* Q3 net loss of 27.8 million euros vs poll of 14.7 million euros
* 2010 losses expected to hit high end of estimated range
* Flagship product sales rising, pipeline strong
* Shares fall 5.3 percent, underperform European peers
(Adds shares, further details, analyst comments)
ZURICH, Nov 9 (Reuters) - Intercell reported a much higher than expected third-quarter loss, hitting shares, even as the Austrian biotech company signalled improving sales for its flagship product and a strengthening vaccine pipeline.
Losses for the period almost doubled from a year earlier to 27.8 million euros ($38.65 million), while sales fell 27 percent to 6.7 million euros, well below the average estimate for 12.9 million in a Reuters poll.
Intercell said it expected net losses for 2010 to reach 40 million euros -- at the high end of a previously communicated range -- provided the company achieved upcoming milestones.
Shares traded 5.3 percent lower at 0953 GMT, underperforming a 0.2 percent dip in the European healthcare sector index.
Intercell highlighted the results, announced on Oct. 25, from a Phase II clinical trial of a vaccine to combat infections from Pseudomonas aeruginosa, which the company said was a leading cause of hospital-acquired infections with increasing antibiotic resistance and high unmet medical need.
"This is a positive result not thoroughly reflected in the share price. There is potential for a blockbuster vaccine, all primary endpoints were met and the company observed a significant reduction in mortality well beyond expectations," said Erste Bank analyst Vladimira Urbankova, referring to the promising trial results.
"A product in advanced Phase II could have a meaningful impact on target prices," Urbankova said.
Intercell brought its first product to market last year, the Ixiaro vaccine against Japanese Encephalitis, distributed by Novartis AG.
The company reported a positive sales trend for this key product in the third quarter.
"This is encouraging given that delayed Q1 deliveries were recorded in Q2 and reflects increasing global marketing and sales efforts by Intercell and its partners Novartis and CSL Ltd," Intercell said in a statement.
Japanese Encephalitis can be a serious illness causing inflammation of the brain. It is caused by a virus and passed to humans by the bite of infected mosquitoes.
The company is the only major independent vaccine maker left in Europe apart from Dutch company Crucell NV, the subject of a takeover offer from Johnson & Johnson.
The company is due to disclose study results for its S.aureus vaccine, which it is developing with Merck & Co, in 2011.
Investors are also looking out for study results on its vaccine patch against Traveller's Diarrhea (TD), in development with GlaxoSmithKline, which are due at the end of 2010 or early 2011. ($1=.7193 Euro) (Reporting by Martin de Sa'Pinto; Editing by Jon Loades-Carter)