April 21 (Bloomberg) -- Eli Lilly & Co.'s first-quarter earnings missed analysts' estimates because of flagging sales of Zyprexa, the world's top schizophrenia drug last year, and higher costs for stopping work on inhaled insulin.

The company today reported adjusted earnings of 92 cents a share, 4 cents short of the average estimate in a Bloomberg survey, triggering Lilly's biggest decline in almost six months on the New York Stock Exchange.

Revenue from Zyprexa increased only because of converting sales outside the U.S. into a weakened dollar. Sales of the antidepressant Cymbalta and the impotence drug Cialis are supposed to help make up for Zyprexa, whose patent expires in 2011. Even though revenue from all products rose 14 percent to $4.81 billion, that figure also missed analysts' estimates.

``We're in a bear market, which amplifies negative news, and the investment community has thrown up their hands with respect to pharmaceuticals,'' Charles Anthony Butler, an analyst for Lehman Brothers in New York, said today by telephone.

Lilly, based in Indianapolis, also reported a charge of $145.7 million, or 9 cents a share, for halting development of its AIR insulin inhaler, at least $25.7 million more than it estimated when it abandoned the drug last month.

Lilly fell $2.47, or 4.7 percent, to $49.60 in composite trading at 4:00 p.m., the biggest drop since Oct. 25. Lilly declined 18 percent in the last 12 months.

Net Income

Lilly's net income more than doubled during the quarter from a year earlier, when the company had extra costs for acquiring Icos Corp., the maker of Cialis.

Cymbalta sales rose 37 percent in the first quarter to $605 million. Cialis generated $336.9 million in revenue, a 27 percent increase. Worldwide sales of the diabetes drug Byetta, which Lilly markets with Amylin Pharmaceuticals Inc., increased 15 percent to $169 million.

The increase was smaller than expected, according to Amylin.

Lilly's portion of the profit from Byetta climbed 16 percent to $82.7 million.

Lilly forecast net income of $3.90 to $4.05 a share this year, up from $3.73 to $3.90 forecast on March 7. The new figures reflect an Internal Revenue Service audit that lowered the tax rate.

Cymbalta

Zyprexa, already facing generic competition in Canada and Germany, slowed ``due to decreased demand,'' the company said. The drug faces competition later this year from lower-priced generic copies of Johnson & Johnson's Risperdal, analysts have said.

Lilly agreed last month to pay $15 million to settle Alaska's claim that the drugmaker withheld data showing its schizophrenia pill increased diabetes. A long-acting, injected version of the drug was turned down by U.S. regulators in February because it caused excessive sedation.

``For Cymbalta, if it can move into other areas, it can definitely offset Zyprexa,'' Damien Conover, an analyst with Morningstar Investment Services Inc., said in an interview today.

``It's pretty clear Cymbalta's on a track to replace Zyprexa,'' Chief Executive Officer John Lechleiter said in an interview.

Lilly's operating expenses jumped 9 percent since last year, which the company attributed to legal costs for Zyprexa; marketing for Cymbalta, the impotence drug Cialis and the insulin Humalog; and higher costs of operating factories overseas because of the weak dollar.

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To contact the reporter on this story: Elizabeth Lopatto in New York at elopatto@bloomberg.net

Last Updated: April 21, 2008 16:14 EDT