with respect to the President of Duramed Research Inc. before the Compensable Termination or, if applicable, before the Change in Control or Potential Change in Control; and

                      (B) a prorated annual bonus for the fiscal year of BPI in which the Compensable Termination occurs, such prorated annual bonus to be determined by multiplying the “Applicable Average Bonus” as defined below in this subparagraph 5(a)(i)(B) by a fraction the numerator of which shall be the number of days elapsed in such fiscal year through (and including) the date on which the Compensable Termination occurs and the denominator of which shall be the number 365. For purposes of this Agreement, the “Applicable Average Bonus” means the higher of (I) the average annual bonus (including any deferred bonus) awarded to the Employee during the three year period immediately preceding the Compensable Termination or, if the Employee was employed by the Company for less than three years before the Compensable Termination, during the period of his employment by the Company prior to the Compensable Termination (annualizing any bonus awarded for less than a full year of employment), or (II) the average annual bonus (including any deferred bonus) awarded to the Employee during the three fiscal years of the Company that precede the fiscal year in which the Compensable Termination occurs or during the portion of such three fiscal years in which he was employed by the Company (annualizing any bonus awarded for less than a full year of employment); provided that, if the Compensable Termination occurs after a Change in Control or Potential Change in Control, the Applicable Average Bonus shall not be less than the average annual bonus (including any deferred bonus) awarded to the Employee during the three years preceding the date on which the Change in Control or Potential Change in Control occurred or during the portion of such three years in which he was employed by the Company (annualizing any bonus awarded for less than a full year of employment); and

                      (C) an amount of money (the “Severance Payment”) equal to two and one-half (2¹/₂) times the Employee’s “Annual Cash Compensation” as hereafter defined, unless the Severance Payment is payable solely on account of the Employee’s resignation for Good Reason pursuant to subparagraph 5(d)(v) below (relating to BPI or an Affiliate giving the Employee notice of non-extension), in which case the Severance Payment shall be equal to one and one-quarter (1¹/₄) times the Employee’s “Annual Cash Compensation” as hereafter defined. Except as otherwise provided hereafter in this subparagraph 5(a)(i)(C), sixty percent (60%) of the Severance Payment shall be paid in a lump sum within ten days after the date of the Compensable Termination. The forty percent (40%) balance of the Severance Payment shall be paid in twelve (12) equal monthly installments one of which shall be paid at the end of each of the first twelve (12) months after the date of the Compensable Termination, provided, in the case of each of such 12 installments, that the Employee has not accepted full-time or regular part-time employment with or regularly served as a consultant to a for-profit

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pharmaceutical company prior to the date for payment of such installment, it being understood and agreed that the foregoing condition shall not be violated by the Employee’s serving as a member of a board of directors of a for-profit pharmaceutical company or by his performing consulting services on an ad hoc basis for such a company. If a Change in Control or Potential Change in Control as defined in section 11 below occurs (either before or after the Compensable Termination), the Severance Payment (or, in the case of a Change in Control or Potential Change in Control that occurs after the Compensable Termination, any portion thereof that remains unpaid at the time such Change in Control or Potential Change in Control occurs) shall be paid in a lump sum within ten days after the Compensable Termination (or, in the case of a Change in Control or Potential Change in Control that occurs after the Compensable Termination, within ten days after the Change in Control or Potential Change in Control occurs), and the two preceding sentences of this subparagraph shall not apply. In addition, if the Severance Payment is payable solely on account of the Employee’s resignation for Good Reason pursuant to subparagraph 5(d)(v) below (relating to BPI or an Affiliate giving the Employee notice of non-extension), the Severance Payment shall be paid in a lump sum within ten days after the Employee resigns for such Good Reason, and the second and third preceding sentences of this subparagraph shall not apply. During the 18 month period following a Compensable Termination, the Company shall also provide the Employee with COBRA coverage at its expense. For purposes of this section 5, the Employee’s “Annual Cash Compensation” shall mean the sum of (I) the Employee’s highest Base Salary (i.e., one year’s salary at its highest rate), plus (II) the “Applicable Average Bonus” as defined in subparagraph 5(a)(i)(B) above.

               (ii) If the term of this Agreement as the same may have been extended in accordance with the provisions of section 2 above is not extended or further extended because BPI or an Affiliate gives written notice of non-extension to the Employee as provided in section 2 above, and there is not Good Cause for termination of the Employee’s employment at the time of giving such notice, and the Employee does not thereafter resign for Good Reason during the term of this Agreement as permitted by paragraph 5(d)(v) below, then the Company, subject to fulfillment by the Employee of his obligations under this Agreement during the balance of the term and his compliance with the provisions of sections 6 and 7 below, relating to confidential information, non-solicitation and disparaging remarks, shall, as non-renewal compensation, and as additional consideration for the Employee’s undertakings under this Agreement including sections 6 and 7 below, pay the Employee an amount of money (the “Non-Renewal Payment”) equal to the Employee’s Annual Cash Compensation as defined in subparagraph 5(a)(i)(C) above, in addition to any other amounts to which the Employee may be entitled hereunder (including without limitation his annual bonus pursuant to paragraph 4(b) above for the fiscal year of BPI in which his employment terminates and any amounts to which he may be entitled under section 8, 9 or 10 below) or by law or pursuant to the terms of any compensation or benefit plan or arrangement in which he participated before his employment terminated. The Non-Renewal Payment shall be paid in a lump sum within ten days after the date on which the Employee’s employment terminates. During the 18 month period following the termination of his employment, the Company shall also provide the Employee with COBRA coverage at its expense.

