What do you get when you add:

  • Accusations in a newspaper alleging employee deviation from standard operating procedure at a drug company.
  • Claims by the company that the Food and Drug Administration concluded that the "baseless accusations in the article were unfounded."
  • A differing statement by the FDA that it had "formed no conclusions."
  • And an impressive earnings report?

The answer: One volatile week of trading for Mylan (NASDAQ:MYL) that resulted in an overall decrease of about 3%.

That sounds about right to me.

On the earnings conference call yesterday, management stuck by its statements for the week, although it left open the possibility that the FDA could still sanction the company. That lingering doubt should increase the risk premium investors require to hold the stock, but not by that much, as it was a pretty good quarter after all.

Revenue was up 5% year over year, thanks to the launch of a generic version of Abbott Labs' (NYSE:ABT) Depakote. More importantly, the integration of Merck KGaA's generic drug business that it bought at the end of 2007 is paying off nicely. Adjusted earnings per share came in at $0.32 -- 60% higher than the year-ago quarter.

Mylan is smaller than Teva Pharmaceuticals (NASDAQ:TEVA) and Novartis' (NYSE:NVS) generic-drug division, Sandoz, but it still looks to be holding its own. The company is expecting to launch 45 new drugs next year, including about a dozen that are the Holy Grail of generic drugs -- those with limited competition that can usually fetch much higher margins.

Holding Mylan is a little risky right now, but the investment could pay off handsomely if the growth continues and the FDA issues turn out to be minor.

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Fool contributor Brian Orelli, Ph.D., doesn't own shares of any company mentioned in this article. Novartis is a Motley Fool Global Gains recommendation. The Fool has a disclosure policy.