* Q3 sales $14.34 bln vs poll average $14.32 bln
* Core EPS $1.26, misses $1.29 forecast in Reuters poll
* Expects FY sales to grow at low to mid-single digits
* Sees FY core earnings in line or better than previous year (Adds details on R&D spending, China, strategic review)
ZURICH, Oct 22 (Reuters) - Swiss drugmaker Novartis raised its full-year sales and profit forecasts for a second quarter in a row on Tuesday, as it benefited from delays to a cheap, copycat competitor to one of its best-selling drugs, blood pressure pill Diovan.
Novartis lost its patent rights on Diovan in the United States last year and already faces some generic competition. But it has been granted a partial reprieve as U.S. regulators have not yet approved a generic version of one of the main forms the treatment from India's Ranbaxy Laboratories.
Basel-based Novartis expects full-year sales to grow by a low to mid single-digit percentage in constant currencies, and core earnings to be in line or better than the previous year.
It had previously guided for a low single digit percentage decline in core earnings, and low single digit sales growth.
However, the company cautioned the delay in a generic competitor to Diovan would push the hit from that into 2014.
Analysts at Berenberg said Novartis had reported a good set of numbers but noted the upgrade was not due to fundamental outperformance in its underlying business and would be viewed as a one-off.
Shares in Novartis - which trade at 13.6 times forecast earnings, a discount to cross-town rival Roche's 15.4 times - were up 1 percent to 68.55 francs at 0925 GMT compared with a 0.3 percent firmer European drugs sector.
Novartis has used the reprieve from full competition to Diovan to funnel more money into research and development.
Chief Executive Joe Jimenez told reporters that R&D spending, at around 22 percent of sales in the third quarter, was at the higher end of where the company would like it to be.
He said the firm was scrutinising its pipeline to prioritise the most promising molecules and would consider partnership or licensing deals for some lower priority compounds.
New Chairman Joerg Reinhardt launched a strategic review of some of Novartis' business units in August, and Jimenez said the company was still considering options for its divisions that lack global scale and critical mass.
Citi analyst Andrew Baum suggested the animal health unit could be on the block, given the announcement that George Gunn, who heads the unit, will hand over his separate corporate responsibility role to Juergen Brokatzky-Geiger.
Baum estimates the division, which has annual sales of around $1.3 billion, could have an enterprise value (equity plus debt) of roughly $4 billion.
Novartis' net sales rose 4 percent in the third quarter to $14.34 billion, in line with the average analyst forecast for $14.32 billion in a Reuters poll. Core earnings per share fell 4 percent to $1.26, missing the $1.29 mean estimate.
Adverse foreign exchange rates shaved 6 percentage points off third quarter core operating income, with the company hit in particular by a sharp slide in emerging market currencies and a weaker Japanese yen.
The group is pinning its hopes on emerging markets and sales in China grew 18 percent in the three months to the end of September, at a slower pace than the 25 percent seen in the second quarter.
A crackdown on bribery is expected to hit promotional sales at many Western drugmakers in China, with GlaxoSmithKline - at the centre of the bribery allegations - expected to feel the biggest impact.
Jimenez said market growth for the industry in China was weaker as hospitals limit access to sales reps, but added he did not expect the slowdown to be permanent.
Last week, Roche said its focus on speciality cancer drugs, which are generally paid for privately, had helped shield it from the slowdown. (Editing by David Cowell and Mark Potter)