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               (iii) The foregoing provisions of (including any payments under) this paragraph 5(a) shall be in lieu of any severance pay that may be payable under any plan or practice of BPI or any Affiliate, but shall be in addition to (and not in lieu of) any payments to which the Employee may be entitled under sections 8, 9 and 10 below. Subparagraphs 5(a)(i)(C) and 5(a)(ii) above are intended to be mutually exclusive, and in no event shall such subparagraphs, either individually or collectively, be construed to require the Company to pay an amount of money in excess of two and one-half (2¹/₂) times the Employee’s Annual Cash Compensation under such subparagraphs, either individually or collectively, in addition to the 18 months of COBRA coverage provided for therein. The Employee shall not be required to mitigate the amount of any payment or benefit provided for in this Agreement (including but not limited to any payment provided for above in this paragraph 5(a)) by seeking other employment or otherwise, nor shall any compensation earned by the Employee in other employment or otherwise reduce the amount of any payment or benefit provided for in this Agreement.

     (b) Termination by BPI or an Affiliate for Good Cause or by the Employee without Good Reason. If, during the term of this Agreement, the Employee’s employment by the Company and its subsidiaries is terminated by BPI or an Affiliate for Good Cause or by the Employee without Good Reason, the Employee shall not be entitled to receive any compensation under section 4 above accruing after the date of such termination or any payment under paragraph 5(a) above. However, any obligations of BPI or the Company under sections 8, 9 and 10 shall not be affected by such termination of employment. The provisions of this paragraph 5(b) shall be in addition to, and not in lieu of, any other rights and remedies the Company may have at law or in equity or under any other provision of this Agreement in respect of such termination of employment. However, if during the term of this Agreement the Employee’s employment is terminated by the Employee without Good Reason and the Employee gives BPI at least 120 days’ advance notice of such termination, then the Employee shall not have any obligation or liability to BPI or any Affiliate under this Agreement on account of such termination of employment, but his obligations under Section 6 and 7 hereof shall not be affected by such termination of employment.

     (c) Good Cause Defined. For purposes of this Agreement, BPI and its Affiliates shall have “Good Cause” to terminate the Employee’s employment by the Company during the term of this Agreement only if:

               (i) (A) the Employee fails to substantially perform his duties hereunder for any reason or to devote substantially all his business time exclusively to the affairs of the Company (including Company activities on behalf of BPI or an Affiliate), other than by reason of a medical condition that prevents the Employee from substantially performing his duties hereunder even with a reasonable accommodation by the Company, or fails to obtain the consent of the BPI Board to his service on the board of directors of another company, and (B) such failure is not discontinued within a reasonable period of time, in no event to exceed 30 days, after the Employee receives written notice from BPI or an Affiliate of such failure; or

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               (ii) the Employee commits an act of dishonesty resulting or intended to result directly or indirectly in gain or personal enrichment at the expense of BPI or an Affiliate, or engages in conduct that constitutes a felony in the jurisdiction in which the Employee engages in such conduct; or

               (iii) the Employee is grossly negligent or engages in willful misconduct or insubordination in the performance of his duties hereunder; or

               (iv) the Employee materially breaches his obligations under section 6 or paragraph 7(a) below, relating to confidential information and non-solicitation.

Any foregoing provision of this paragraph 5(c) to the contrary notwithstanding, BPI and its Affiliates shall not have “Good Cause” to terminate the Employee’s employment within three years after a Change in Control or Potential Change in Control (as such terms are defined in section 11 below) unless (A) the Employee’s act or omission is willful and has a material adverse effect upon BPI, (B) the BPI Board gives the Employee (I) written notice warning of its intention to terminate the Employee for Good Cause if the specified act or omission alleged to constitute Good Cause is not discontinued and, if curable, cured, and (II) a reasonable opportunity after receipt of such written notice, but in no event less than two weeks, to discontinue and, if curable, cure the conduct alleged to constitute Good Cause, and (C) the Employee fails to discontinue and, if curable, cure the act or omission in question; provided that clauses (B) and (C) of this sentence shall not apply with respect to conduct on the part of the Employee that constitutes a felony in the jurisdiction in which the Employee engages in such conduct, and, provided further, that this sentence shall not apply to conduct involving moral turpitude. For all purposes of this Agreement, no act, or failure to act, on the Employee’s part shall be deemed “willful” unless done, or omitted to be done, by him intentionally and in bad faith (i.e., without reasonable belief that his action or omission was in furtherance of the interests of BPI or an Affiliate).

          (d) Good Reason Defined. For purposes of this Agreement, the Employee shall have “Good Reason” to terminate his employment during the term of this Agreement only if:

               (i) the Company fails to pay or provide any amount or benefit that the Company is obligated to pay or provide under section 4 above or section 8, 9 or 10 below and the failure is not remedied within 30 days after BPI receives written notice from the Employee of such failure; or

               (ii) the Employee is assigned duties, responsibilities or reporting relationships not contemplated by section 3 above without his consent, or his duties or responsibilities or power or authority contemplated by section 3 above are limited in any respect materially detrimental to him, and in either case the situation is not

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remedied within 30 days after BPI receives written notice from the Employee of the situation; or

               (iii) he is removed from, or not elected or reelected to, the office, title or position of President and Chief Operating Officer of DPI, and BPI and the Affiliates do not have Good Cause for doing so; or

               (iv) BPI or an Affiliate relocates his office outside of either the Company’s principal executive offices or the greater New York City metropolitan area without his written consent (given in a personal rather than representative capacity), and the situation is not remedied within 30 days after BPI receives written notice from the Employee of the situation; or

               (v) BPI or an Affiliate gives the Employee written notice, in the manner set forth in paragraph 13(e) or (f) below, prior to any Extension Effective Date, that the term of this Agreement that is in effect at the time such written notice is given is not to be extended or further extended, as the case may be; provided that the giving of such written notice to the Employee shall constitute Good Reason only if and when the Employee shall have performed such of his duties and responsibilities for such period of time, in no event to exceed ninety (90) days after the giving of such notice, as the COO, the CEO or the BPI Board may reasonably request in writing to transition his duties and responsibilities; or

               (vi) a Change in Control occurs and as a result thereof either (A) equity securities of BPI cease to be publicly-traded, or (B) the Employee is not elected or designated to serve as the sole President and Chief Operating Officer of DPI or its survivor in the Change in Control; or

