Merck & Co (MRK.N) reported a better-than-expected profit on Monday, helped by sales of its vaccines and cholesterol drugs, and raised its 2007 profit forecast.

The results provided the latest sign of success for Merck's new products and restructuring efforts. Sales of the company's vaccines more than doubled in the quarter, and its Gardasil cervical cancer vaccine outperformed the expectations of several analysts.

Newly launched products, including Gardasil and (diabetes drug) Januvia, continue to exhibit strong launch trends, Bank of America analyst Chris Schott said in a research note.

The company said it earned $1.53 billion, or 70 cents per share, compared with $941 million, or 43 cents per share, in the year-ago period when it took a $598 million charge for legal expenses related to its withdrawn Vioxx arthritis drug.

Excluding restructuring charges, Merck earned 75 cents per share, ahead of the 69 cents per share expected, on average, by analysts, according to Reuters Estimates.

Sales rose 12 percent to $6.07 billion.

Merck shares rose 14 cents to $53.25 in morning trading on the New York Stock Exchange. They have risen 22 percent in 2007.

Sales of the cholesterol drugs Zetia and Vytorin, which the company sells in a joint venture with Schering-Plough Corp (SGP.N), rose 26 percent to $1.3 billion.

Schering-Plough on Monday reported profit and sales below Wall Street's target, sending its shares down more than 13 percent.

IMPROVING MARGINS

Merck's profit margins are improving and its sales momentum is continuing, Schott said.

Merck's vaccine sales more than doubled to $1.2 billion. Gardasil, Merck's new cervical cancer vaccine, posted sales of $418 million.

Sales of Januvia, approved a year ago, were $185 million.

Sales of allergy and asthma treatment Singulair rose 17 percent to $1 billion.

The drug maker said as of October 9 it still faced about 26,600 personal-injury lawsuits related to Vioxx, the onetime blockbuster arthritis drug Merck withdrew in September 2004 after a clinical trial found it doubled the rate of heart problems.

Merck recorded a $70 million charge in the quarter to increase its reserve to $720 million for future legal defense costs related to Vioxx litigation. The company has repeatedly stressed it will fight each case individually rather than enter into a broad settlement.

In cases that have reached jury verdicts, Merck has won 11 times against five victories for plaintiffs, creating optimism among investors that the company will be able to manage the litigation.

The primary risk to Merck's shares is the Vioxx litigation, which is unlikely to prove unmanageable, in our view, Deutsche Bank analyst Barbara Ryan said in a research note.

Merck projected 2007 earnings per share of $3.08 to $3.14, excluding the restructuring charges related to site closures and position eliminations. It previously forecast $3 to $3.10 per share.

Mehta Partners analyst Shaojing Tong said most analysts had expected the company to raise its profit forecast.

Medicine Merck & Co.