Merck & Co said second-quarter earnings fell, hurt by the strong dollar and lower sales of its cholesterol drugs, but favorable tax settlements helped the drugmaker soundly beat profit forecasts.

Merck, which plans to acquire Schering-Plough Corp in coming months, said on Tuesday it earned $1.59 billion, or 74 cents per share. That compares with $1.77 billion, or 82 cents per share, in the year-earlier period.

Excluding special items, it earned 83 cents per share. Analysts on average expected 77 cents, according to Reuters Estimates.

Revenue fell 3 percent to $5.90 billion but came in $70 million above the Reuters Estimate forecast. Sales would have risen 3 percent if not for the strong dollar, which undermines the value of overseas sales.

Results were helped by a 10 percent decline in marketing and administrative expenses. Moreover, the drugmaker's effective tax rate, excluding special charges and merger-related costs, was 20.4 percent, a benefit of about 5 percentage points due to favorable tax settlements.

Merck stuck with its full-year 2009 profit forecast of $3.15 to $3.30 per share excluding special items, and its full-year revenue forecast of $23.2 billion to $23.7 billion.

The company said it expects its acquisition of Schering-Plough to close in the fourth quarter.

(Reporting by Ransdell Pierson; editing by John Wallace)

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