               (vii) a Change in Control or Potential Change in Control occurs and (A) the dollar value of the stock optioned to the Employee annually thereafter is less than the average annual dollar value of the stock that was optioned to the Employee during the four years prior to the Change in Control or Potential Change in Control, or (B) the material terms of such options (including without limitation vesting schedules) are less favorable to the Employee than the material terms of the options that were granted to the Employee during the four years prior to the Change in Control or Potential Change in Control, and in either case (A) or (B) the situation is not remedied within 30 days after BPI receives written notice from the Employee of the situation. For purposes of (A) and (B) of this subparagraph 5(d)(vii), if free-standing stock appreciation rights are granted to the Employee (such as those described in paragraph 4(c) above), the stock subject to such rights shall be considered stock that is optioned to the Employee, and if alternative stock appreciation rights (aka tandem stock appreciation rights) are granted to the Employee, the stock appreciation rights shall be considered terms of the options to which they are alternative/tandem; or

               (viii) BPI or a Permitted Assignee attempts to assign any of its rights or obligations under this Agreement other than in accordance with paragraph 13(d)

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below and does not remedy the situation within 30 days after BPI receives written notice from the Employee of the situation.

In no event shall the Employee’s continued employment after any of the foregoing constitute his consent to the act or omission in question, or a waiver of his right to terminate his employment for Good Reason hereunder on account of such act or omission.

          (e) Disability

               (i) Notwithstanding any provision of this Agreement to the contrary, (A) if during the term of this Agreement as the same may be extended from time to time pursuant to section 2 above, a medical condition prevents the Employee, even with a reasonable accommodation by the Company, from substantially performing his duties hereunder (it being understood that a transitory illness, such as a cold or flu, that prevents the Employee from substantially performing his duties hereunder during a brief period is not such a medical condition), then until the date, if any, on which the Employee recovers from such medical condition (the “Evaluation Period”), BPI or an Affiliate may terminate the Employee’s employment only pursuant to subparagraph 5(e)(ii) below (a “Disability Termination”) or for willful misconduct constituting Good Cause under paragraph 5(c) above, and (B) if any notice of non-extension of the term of this Agreement was given before the Evaluation Period, or is given during the Evaluation Period, whether by BPI, an Affiliate or the Employee, pursuant to section 2 above, and, but for this clause (B), the term of this Agreement would expire during the Evaluation Period as a result of such notice of non-extension having been given, then the term of this Agreement will automatically be extended without action by any party until the Employee recovers from such medical condition. For purposes of this paragraph 5(e), the Employee will be deemed to recover from a medical condition only if and when he both (I) has been able to substantially perform his duties hereunder (either with or without a reasonable accommodation by the Company) for more than six months, consecutive or non-consecutive, within any period of 12 or fewer consecutive months commencing on or after the commencement of the Evaluation Period, and (II) is not entitled to receive long-term disability (“LTD”) benefits under a LTD plan of BPI or a Subsidiary.

               (ii) Except as otherwise provided in subparagraph 5(e)(i) above, during the Evaluation Period, BPI or an Affiliate may terminate the Employee’s employment only in the event of a “Disability”, which for this purpose means that a medical condition either (A) has prevented the Employee, even with a reasonable accommodation by the Company, from substantially performing his duties hereunder for six months, consecutive or non-consecutive, in any period of 12 or fewer consecutive months, or (B) entitles the Employee to receive LTD benefits under a LTD plan of BPI or any Subsidiary. The Company will give the Employee at least ten (10) days advance written notice of a Disability Termination. Notwithstanding any provision of this Agreement to the contrary, a Disability Termination will not be treated as a termination to which the provisions of paragraph 5(a) or 5(b) apply.

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               (iii) In the event of a Disability Termination, the Company will pay or provide the Employee with the following:

                      (A) With respect to the period ending on the date of the Disability Termination, the Employee will receive all of the compensation and benefits provided by Section 4 above. The amount of any compensation payable to the Employee with respect to the period ending on the date of the Disability Termination may be reduced by (I) any payments which the Employee receives with respect to the same period because of short- or long-term disability under any disability plan of BPI or any Subsidiary, and (II) any income (whether from Social Security, workers compensation or any other source) that is deducted in computing the amount of such payments under any disability plan of BPI or any Subsidiary;

                      (B) During the period from the date of the Disability Termination until the first to occur of (I) the date, if any, on which the Employee recovers from the disabling medical condition, (II) the Employee’s attainment of age 65, and (III) the death of the Employee (such period being referred to in subparagraph 5(e)(iii)(C) below as the “LTD Period”), the Company will pay the Employee a monthly amount of money equal to the excess, if any, of (aa) over (bb) where (aa) is 60% of one-twelfth (l/12^th) of the Employee’s Base Salary (as defined in subparagraph 4(a) above) immediately before the Disability Termination (i.e., 60% of the Employee’s monthly salary at its highest rate), and (bb) is the sum of (1) the monthly LTD benefit (if any) which the Employee receives with respect to the same month under a LTD plan of BPI or any Subsidiary, plus (2) any income (whether from Social Security, workers compensation or any other source) that is deducted in computing the amount of such monthly LTD benefit; and

                      (C) Promptly following the LTD Period as defined in subparagraph 5(e)(iii)(B) above (and whether or not the Employee received payments pursuant to that subparagraph during the LTD Period), the Company will pay the Employee or his estate or designated beneficiary a lump sum amount of money equal to the excess, if any, of (I) over (II) where (I) is the Severance Payment as defined in subparagraph 5(a)(i)(C) above, and (II) is the cumulative monthly payments made by the Company to the Employee pursuant to subparagraph 5(e)(iii)(B) above (if any). In calculating the amount payable pursuant to this subparagraph 5(e)(iii)(C) (including the payments made pursuant to subparagraph 5(e)(iii)(B) above), no adjustments will be made for interest or otherwise for the time value of money.

The payments and benefits provided by the foregoing provisions of this subparagraph 5(e)(iii) are in addition to and not in lieu of any other amounts to which the Employee is entitled by law or pursuant to the terms of any compensation or benefit plan or arrangement in which he participated prior to the Disability Termination, and any amounts payable pursuant to section 8, 9 or 10 below.

