UPDATE 2-Cephalon 3rd quarter profit rises

* Q3 adjusted EPS $1.62 vs Street $1.41

* Revenue up 10 pct to $549.4 million

* Sees 2010 adjusted EPS $6.50-$6.70, sales $2.33-$2.4 bln

* Shares up 1.4 pct after hours (Adds outlook, analyst comment, sales details)

By Bill Berkrot

NEW YORK, Oct 27 (Reuters) - Cephalon Inc CEPH.O reported better-than-expected third-quarter profit on higher sales, lower costs and lower tax expenses related to a legal settlement, and the company issued a 2010 earnings forecast in line with diminished Wall Street estimates.

Cephalon said it expects 2010 adjusted earnings of $6.50 to $6.70 per share and sales of $2.33 billion to $2.4 billion.

While that signals lower growth than the 15 percent to 20 percent annual rate the company had been promising early in the year, it should satisfy investors, analysts said.

"The numbers are robust enough relative to the low expectations going into the quarter," said Leerink Swann analyst Gary Nachman.

"Given how the stock has been performing lately, we feel that that's good enough for people to look forward and get into the stock at these levels," added Nachman, who has a "buy" rating on Cephalon shares, which had fallen about 10 percent over the past five weeks.

Cephalon shares rose to $55.50 after hours from their Nasdaq close at $54.75.

Excluding items, the drugmaker posted an adjusted third-quarter income of $1.62 per share, while analysts on average expected $1.41 per share, according to Thomson Reuters I/B/E/S.

"Overall, I thought they posted a very impressive bottom line number driven by lower than expected costs, so they seem to be managing expenses better than we thought," Nachman said.

The Frazer, Pennsylvania-based company reported net profit of $95.1 million, or $1.31 per share, compared with a profit of $105.6 million, or $1.34 per share, a year ago.

But adjusted income of $126.7 million was up 36 percent from a year ago, when the company had an income tax adjustment cost of $117.6 million compared with a cost of $23.5 million in the 2009 quarter.

Revenue rose 10 percent to $549.4 million, short of Wall Street estimates of $559.1 million.

But sales of the company's flagship sleep disorder drug Provigil, while about flat at $258 million topped analysts' expectations of $249 million.

Sales of the new Provigil followup drug Nuvigil were $21 million, missing Wall Street estimates of $30.8 million, while sales of the new cancer drug Treanda more than doubled to $54.5 million.

Cephalon lowered its 2009 sales forecast to $2.13 billion to $2.18 billion from its prior view of $2.18 billion to $2.23 billion. But it still expects adjusted earnings of $6.30 to $6.40 per share.

"You can continue to sleep well at night knowing that they're going to hit their numbers," said Jefferies & Co analyst Corey Davis. (Reporting by Bill Berkrot; Editing by Tim Dobbyn, Bernard Orr)