* Astra 2011 target for core EPS $6.45 to $6.75
* Novartis Q4 EPS $1.14, sees lower sales in 2011
* Both companies see challenging year ahead
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By Kate Kelland and Katie Reid
LONDON/ZURICH, Jan 27 (Reuters) - Drugmakers AstraZeneca and Novartis set a cautious tone for the year ahead on Thursday, bracing the sector for challenging patent expiries and price pressures from U.S. health reforms.
While AstraZeneca delivered above-forecast fourth quarter earnings and a promise to buy back $4 billion of shares, it joined its Swiss rival in warning that pressure from generics, U.S. healthcare reform and price cuts would take their toll.
Novartis, the first European drugmaker to report in this earnings season, missed analysts' expectations with fourth quarter core earnings per share of $1.14 and said it expected its sales for 2011 to be lower.
Astra is facing pricing pressure from key competitor brands losing exclusivity, such as Pfizer's Lipitor, which competes in the statin market with its blockbuster Crestor.
"The coming years will be challenging for the industry and for the company as its revenue base transitions through a period of exclusivity losses and new product launches," Astra said in a statement.
The European pharma companies' earnings come after diversified healthcare group Johnson & Johnson kicked off the big pharma season by cautioning it was facing growing pressure form governments and insurers to keep a lid on prices after posting disappointing sales figures.
Bristol Myers-Squibb and Eli Lilly will provide more clues on the health of the sector when they report later on Thursday.
The Anglo-Swedish drugmaker's core pretax profit dropped by 2 percent to $2.737 billion in the fourth quarter, giving earnings per share 1 percent higher at $1.39, on sales of $8.617 billion.
Novartis, which last year wrapped-up its buyout of eyecare group Alcon, missed expectations with a 10 percent drop in fourth-quarter core earnings.
Analysts at MF Global described Novartis' fourth quarter figures as "lacklustre", citing weaker pharma margins and a disappointing performance in vaccines. (Additional reporting by Paul Sandle in LONDON, editing by Alexander Smith)