     6. Confidential Information. The Employee agrees not to disclose, either while in the Company’s employ or at any time thereafter, to any person not employed by BPI or an Affiliate, or not engaged to render services to BPI or an Affiliate, except with

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the prior written consent of an authorized officer of BPI or an Affiliate or as necessary or appropriate for the performance of his duties hereunder, any confidential information obtained by him while in the employ of the Company, including, without limitation, information relating to any of the inventions, processes, formulae, plans, devices, compilations of information, research, methods of distribution, suppliers, customers, client relationships, marketing strategies or trade secrets of BPI or any Affiliate; provided, however, that this provision shall not preclude the Employee from use or disclosure of information known generally to the public or of information not considered confidential by persons engaged in the businesses conducted by BPI or any Affiliate, or from disclosure required by law or court order. The Employee also agrees that upon leaving the Company’s employ he will not take with him, without the prior written consent of an authorized officer of the Company, and she will surrender to the Company, any record, list, drawing, blueprint, specification or other document or property of BPI or an Affiliate, together with any copy or reproduction thereof, mechanical or otherwise, which is of a confidential nature relating to BPI or an Affiliate, or without limitation, relating to its or their methods of distribution, suppliers, customers, client relationships, marketing strategies or any description of any formulae or secret processes, or which was obtained by him or entrusted to him during the course of his employment with the Company.

     7. Restrictive Covenants

          (a) Non-Solicitation. Employee covenants and agrees that, during his employment by the Company and during the one year period immediately following the termination of his employment with the Company for any reason (including, without limitation, a termination of employment by BPI or an Affiliate without cause and a voluntary termination of employment by the Employee, in either case whether during the term of this Agreement, at the expiration of the term of this Agreement or at any time thereafter), he will not solicit or attempt to persuade any employee of BPI or any Affiliate (except the Employee’s personal secretary or administrative assistant), or any other person who performs services for BPI or an Affiliate at the time the Employee’s employment terminates or at any time within one year thereafter, to terminate or reduce or refrain from engaging in his or her employment or other service relationship with BPI or an Affiliate; provided, however, that responding to inquiries from any such employees or other persons that are not initiated by the Employee, and subsequently hiring such employees or other persons following the termination of their employment with BPI and any Affiliates shall be permitted.

          (b) Specific Enforcement. Employee recognizes and agrees that, by reason of his knowledge, experience, skill and abilities, his services are extraordinary and unique, that the breach or attempted breach of any of the restrictions set forth above in this section 7 will result in immediate and irreparable injury for which the Company will not have an adequate remedy at law, and that the Company shall be entitled to a decree of specific performance of those restrictions and to a temporary and permanent injunction enjoining the breach thereof, and to seek any and all other remedies to which the

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Company may be entitled, including, without limitation, monetary damages, without posting bond or furnishing security of any kind.

     (c) Restrictions Reasonable. Employee specifically and expressly represents and warrants that (i) he has reviewed and agreed to the restrictive covenants contained in this section 7 and their contemplated operation after receiving the advice of counsel of his choosing; (ii) he believes, after receiving such advice, that the restrictive covenants and their contemplated operation are fair and reasonable; (iii) he will not seek or attempt to seek to have the restrictive covenants declared invalid, and, after receiving the advice of counsel, expressly waives any right to do so; and (iv) if the full breadth of any restrictive covenant and/or its contemplated operation shall be held in any fashion to be too broad, such covenant or its contemplated operation, as the case may be, shall be interpreted in a manner as broadly in favor of the beneficiary of such covenant as is legally permissible. Employee recognizes and agrees that the restrictions on his activities contained in this section 7 are required for the reasonable protection of BPI and its investments; and that the restriction on his activities set forth in paragraph 7(a) will not deprive the Employee of the ability to earn a livelihood.

     (d) Non-Disparagement. Employee covenants and agrees that, during the one year period immediately following the termination of his employment with the Company for any reason (including, without limitation, a termination of employment by BPI or an Affiliate without cause and a voluntary termination of employment by the Employee, in either case whether during the term of this Agreement, at the expiration of the term of this Agreement or at any time thereafter), he will not make disparaging remarks about BPI or any Affiliate or any of their officers, directors or employees, unless required by law or reasonably necessary to assert or defend his position in a bona fide dispute arising out of or relating to this Agreement or the breach thereof.

     (e) Effect on Termination Payments. The Employee recognizes and agrees that the Company shall not be obligated to make any payments provided for in paragraph 5 (a) or 5(e) above if the Employee violates the provisions of section 6 or paragraph 7(a) or 7(d) above during the one year period immediately following the termination for any reason of his employment with the Company. In addition, the Employee recognizes and agrees that, if the Employee violates such provisions, the Company may recoup any payments the Company may have theretofore made pursuant to paragraph 5(a) or 5(e) above and any payments it may thereafter make under paragraph 5(a) or 5(e). The foregoing provisions of this paragraph 7(e) shall be in addition to and not by way of limitation of any other rights and remedies the Company may have in respect of the violation in question.

     8. Indemnification

          To the fullest extent permitted by applicable law, the Company shall indemnify, defend and hold harmless the Employee from and against any and all claims, demands, actions, causes of action, liabilities, losses, judgments, fines, costs and expenses (including reasonable attorneys’ fees and settlement expenses) arising from or relating to his service or status as an officer, director, employee, agent or representative

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of BPI or any Affiliate, or in any other capacity in which the Employee serves or has served at the request of, or for the benefit of, BPI or an Affiliate. The Company’s obligations under this section 8 shall be in addition to, and not in derogation of, any other rights the Employee may have against BPI or any Affiliate to indemnification or advancement of expenses, whether by statute, contract or otherwise.

