* Lilly says it has not increased drug prices
* Lilly to offer less than 20 pct in Elanco IPO
* Plans $8 bln share repurchase program (Adds details on quarter, background; updates share movement)
July 24 (Reuters) - Eli Lilly and Co announced on Tuesday it would spin off its Elanco animal health business and posted better-than-expected quarterly profit, helped by demand for its diabetes drugs Trulicity and Humalog.
Shares of the Indiana-based drugmaker, also helped by a separate launch of an $8 billion share buyback and a higher full-year profit forecast, rose 5.7 percent to $93.90 before the bell.
Lilly also joined major competitors Pfizer Inc, Merck & Co Inc and Novartis AG in keeping drugs prices on hold, effectively freezing them for the rest of the year in response to President Donald Trump's blueprint aimed at clamping down on escalating costs for patients.
"We remain focused on driving revenue growth through volume, not price," Chief Executive Officer David Ricks said in a statement, adding that the company's forecast for 2018 does not assume U.S. price increases for the rest of the year.
Lilly raised its adjusted earnings per share forecast for the full year to $5.40 to $5.50 from $5.10 to $5.20.
In the IPO, the company plans to offer less than 20 percent of Elanco, which brought in a revenue of $792.1 million in the reporting quarter, and the company could have a valuation of several billion dollars.
The company expects to complete its initial public offering in the second half of 2018.
The unit brought in sales of $3.09 billion in 2017 and accounted for about 13.5 percent of Lilly's total revenue.
The decision to separate the unit follows similar moves by Pfizer Inc and Henry Schein, which have spun off their animal health units to focus on their main business.
The market value of top animal-health company Zoetis Inc has nearly tripled since it was spun off from Pfizer about five years ago.
Excluding items, Lilly earned $1.50 per share in the second quarter, ahead of analysts' average estimate of $1.30 per share, according to Thomson Reuters I/B/E/S.
The company posted a net loss of $259.9 million in the quarter ended June 30, compared with a year-ago profit of $1.01 billion, as it incurred acquisition-related charges to the tune of $1.62 billion.
Revenue for the quarter rose 9.1 percent to $6.36 billion, beating estimates of $6.05 billion.
Despite competing with Novo Nordisk A/S's diabetes drug Ozempic, Lilly's Trulicity brought in sales of $779.8 million, above analysts' estimate of $712.67 million, and overtaking Humalog as its best-selling drug. (Reporting by Tamara Mathias in Bengaluru Editing by Supriya Kurane)