RPT-UPDATE 2-Lilly profit falls short, sales beat Street view

* EPS 91 cents ex-items; Street view 92 cents

* Sales rise 14 pct to $5.93 bln; Street view $5.68 bln

* Shares rise 1.6 pct in premarket trade (Adds product sales, Bristol-Myers agreement, background, byline, share move)

By Ransdell Pierson

NEW YORK, Jan 28 (Reuters) - Eli Lilly and Co (LLY.N) reported fourth-quarter profit in line with expectations, but sales topped forecasts and the drugmaker reaffirmed its 2010 outlook.

Lilly, whose shares rose 1.6 percent in premarket trading, earned $915 million, or 83 cents per share. That compared with a loss of $3.63 billion, or $3.31 per share, in the year-earlier period, when it took charges related to its 2008 purchase of biotechnology company Imclone Systems.

Excluding special items, Lilly earned 91 cents share. Analysts' average forecast was 92 cents, according to Thomson Reuters I/B/E/S.

Global sales rose 14 percent to $5.93 billion but would have risen only 11 percent if not for the weaker dollar. Wall Street had expected $5.68 billion.

Lilly said it had reached an agreement with Bristol-Myers Squibb (BMY.N) under which the drugmakers will co-develop a promising experimental lung cancer drug that Lilly acquired through its purchase of ImClone.

Lilly said it continues to expect earnings this year of $4.65 to $4.85 per share excluding special items. That would reflect growth of 5 percent to 10 percent. Analysts' average forecast is $4.73 per share.

Investors are expecting Lilly sales and profits to be hurt late next year when its $5 billion-a-year schizophrenia drug Zyprexa loses U.S. patent protection and begins facing generic competition.

Sales of Zyprexa rose 19 percent in the fourth quarter to $1.37 billion.

Sales of depression treatment Cymbalta jumped 15 percent to $831 million, while lung cancer treatment Alimta rose 64 percent to $524 million. Revenue from the company's Humalog insulin rose 16 percent to $531 million. But sales of Gemzar, a treatment for numerous types of cancer, fell 25 percent to $311 million, hurt by generic competition overseas.

Bristol-Myers, which held a stake in ImClone and helped develop its Erbitux colon cancer drug, contended that it also shared rights to ImClone's lung cancer medicine -- called necitumumab (IMC-11F8) -- after Lilly purchased ImClone. The drug is now in late-stage trials.

Under a restructuring of the 2001 contract between Bristol-Myers and ImClone, Bristol-Myers and Lilly together will co-develop and co-market necitumumab in the United States, Canada and Japan, the companies said. Lilly will retain rights in all other countries to the drug, which Cowen and Co has said could garner sales of $300 million in 2015.

Lilly said in September it plans to cut 5,500 jobs, or 13.5 percent of its workforce, as it girds for Zyprexa's downturn and U.S. generic competition late this year for Gemzar. It plans to cut annual costs by $1 billion by the end of 2011.

Pfizer Inc (PFE.N) and Merck & Co (MRK.N) last year struck mega-mergers, giving them new products that will help offset plunging sales of their own blockbuster drugs going off patent.

But Lilly has avoided a mega-merger, preferring small and mid-sized deals to augment its own line of experimental drugs. It created a new organizational structure focusing on five business units: oncology, diabetes, emerging markets, established markets and animal health.

Lilly shares stood at $37.00 in premarket trading, up from a close at $36.39 Wednesday on the New York Stock Exchange. (Reporting by Ransdell Pierson; Editing by Derek Caney and John Wallace)