     9. Certain Additional Payments by the Company

          (a) Anything in this Agreement (other than the second sentence of this paragraph 9(a)) to the contrary notwithstanding, in the event it shall be determined that any payment or distribution by BPI or an Affiliate to or for the benefit of the Employee (whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise, but determined without regard to any additional payments required under this section 9) (a “Payment”), would be subject to the excise tax imposed by Section 4999 of the United States Internal Revenue Code (the “Code”) or any interest or penalties are incurred by the Employee with respect to such excise tax (such excise tax, together with any such interest and penalties, are hereinafter collectively referred to as the “Excise Tax”), then the Employee shall be entitled to receive an additional payment (a “Gross-Up Payment”) in an amount such that after payment by the Employee of all taxes and any benefits that result from the deductibility by the Employee of such taxes (including, in each case, any interest or penalties imposed with respect to such taxes), including, without limitation, any income taxes (and any interest and penalties imposed with respect thereto) and Excise Tax imposed upon the Gross-Up Payment, the Employee retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments. However, if it shall be determined that none of the Payments would be subject to the Excise Tax if the total Payments were reduced in the aggregate by $25,000 or less, then in that event the total Payments shall be reduced by the smallest amount (in no event to exceed $25,000 in the aggregate) necessary to ensure that none of the Payments will be subject to the Excise Tax. The decision as to which Payments shall be so reduced shall be made by the Employee, unless allowing the decision to be made by the Employee will result in any income inclusion pursuant to Code section 409A(a)(l)(A), in which case the Payments shall be reduced in the chronological order in which they are payable to or on behalf of the Employee.

          (b) Subject to the provisions of paragraph 9(a) above and 9(c) below, all determinations required to be made under this section 9, including whether and when a Gross-Up Payment is required and the amount of such Gross-Up Payment and the assumptions to be utilized in arriving at such determination, and whether Payments are to be reduced pursuant to the second sentence of paragraph 9(a) above, shall be made by Deloitte & Touche or such other certified public accounting firm as may be designated by the Employee (the “Accounting Firm”) which shall provide detailed supporting calculations both to BPI and the Employee within 15 business days of the receipt of notice from the Employee that there has been a Payment, or such earlier time as is requested by BPI. In the event that the Accounting Firm is serving as accountant or auditor for the individual, entity or group effecting the “change in ownership or effective control” or “change in the ownership of a substantial portion of assets” (within the

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meaning of Code section 280G(b)(2)(A)) that gives rise to the Excise Tax, or in the event that the Accounting Firm for any reason is unable or unwilling to make the determinations required hereunder, the Employee shall appoint another nationally recognized accounting firm to make the determinations required hereunder (which accounting firm shall then be referred to as the Accounting Firm hereunder). All fees and expenses of the Accounting Firm shall be borne solely by the Company. Any Gross-Up Payment, as determined pursuant to this section 9, shall be paid by the Company to the Employee within five days of the receipt of the Accounting Firm’s determination. Any determination by the Accounting Firm shall be binding upon the Company and the Employee. As a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments which will not have been made by the Company should have been made (an “Underpayment”), consistent with the calculations required to be made hereunder. In the event that BPI exhausts its remedies pursuant to paragraph 9(c) and the Employee thereafter is required to make a payment of any Excise Tax, the Accounting Firm shall determine the amount of the Underpayment that has occurred and any such Underpayment, along with any penalty and interest imposed with respect to such Underpayment, shall be promptly paid by the Company to or for the benefit of the Employee.

          (c) The Employee shall notify BPI in writing of any claim by the Internal Revenue Service that, if successful, would require either the payment by the Company of the Gross-Up Payment or the reduction of Payments pursuant to the second sentence of paragraph 9(a) above. Such notification shall be given as soon as practicable but no later than ten business days after the Employee is informed in writing of such claim and shall apprise BPI of the nature of such claim and the date on which such claim is requested to be paid. The Employee shall not pay such claim prior to the expiration of the 30-day period following the date on which she gives such notice to BPI (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If BPI notifies the Employee in writing prior to the expiration of such period that it desires to contest such claim, the Employee shall:

               (i) give BPI any information reasonably requested by BPI relating to such claim,

               (ii) take such action in connection with contesting such claim as BPI shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by BPI,

               (iii) cooperate with BPI in good faith in order effectively to contest such claim, and

               (iv) permit BPI to participate in any proceedings relating to such claim;

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provided, however, that the Company shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall indemnify and hold the Employee harmless, on an after-tax basis, for any Excise Tax or income tax (including interest and penalties with respect thereto) imposed as a result of such representation and payment of costs and expenses. Without limitation on the foregoing provisions of this paragraph 9(c), BPI shall control all proceedings taken in connection with such contest and, at its sole option, may pursue or forgo any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim and may, at its sole option, either direct the Employee to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and the Employee agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as BPI shall determine, provided, however, that if BPI directs the Employee to pay such claim and sue for a refund, the Company shall, if permissible under Section 402 of the Sarbanes-Oxley Act of 2002, advance the amount of such payment to the Employee, on an interest-free basis or, if such an advance is not permissible thereunder, pay the amount of such payment to the Employee as additional compensation, and shall indemnify and hold the Employee harmless, on an after-tax basis, from any Excise Tax or income tax (including interest or penalties with respect thereto) imposed with respect to such advance or additional compensation; and further provided that any extension of the statute of limitations relating to payment of taxes for the taxable year of the Employee with respect to which such contested amount is claimed to be due is limited solely to such contested amount. Furthermore, BPI’s control of the contest shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and the Employee shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority.

          (d) If, after the receipt by the Employee of an amount advanced or paid by the Company pursuant to paragraph 9(a) or 9(c), the Employee becomes entitled to receive any refund with respect to such claim, the Employee shall (subject to the Company’s complying with the requirements of paragraph 9(c)) promptly pay to the Company the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto). If, after the receipt by the Employee of an amount advanced by the Company pursuant to paragraph 9(c), a determination is made that the Employee shall not be entitled to any refund with respect to such claim and BPI does not notify the Employee in writing of its intent to contest such denial of refund prior to the expiration of 30 days after such determination, then such advance shall be forgiven and shall not be required to be repaid and the amount of such advance shall offset, to the extent thereof, the amount of Gross-Up Payment required to be paid.

