US generic drugmaker Mylan Laboratories has reported strong sales and profit gains that belie the current tough operating environment in the sector, facing increased competition and downward pricing pressure.

But shares in the company fell nearly 2% as investors worried about exposure of its top-selling product to competition.

Mylan’s second-quarter results revealed revenues up 26% to $367 million and operating profit up a massive 132% to $135 million on the back of cost saving related to the closure of its branded drug business last year. Earnings per share came in at $0.36, compared to $0.16 a year earlier.

Operating margins also improved considerably, thanks to higher sales of Mylan’s transdermal patch products, and notably a generic of Johnson & Johnson’s Duragesic (fentanyl) patch, which are less prone to competition.

Mylan remains the only generic drugmaker with a Duragesic clone on the US market, and although the company does not break out sales information for specific products, said the fentanyl patch accounted for around 20% of its total revenues in the quarter.

However, a dark cloud lies on the horizon for Mylan, as another generic version of Duragesic from Greek company Lavipharma was cleared by the US Food and Drug Administration (FDA) in August, just hours after Mylan chief executive Robert Coury said in a statement the company did not expect competition until next March.

Mylan recently bought Indian drugmaker Matrix Laboratories in a move designed to increase its reach in Europe (via Matrix’ Docpharma subsidiary) and emerging markets in Asia, as well as increase the number of active pharmaceutical ingredients (APIs) it can access and cut manufacturing costs.

But investors are less impressed by this deal than others by Mylan’s peers in the generics sector, notably Barr’s takeover of Pliva.