UPDATE 4-Gilead cuts 2010 sales outlook, shares fall

* Q1 adjusted EPS was 99 cents vs Street view 96 cents

* Revenue rises 36 percent to $2.09 billion

* Lowers 2010 sales outlook, citing U.S. healthcare reform

* Shares fall 3.3 percent after-hours (Adds company comment, analyst comment, background)

By Deena Beasley

LOS ANGELES, April 20 (Reuters) - Gilead Sciences Inc (GILD.O) posted quarterly sales for its core HIV drugs that were less than analysts had expected, and cut its full-year forecast due to U.S. healthcare reform. Its shares fell more than 3 percent after-hours.

First-quarter sales of AIDS drug Truvada rose 11 percent to $657.8 million, while sales of Atripla, which combines Truvada with Bristol-Myers Squibb Co's (BMY.N) Sustiva into a single pill, rose 36 percent to $692.9 million.

However, analysts had expected Truvada sales of $680 million and Atripla sales of $726 million, according to RBC Capital Markets.

Earnings for the quarter rose 45 percent, but investors are wondering how Gilead will be positioned when patents covering its key medicines begin expiring in a few years.

"They need to put some cash to work," said Sanford Bernstein analyst Geoffrey Porges.

Gilead, which had $4.62 billion in cash at the end of June, said late on Monday that it had terminated study of an experimental drug for hepatitis C because the drug was causing too much toxicity. [ID:nN19226206]

"Their hepatitis C program doesn't look like it's competitive and now you've got a little softness in their HIV revenue," Porges said, adding that investors may be "heading toward the end of their patience."

John Milligan, Gilead's chief operating officer, said on a conference call that the company continues to seek to bring in new compounds to its pipeline.

Gilead, based in Foster City, Calif, also lowered its outlook for 2010 sales by about $200 million to a range of $7.4 billion to $7.5 billion, citing the impact of recently passed healthcare reform. The new legislation calls on drugmakers to offer higher price rebates for government-funded health plans.

The biotech company said first-quarter net income rose to $854.9 million, or 92 cents per share, from $589.1 million or 63 cents per share a year earlier.

Adjusting for acquisition expenses, restructuring costs and stock-based compensation, the company said it earned 99 cents a share for the quarter. Analysts had expected 96 cents a share, according to Thomson Reuters I/B/E/S.

Quarterly revenue rose 36 percent to $2.09 billion, while product sales rose 24 percent to $1.79 billion. Analysts had expected revenue of $2.07 billion.

Chief Financial Officer Robin Washington said on a conference call that international government pricing pressures and currency exchange rates also could affect sales.

"During the first quarter we have seen increased evidence of additional international government measures to reduce pharmaceutical expenditures including increased rebates, cancellations, and callbacks of price increases," she said.

Royalty, contract and other revenue more than tripled to $297.8 million from $82.9 million. Gilead derives most of its royalty revenue from Roche Holding AG's (ROG.VX) sales of Tamiflu, which has seen strong demand because of the swine flu pandemic.

Also on Tuesday, Johnson & Johnson (JNJ.N) said its experimental AIDS drug, known as TMC278, was found to be at least as effective as Bristol-Myers' Sustiva in tests the company plans to submit for regulatory approval in the third quarter. J&J and Gilead are working on single pill that would combine TMC278 with Truvada.

Gilead also is developing a four-drug pill, known as the "Quad" tablet, which includes a component drug that belongs to a new class of HIV treatments called integrase inhibitors.

Gilead shares, which closed at $45.07 on the Nasdaq, fell to $43.60 in after-hours trading. (Additional reporting by Bill Berkrot; Editing by Andre Grenon, Richard Chang, Matthew Lewis and Carol Bishopric)