     10. Certain Enforcement Matters

          (a) If, after a Change in Control or Potential Change in Control, a dispute arises (i) with respect to this Agreement or the breach thereof, or (ii) with respect to the Employee’s or the Company’s or BPI’s rights or obligations under this Agreement, including but not limited to any such dispute between the Employee and BPI, the

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Company shall pay or reimburse the Employee for all reasonable costs and expenses (including court costs, arbitrators’ fees and reasonable attorneys’ fees and disbursements) the Employee incurs in connection with such dispute, including without limitation costs and expenses he incurs to obtain payment or otherwise enforce his rights under this Agreement, or to obtain payment of costs and expenses due under this paragraph 10(a). In addition, the Company shall pay the Employee such additional amount (a “Gross Up”) as will be sufficient, after the Employee pays his tax liability with respect to the Gross Up from the Gross Up, to pay all of his federal, state and local tax liability with respect to any costs and expenses that are paid by the Company pursuant to this paragraph 10(a). The Company shall promptly pay or reimburse the Employee for all such costs and expenses as he incurs them, upon presentation of reasonable documentation of such costs and expenses, and shall promptly pay the related Gross Up as and when it pays or reimburses costs and expenses. The Employee shall not be obligated to repay any such costs, expenses or Gross Up unless it is finally determined by the trier of fact in a non-appealable judicial or arbitral decision or ruling (as applicable) that the Employee’s principal positions with respect to the principal matter(s) in dispute were unreasonable and pursued in bad faith.

          (b) Any payments to which the Employee may be entitled under this Agreement, including, without limitation, under section 5, 8, 9 or 10 hereof, shall be made forthwith on the applicable date(s) for payment specified in this Agreement. If for any reason the amount of any payment due to the Employee cannot be finally determined on that date, such amount shall be estimated on a good faith basis by the Company and the estimated amount shall be paid no later than within 10 days after such date. As soon as practicable thereafter, the final determination of the amount due shall be made and any adjustment requiring a payment to or from the Employee shall be made as promptly as practicable.

          (c) Any controversy or claim arising, after a Change in Control or Potential Change in Control, out of or related to this Agreement or the breach thereof, shall be settled by binding arbitration in the City of New York, in accordance with the employment dispute arbitration rules of the American Arbitration Association then in effect, and the arbitrator’s decision shall be binding and final and judgment upon the award rendered may be entered in any court having jurisdiction thereof, except that the Employee may elect to have any such controversy or claim settled by judicial determination in lieu of arbitration by bringing a court action, if he is the plaintiff or, if he is not the plaintiff, demanding such judicial determination within the time to answer any complaint in any arbitration action that may be commenced.

     11. Change in Control

          (a) The term “Change in Control” as used in this Agreement means a change of control of BPI of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), whether or not BPI is then subject to such reporting requirement; provided that, whether or not any of the following

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events would constitute a change of control of such a nature, a Change in Control shall be deemed to occur for purposes of this Agreement if and when any of the following events occur:

          (i) any “person” (as such term is used in Sections 13(d) and 14(d)(2) of the Exchange Act) (a “Person”), other than—

     (A) BPI,

     (B) a Subsidiary,

     (C) a trustee or other fiduciary holding securities under an employee benefit plan of BPI or a Subsidiary, or

     (D) an underwriter engaged in a distribution of BPI stock to the public with BPI’s written consent,

becomes the beneficial owner (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of Voting Securities that represent more than thirty percent (30%) of the combined voting power of the then outstanding Voting Securities. However, if the Person in question is an institutional investor whose investment in Voting Securities is purely passive when such Person becomes such a more than thirty percent beneficial owner of Voting Securities, then such event (i.e., such Person’s becoming a more than thirty percent beneficial owner of Voting Securities) shall not be deemed to constitute a Change in Control under this subparagraph 11(a)(i) for so long as (and only for so long as) such Person’s investment in Voting Securities remains purely passive; or

          (ii) the stockholders of BPI approve a merger, consolidation, recapitalization or reorganization of BPI or a Subsidiary, reverse split of any class of Voting Securities, or an acquisition of securities or assets by the Company or a Subsidiary, or consummation of any such transaction if stockholder approval is not obtained, other than (A) any such transaction in which the holders of outstanding Voting Securities immediately prior to the transaction receive, with respect to such Voting Securities (or, in the case of a transaction in which BPI is the surviving corporation or a transaction involving a Subsidiary, retain), voting securities of the surviving or transferee entity representing more than fifty percent (50%) of the total voting power outstanding immediately after such transaction, with the voting power of each such continuing holder relative to other such continuing holders not substantially altered in the transaction, or (B) any such transaction which would result in BPI or a Related Party beneficially owning more than 50 percent of the voting securities of the surviving entity outstanding immediately after such transaction; or

          (iii) the stockholders of BPI approve a plan of complete liquidation of BPI or an agreement for the sale or disposition by BPI of all or substantially all of BPP’s assets other than any such transaction which would result in a

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Related Party owning or acquiring more than 50 percent of the assets owned by BPI immediately prior to the transaction; or

               (iv) the persons who were members of the BPI Board immediately before a tender or exchange offer for shares of Common Stock of BPI by any person other than BPI or a Related Party, or before a merger or consolidation of BPI or a Subsidiary, or contested election of the BPI Board, or before any combination of such transactions, cease to constitute a majority of the BPI Board as a result of such transaction or transactions.

          (b) For purposes of this Agreement, including paragraph 11(a) above:

               (i) the term “Related Party” shall mean (A) a Subsidiary, (B) an employee or group of employees of BPI or any Subsidiary, (C) a trustee or other fiduciary holding securities under an employee benefit plan of BPI or any Subsidiary, or (D) a corporation or other form of business entity owned directly or indirectly by the stockholders of BPI in substantially the same proportion as their ownership of Voting Securities;

               (ii) the term “Subsidiary” means a corporation or other form of business association of which shares (or other ownership interests) having more than 50% of the voting power are, or in the future become, owned or controlled, directly or indirectly, by BPI; and

               (iii) the term “Voting Securities” shall mean any securities of BPI which carry the right to vote generally in the election of directors.

