UPDATE 2-Cost controls help Merck beat profit forecast

(Recasts, adds analyst comment, background, byline; updates shares)

By Ransdell Pierson

NEW YORK, April 21 (Reuters) - Merck & Co (MRK.N: Quote, Profile, Research) on Monday reported better-than-expected quarterly earnings as tight cost controls offset plunging sales of an osteoporosis drug now facing generic competition and slowing sales growth of its Vytorin and Zetia cholesterol fighters.

"Merck's revenue came up a little below expectations, but their cost control was good," said Edward Jones analyst Linda Bannister.

An unexpectedly low tax rate in the quarter also boosted Merck's results, and helped the company reaffirm its 2008 earnings forecast of modest growth, Bear Stearns analyst John Boris said.

The company said it earned $3.3 billion, or $1.52 per share, compared with $1.7 billion, or 78 cents per share, in the year-earlier period.

Excluding special items, Merck earned 89 cents per share. Analysts on average expected 86 cents per share, according to Reuters Estimates.

The items included $2.2 billion received from AstraZeneca as a result of a complex arrangement reached in February between the two partners, under which Merck will keep its rights to certain AstraZeneca medicines.

Merck said global sales rose 1 percent to $5.82 billion, but would have fallen 3 percent if not for the weak dollar, which raises the value of overseas sales when converted back to U.S. currency.