But hopes for 2012 deteriorated at British drugmaker GlaxoSmithKline, which on Wednesday warned that full-year sales will be flat as pressure on drug prices intensifies in Europe due to government austerity measures aimed at curbing healthcare costs. Its shares fell 1.3 percent.

Lilly Chief Financial Officer Derica Rice said some dozen company drugs now in late-stage trials and many others in mid-stage studies will drive Lilly's comeback.

"We're seeing pieces of the puzzle coming together," Rice said in a conference call with industry analysts. Company earnings plunged 23 percent in the quarter, months after its biggest product --Zyprexa for schizophrenia -- lost U.S. patent protection. The pain intensifies late next year, when $5 billion-a-year depression drug Cymbalta goes generic.

Analysts welcomed Rice's show of confidence but said it was too early to know whether cost-cutting might be a bigger contributor than the introduction of Lilly prescription drugs.

"The key controversy remaining is: Can they really improve margins if the pipeline fails to deliver?" ISI Group analyst Mark Schoenebaum said. "So what if the revenue doesn't grow?"

Bristol-Myers Squibb Co reported lower quarterly sales and earnings as cost-cutting and sales gains for newer drugs only partly offset plunging sales of its Plavix blood clot preventer and Avapro blood-pressure medicine, now facing generic rivals.

Industry analysts said the Bristol-Myers earnings report produced no significant surprises and came in roughly in line with expectations. But they were impressed that the company, whose shares were little changed, was able to reaffirm its 2012 profit view despite Plavix's freefall and a stronger dollar that hurts sales in overseas markets.

Lilly's quarterly earnings handily beat Wall Street forecasts, helped by surging sales of Cymbalta. The company said profit margins should improve after 2014, once the damage from patent expirations on its top drugs has abated.

The Indianapolis drugmaker, whose shares rose almost 3 percent, raised its 2012 profit outlook because the stronger U.S. dollar has reduced the cost of overseas goods used to produce the company's products.

It earned $924 million, or 83 cents per share, compared with $1.2 billion, or $1.07 per share, a year earlier. Excluding special items, the company earned 83 cents per share. Analysts on average expected 77 cents, according to Thomson Reuters I/B/E/S.

Global sales of $5.6 billion were in line with Wall Street expectations of $5.59 billion.

Lilly said it now expected full-year 2012 earnings of $3.30 to $3.40 per share, excluding special items. It had previously forecast $3.15 to $3.30. That would represent a 23 percent decline from 2011 results.

Quarterly global sales of Zyprexa fell 73 percent to $380 million. Sales of Cymbalta, now Lilly's top product, jumped 22 percent to $1.22 billion.

Bristol-Myers said it still expects a full-year 2012 profit, excluding special items, of $1.90 to $2.00 per share. That would reflect a decline of 12 percent to 17 percent from 2011, when Plavix held sway as the world's second-biggest-selling medicine. The pill lost U.S. patent protection in May.

The company reported net earnings of $808 million, or 38 cents per share, down from $1.31 billion, or 52 cents per share, in the year-earlier period.

Excluding special items, Bristol-Myers earned 48 cents per share, in line with analysts' expectations, according to Thomson Reuters I/B/E/S.

Global sales fell 18 percent to $4.44 billion, in line with Wall Street expectations.

Plavix sales fell 60 percent to $741 million in the quarter, while sales of Avapro dropped 53 percent to $117 million.

Many newer drugs did well, including Baraclude, a treatment for hepatitis B infections, whose sales jumped 22 percent to $357 million. Sales of leukemia drug Sprycel rose 26 percent to $244 million.

(Reporting By Ransdell Pierson; Editing by Andrew Hay)

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