          (c) For purposes of this Agreement, a “Potential Change in Control” means that (i) BPI or a Subsidiary enters into an agreement, the consummation of which would result in the occurrence of a Change of Control; or (ii) the BPI Board adopts a resolution to the effect that, for purposes of this Agreement, a potential change in control has occurred.

          (d) A “Change in Control” as such term is used in this Agreement shall also be deemed to occur if either Barr Laboratories. Inc. (a Delaware corporation), or a Permitted Assignee to which BPI assigns any of its rights or obligations under this Agreement in accordance with paragraph 13(d) below, ceases to be an Affiliate.

     12. Severability; Survival

          (a) In the event that any provision of this Agreement shall be determined to be invalid or unenforceable for any reason, the remaining provisions of this Agreement not so invalid or unenforceable shall be unaffected thereby and shall remain in full force and effect to the fullest extent permitted by law; and

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          (b) Any provision of this Agreement which may for any reason be invalid or unenforceable in any jurisdiction shall remain in effect and be enforceable in any jurisdiction in which such provision shall be valid and enforceable.

          (c) The provisions of sections 6, 7, 8, 9 and 10 and paragraph 5(e) of this Agreement, and any other provision of this Agreement which is intended to apply, operate or have effect after the expiration or termination of the term of this Agreement, or at a time when the term of this Agreement may have expired or terminated, shall survive the expiration or termination of the term of this Agreement for any reason.

      13. General Provisions

          (a) No right or interest to or in any payments to be made under this Agreement shall be subject to anticipation, alienation, sale, assignment, encumbrance, pledge, charge or hypothecation or to execution, attachment, levy or similar process, or assignment by operation of law. All payments to be made by the Company hereunder shall be subject to the withholding of such amounts as the Company may determine it is required to withhold under the laws or regulations of any governmental authority, whether foreign, federal, state or local.

          (b) To the extent that the Employee acquires a right to receive payments from the Company under this Agreement, such right shall be no greater than the right of an unsecured general creditor of the Company. All payments to be made hereunder shall be paid from the general funds of the Company and no special or separate fund shall be established and no segregation of assets shall be made to assure payment of any amount hereunder.

          (c) This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of New York, without giving effect to the principles of conflicts of laws of that State.

          (d) This Agreement shall be binding upon and inure to the benefit of BPI, its successors and permitted assigns, and the Employee, his heirs, devisees, distributees and legal representatives. BPI may assign any or all of its rights and obligations under this Agreement to any Subsidiary or Affiliate (collectively, “Permitted Assignees”), and, if any rights or obligations are assigned pursuant to this sentence, the assignee may thereafter assign any or all of such rights and obligations to any other Permitted Assignee; provided that (i) the Employee’s title, authority, duties and responsibilities, reporting relationships and office location immediately before any such assignment are not changed in any respect materially detrimental to the Employee in connection with such assignment without the written consent of the Employee (given in a personal capacity rather than a representative capacity), (ii) no such assignment shall relieve BPI of any past, present or future payment or benefit obligation hereunder without the express written consent of the Employee (also given in a personal capacity), and (iii) no assignment may be made after a Change in Control or Potential Change in Control without the express written consent of the Employee (also given in a personal capacity).

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In the event of an assignment in accordance with this paragraph, (A) the term “Company” as used in this Agreement shall be deemed to refer, with respect to the period commencing on the effective date of such assignment, to the Permitted Assignee to which such rights or obligations are assigned and, with respect to any obligations that are assigned hereunder, to BPI and such Permitted Assignee jointly and severally, and (B) the term “BPI” as used in this Agreement shall continue to refer exclusively to BPI as defined on page 1 of this Agreement and its successors. The foregoing provisions of this paragraph are intended to enable BPI to assign its right to employ the Employee under this Agreement to an Affiliate but only if (I) such assignment does not change to the material detriment of the Employee his title, authority, duties, responsibilities, reporting relationships, office location or compensation, (II) such assignment does not result in any Affiliate replacing BPI as an obligor under this Agreement, and (III) the Employee expressly consents in writing to any assignment that is to occur after a Change in Control or Potential Change in Control. For the avoidance of doubt, as an example, the Employee would not have Good Reason under subparagraph 5(d)(ii), (iii) or (iv) above if as a result of an assignment in accordance with this paragraph the Employee were to cease to be employed by BPI as President and Chief Operating Officer of DPI, he were employed by the Permitted Assignee as President and Chief Operating Officer of DPI, and his authority, duties, responsibilities, reporting relationships and office location were to continue to be those described in subparagraphs 3(a) and 3(b) above as in effect immediately before the assignment. The term “BPI” as used in this Agreement shall include any successor to BPI by merger or operation of law, and the term “Company” shall include any successor to the relevant Permitted Assignee. The rights and obligations of the Employee hereunder are personal to the Employee and may not be assigned by the Employee; provided that nothing herein shall prevent the Employee from assigning the right to any amount that may be payable under this Agreement after the death of the Employee by will or the laws of descent and distribution or to a beneficiary designated by the Employee with the written consent of BPI.

          (e) Any notice or other communication to BPI pursuant to any provision of this Agreement shall be given in writing and will be deemed to have been delivered:

               (i) when delivered in person to the General Counsel of BPI; or

               (ii) one week after it is deposited in the United States certified or registered mail, postage prepaid, addressed to the General Counsel of BPI at 400 Chestnut Ridge Road, Woodcliff Lake, New Jersey 07677 or at such other address of which BPI may from time to time give the Employee written notice in accordance with paragraph 13(f) below.

          (f) Any notice or other communication to the Employee pursuant to any provision of the Agreement shall be given in writing and will be deemed to have been delivered:

               (i) when delivered to the Employee in person, or

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               (ii) one week after it is deposited in the United States certified or registered mail, postage prepaid, addressed to the Employee at his address as it appears on the records of the Company or at such other address of which the Employee may from time to time give BPI written notice in accordance with paragraph 13(e) above.

