Eli Lilly sees health-reform hit in 2010, 2011

NEW YORK (Reuters) - Eli Lilly and Co (LLY.N) posted a better-than-expected first-quarter profit on Monday, but cut its full-year profit forecast because of costs from the newly passed U.S. healthcare overhaul.

The reform costs this year include a one-time tax charge tied to drug subsidies for Lilly's retirees, and higher government rebates that will reduce revenue by $350 million to $400 million. For 2011, it expects the reforms to hurt revenue $600 million to $700 million.

"Now the question is: is everyone else going to lower their guidance?" Deutsche Bank analyst Barbara Ryan said, referring to other drugmakers. "We don't know, but everyone is going to worry that that is going to be the case."

Lilly, whose shares fell 2.4 percent to $35.65 in premarket trading, now expects 2010 earnings of $4.40 to $4.55 per share, excluding special items, a comedown from its earlier forecast of $4.65 to $4.85 per share.

The Indianapolis-based company is the first of the large U.S. drugmakers to report first-quarter earnings, with Johnson & Johnson (JNJ.N) and Abbott Laboratories (ABT.N) on deck later this week.

Lilly reported net income of $1.25 billion, or $1.13 per share. That compared with $1.31 billion, or $1.20 per share, in the year-earlier period.

Excluding special items, Lilly reported a profit of $1.18 per share, which includes a 12-cent reduction due to the health reform law. Analysts on average expected $1.10, according to Thomson Reuters I/B/E/S.

Ryan said better-than-expected profit margins and administrative expenses helped results in the quarter.

Global sales rose 9 percent to $5.49 billion, a bit lower than the $5.56 billion expected by Wall Street. Revenue from diabetes treatment Byetta, sold in partnership with Amylin Pharmaceuticals Inc (AMLN.O), rose 19 percent to $116 million.

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.

It is counting on U.S. regulators this year to approve a once-weekly form of Byetta, known as Bydureon, that could ensure continued strong growth of the franchise. The U.S. Food and Drug Administration last month requested more information on Bydureon, but did not ask for lengthy new clinical trials.

Amylin, which posted a narrow loss on Monday, said it plans this week to respond to the FDA concerns.

Global Zyprexa sales rose 8 percent in the quarter to $1.22 billion, helped by price increases in the United States. Revenue from depression treatment Cymbalta jumped 13 percent to $803 million, fueled by price increases and strong overseas demand.

Sales of lung cancer drug Alimta soared 57 percent to $527 million, helped by the product's approval last year in Japan for the cancer indication.

(Reporting by Ransdell Pierson and Lewis Krauskopf; Editing by Lisa Von Ahn and Maureen Bavdek)