INDIANAPOLIS -- Eli Lilly and Co. on Wednesday said earnings rose 20 percent after four consecutive quarters of declines, but the drug maker's shares dropped nearly 8 percent as Lilly lowered its outlook for next quarter.

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Lilly's shares closed at $58.09 Wednesday, down $4.91.

The day started with company officials announcing a 20 percent increase in earnings, although officials told RTV6's Kristi Tedesco that the numbers were less than that from an individual investor's perspective.

In the third quarter of 2002, July through September, Lilly earnings adjusted for one-time events were up three percent, according to Lilly financial consultant manager, Tara Fox.

The company reported a normalized earnings per share of 68 cents for the third quarter, compared to 66 cents a share during the same period of 2001, Tedesco reported.

The company's expected fourth-quarter performanace is believed to have driven the stock price down.

Lilly said it now expected earnings in this year's fourth quarter of 68 to 70 cents per share. Wall Street had been expecting 72 cents a share. Lilly said it now expects full-year earnings of $2.55 to $2.57 per share, while analysts had expected $2.60 per share.

Lilly also offered no timetable for resolution of manufacturing problems that could hold up at least three new drugs.

Sidney Taurel, Indianapolis-based Lilly's chairman, president and chief executive, said the company's Prozac troubles were history.

"We are now through the period during which the Prozac sales decline triggered by generic competition in the U.S. had the greatest impact on our performance," Taurel said.

Robert Hazlett, an industry analyst with SunTrust Robinson Humphrey, said Lilly can expect robust growth starting in the second half of next year if it resolves manufacturing problems delaying new drugs.

"In the near term, mediocre quarters aren't too troubling at this point," Hazlett said. "We just need to make sure those drugs get to market."

Lilly said the move was driven by increasing investment to support its current top-seller, the anti-psychotic Zyprexa, which faces increasing competition, and to prepare for introduction of new drugs. Lilly also cited slow sales of some of its older drugs, and disappointing sales of Xigris, a blood-infection drug introduced in November.

Lilly shares hit a 52-week low of $43.75 in July after the company warned that the U.S. Food and Drug Administration's concerns about quality control at some manufacturing plants remained unresolved.

The problems, primarily at Indianapolis plants, are not expected to be cleared up until at least early next year, when follow-up FDA inspections are planned.

Lilly offered little information on the matter Wednesday, saying it had heard "nothing definitive" back from the FDA.

The problems could delay approval of three drugs produced in Indianapolis: Cymbalta, an anti-depressant; Forteo, for osteoporosis; and an injectible version of Zyprexa.

Lilly is awaiting FDA approval of two other drugs produced outside Indianapolis: Cialis, a medication for male erectile dysfunction that could compete with Viagra, and Strattera, for attention deficit disorder.

Lilly on Wednesday offered no specific forecast of next year's earnings, other than to say it expects "some earnings growth," assuming the FDA does not impose financial penalties over the manufacturing problems or other unexpected expenses occur.

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Some of the released numbers show a 20 percent increase in earnings, but company officials told RTV6's Kristi Tedesco that the numbers are less than that from an individual investor's perspective.

In the third quarter of 2002, July through September, Lilly earnings adjusted for one-time events were up three percent, according to Lilly financial consultant manager, Tara Fox.

The company reported a normalized earnings per share of 68 cents for the third quarter, compared to 66 cents a share during the same period of 2001, Tedesco reported.

Company officials welcomed the good news, especially given the problems coming out of their laboratories.

The Food and Drug Administration has been scrutinizing the company for quality control issues, and won't approve the release of new medications until manufacturing problems are resolved, Tedesco reported.

Company officials have said that they're working diligently to deal with those issues, Tedesco reported. There are 10 new drugs currently in the pipeline.

Despite the positive news, overall sales are down 3 percent for the company, Tedesco reported.

Lilly officials said the negative number is largely due to the slide in Prozac sales, because the patent expiration has lead to cheaper generic drugs.

Sidney Taurel, Lilly's chairman, president and chief executive, said the company had put that problem behind it.

"This quarter marks a return to quarterly earnings growth for Lilly, and we are now through the period during which the Prozac sales decline triggered by generic competition in the U.S. had the greatest impact on our performance," Taurel said.

Robert Hazlett, an industry analyst with SunTrust Robinson Humphrey, said Lilly can expect robust growth starting in the second half of next year if it resolves manufacturing problems that could delay some of its pipeline of new drugs.

"In the near term, mediocre quarters aren't too troubling at this point," Hazlett said. "We just need to make sure those drugs get to market."