          (g) No provision of this Agreement may be amended, modified or waived unless such amendment, modification or waiver shall be agreed to in a writing signed by the Employee and an authorized officer of BPI.

          (h) This instrument contains the entire agreement of the parties relating to the subject matter of this Agreement and supersedes and replaces all prior agreements and understandings with respect to such subject matter, and the parties have made no agreements, representations or warranties relating to the subject matter of this Agreement which are not set forth herein.

          (i) BPI and DPI agree to amend this Agreement on or before December 31, 2005 (or such later date, if any, to which the December 31, 2005 date referred to in Q&A-19 of IRS Notice 2005-1 is extended) in the respects that BPI reasonably determines to be necessary or advisable to enable the Employee to receive all amounts and benefits payable under this Agreement at the times herein provided (or as close thereto as is practicable and permissible) without inclusion of any amounts or benefits in the Employee’s income pursuant to Section 409A(a)(l)(A) of the Code. BPI and DPI also agree to use commercially reasonable efforts to administer this Agreement, and operate any deferred compensation plans in which the Employee participates from time to time that are aggregated with this Agreement for purposes of Section 409A of the Code (e.g., account balance plans, nonaccount balance plans, and plans that are neither account balance nor nonaccount balance plans), in good faith compliance with Section 409 A of the Code to the extent necessary to avoid inclusion of any amounts or benefits payable hereunder in the Employee’s income pursuant to Section 409A(a)(l)(A) of the Code.

 14. Representations and Warranties of the Employee. The Employee represents and warrants that:

          (a) his negotiation, execution and performance of this Agreement, and his compliance with the terms and conditions of this Agreement, does not and will not conflict with or result in the breach by him of any agreement to which he is a party or by which he may be bound,

          (b) in connection with the negotiation of this Agreement he has not violated, and in connection with his employment with the Company he will not violate, any non-solicitation covenant, non-competition covenant or other similar covenant or agreement by which he is or may be bound, and

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               (c) in connection with the negotiation of this Agreement or his employment with the Company he has not used or disclosed, and will not use or disclose, any confidential or proprietary information he may have obtained in connection with employment with any prior employer.

[This space left blank intentionally]

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     IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written.

	BARR PHARMACEUTICALS, INC.
	By: /s/ [ILLEGIBLE]
[SEAL]
Attest:
/s/ [ILLEGIBLE]
Secretary
	DURAMED PHARMACEUTICALS, INC.
	By: /s/ [ILLEGIBLE]
[SEAL]
Attest:
/s/ [ILLEGIBLE]
Secretary
	/s/ [ILLEGIBLE]
	Employee

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Appendix

Examples Illustrating Intended Operation of Extension Provisions of Paragraph 2

Example 1:

Facts: BPI and its Affiliates do not give the Employee, and the Employee does not give BPI, written notice of non-extension before the date that is six months before the third anniversary of the Commencement Date.

Result: Effective as of the date that is six months before the third anniversary of the Commencement Date, the term of the Agreement is extended 12 months, so that it will expire on the fourth anniversary of the Commencement Date unless further extended in accordance with the provisions of Paragraph 2 of the Agreement.

Example 2:

Facts: BPI or an Affiliate gives the Employee, or the Employee gives BPI, written notice of non-extension before the date that is six months before the third anniversary of the Commencement Date.

Result: The term of the Agreement is not extended, and expires on the third anniversary of the Commencement Date.

Example 3:

Facts: BPI and its Affiliates do not give the Employee, and the Employee does not give BPI, written notice of non-extension before the date that is six months before the fourth anniversary of the Commencement Date.

Result: Effective as of the date that is six months before the fourth anniversary of the Commencement Date, the term of the Agreement as extended in accordance with Example 1 above is further extended 12 months, so that it will expire on the fifth anniversary of the Commencement Date unless further extended in accordance with the provisions of Paragraph 2 of the Agreement.

Example 4:

Facts: BPI or an Affiliate gives the Employee, or the Employee gives BPI, written notice of non-extension on or after the date that is six months before the fourth anniversary of the Commencement Date and before the date that is six months before the fifth anniversary of the Commencement Date.

Result: The term of the Agreement as extended is not further extended, and expires on the fifth anniversary of the Commencement Date.

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EX-31.1

EXHIBIT 31.1

CERTIFICATION OF BRUCE L. DOWNEY PURSUANT TO
EXCHANGE ACT RULES 13a-14(a) AND 15d-14(a), AS ADOPTED
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Bruce L. Downey, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Barr Pharmaceuticals, Inc.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rule 13a15(f) and 15(d)-15(f) for the registrant and have:

a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.
c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 8, 2006

/s/ Bruce L. Downey  

Bruce L. Downey 

Chairman of the Board and Chief
Executive Officer 

EX-31.2

EXHIBIT 31.2

CERTIFICATION OF WILLIAM T. MCKEE PURSUANT TO
EXCHANGE ACT RULES 13a-14(a) AND 15d-14(a), AS ADOPTED
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, William T. McKee, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Barr Pharmaceuticals, Inc.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rule 13a15(f) and 15(d)-15(f) for the registrant and have:

a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.
c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 8, 2006

/s/ William T. McKee  

William T. McKee 

Vice President, Chief Financial Officer,
and Treasurer 

EX-32

EXHIBIT 32.0

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

Each of the undersigned hereby certifies, in his capacity as an officer of Barr Pharmaceuticals, Inc. (the “Company”), for the purposes of 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that to the best of his knowledge:

(1) The Quarterly Report of the Company on Form 10-Q for the period ended March 31, 2006 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: May 8, 2006

/s/Bruce L. Downey
Bruce L. Downey
Chairman of the Board and Chief Executive Officer

/s/William T. McKee
William T. McKee
Vice President, Chief Financial Officer, and Treasurer

A signed original of this written statement required by Section 906 has been provided to Barr Pharmaceuticals, Inc. and will be retained by Barr Pharmaceuticals, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.