(Adds company comment)

By Deena Beasley

Feb 7 (Reuters) - Gilead Sciences Inc on Tuesday projected disappointing sales for its hepatitis C drugs this year because of fewer patients being started on treatments and more competition, sending its shares down more than 5 percent after hours.

The company forecast 2017 hepatitis C drug sales of $7.5 billion to $9 billion, much lower than the $12 billion Wall Street had expected.

"The 2017 guidance was $4-$5 billion lower than buyside expectations," said RBC Capital Markets analyst Michael Yee, adding that the sales outlook implies 2017 earnings for Gilead of $6.60-$9.00 per share, which is well below the average analyst estimate of $10.71 per share.

Gilead said around 231,000 U.S. patients were started on its hepatitis C drugs last year, but that will fall to around 160,000 in 2017 because of a combination of factors including a greater number of patients with less advanced disease and more patients with issues that favor delaying treatment, including alcohol dependency and unstable lifestyle.

A similar trend is expected in Europe and Japan.

"This market has been full of surprises," Gilead Chief Operating Officer Kevin Young said on a conference call. "It surprised us on the way up, and it is surprising us in some ways with the dynamics coming down."

Chief Executive Officer John Milligan acknowledged that the company has few prospects for new products over the next few years. "It makes it challenging for us to grow without an acquisition," he said.

Hepatitis C, estimated to infect about 3.2 million Americans, is a viral disease that causes inflammation of the liver that can lead to liver failure.

Direct-acting anti-virals, such as Gilead's Sovaldi and Harvoni, have revolutionized treatment, with cure rates of more than 90 percent shown in clinical trials.

But there was a backlash from health insurers and other payers when Gilead launched Sovaldi three years ago at a price of $84,000, or $1,000 per pill.

The company said Tuesday that its 2016 average net price for Harvoni was $15,000 per bottle of 28 pills, after discounts and rebates, compared with a $31,5000 list price. For Medicaid, the U.S. government program covering the poor and disabled, Gilead said its average price per bottle was less than $10,000.

Continued price pressure is expected as companies including AbbVie Inc launch new hepatitis C drugs.

For its other products, including HIV drugs, Gilead forecast 2017 sales of $15 billion to $15.5 billion, bringing its expected overall 2017 product sales to between $22.5 billion and $24.5 billion, compared with $30 billion in 2016.

Shares of the Foster City, California-based company were down more than 5 percent at $69.19 in after-hours trading on the Nasdaq.

Fourth-quarter net income fell to $3.1 billion from $4.7 billion a year earlier. Adjusting for one-time items, Gilead said it earned $2.70 a share in the quarter, compared with $3.32 a share a year earlier.

Quarterly sales of hepatitis C drugs Sovaldi, Harvoni and Epclusa totaled $3.2 billion, down from $4.9 billion.

(Reporting by Deena Beasley in Los Angeles; Editing by Grant McCool and James Dalgleish)