UPDATE 2-Merck profit falls, but beats forecasts

* EPS, excluding items, $0.83; forecast $0.77

* Tax settlements, lower marketing costs bolster results

* Shares up 3.8 percent in premarket trade (Adds stock gains, product sales, analyst quote, byline)

By Ransdell Pierson

NEW YORK, July 21 (Reuters) - Merck & Co said second-quarter earnings fell, hurt by lower sales of its cholesterol drugs, but income from partnerships and a rebound in sales of asthma drug Singulair helped the drugmaker beat profit forecasts.

Merck, whose shares rose 3.8 percent in premarket trading on Tuesday, 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.

Merck, which plans to acquire Schering-Plough Corp in coming months, said it earned 83 cents per share, excluding special items. 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.

Sanford Bernstein analyst Tim Anderson said Merck's equity income of $587 million from joint ventures, including its cholesterol partnership with Schering-Plough, was 15 percent higher than his forecast and helped drive the earnings beat.

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.

A bright spot in the earnings report was Singulair, Merck's asthma drug whose sales have steadily declined in the past year due to safety concerns. Its quarterly sales jumped 16 percent to $1.3 billion.

Sales of Januvia, a relatively new diabetes treatment, rose 38 percent to $462 million.

But combined sales of cholesterol fighters Zetia and Vytorin, sold in partnership with Schering-Plough, fell 10 percent to $1 billion. The drugs have lost favor with many doctors following a pair of clinical trials that cast doubt on their effectiveness.

Results were also hampered by Gardasil, Merck's vaccine against the virus that causes cervical cancer. Gardasil sales fell 18 percent to $268 million -- hurt by rival vaccine made by GlaxoSmithKline Plc .

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 expects its acquisition of Schering-Plough to close in the fourth quarter.

Merck shares were up $1.06 at $29.00. (Reporting by Ransdell Pierson; editing by John Wallace and Derek Caney)