Updated from 8:11 a.m. EST

Merck

(MRK) - Get Report

eased Wall Street into the post-Vioxx paradigm Wednesday, cutting its 2005 profit estimate to reflect the absence of its once-mighty analgesic and arthritis treatment.

The company did not address the legal cost of the Vioxx withdrawal, however, saying only that its guidance excluded reserves for "any potential liability for settlements." Merck also said on Wednesday that it is "committed to maintaining" its dividend.

On Tuesday, Merck's board appointed a special committee to review activities leading up to the Vioxx withdrawal from the market on Sept. 30. The company is being investigated by Congress, the Justice Department and the

Securities and Exchange Commission.

Shares rose 40 cents, or 1.4%, to $28.29 in early trading Wednesday.

The Whitehouse Station, N.J., pharmaceuticals giant expects to earn $2.42 to $2.52 a share next year, below the $2.56 a share analysts had been forecasting.

Merck also reiterated that its fourth-quarter earnings will be 48 cents to 53 cents a share, roughly in line with the Thomson First Call consensus of 50 cents a share. That would put the full-year EPS for 2004 in the range of $2.59 to $2.64, making the cost of Vioxx for the year 50 cents to 55 cents a share. The consensus of analysts polled by Thomson First Call is for a full-year EPS of $2.61 for this year.

Merck added that its 2005 EPS estimate doesn't reflect the potential impact of stock option accounting now under review by the Financial Accounting Standards Board or of the new law regarding the repatriation of permanently reinvested earnings from companies' foreign subsidiaries.

Merck predicted that several big-selling drugs will gain in sales from 2004 to 2005. However, the cholesterol drug Zocor is expected to decline to a 2005 range of $4.1 billion to $4.4 billion from an estimated 2004 range of $4.9 billion to $5.1 billion. The lower sales reflects greater competition from other cholesterol drugs, including Vytorin, which is made and marketed by Merck and

Schering-Plough

(SGP)

.

Michael Rabinowitz, executive director for investor relations, said Wednesday that Vytorin was taking market share from all cholesterol drugs known as statins -- not just Zocor. In addition, Zocor, which has been losing patent protection in foreign markets over several years, will lose its marketing exclusivity in France and Australia this year. Zocor will lose U.S. patent protection in mid-2006.

Among other big drugs, Merck predicted that the osteoporosis drug Fosamax should produce sales of $3.3 billion to $3.6 billion, up from an estimated $3 billion to $3.2 billion this year. Sales of the asthma drug Singulair should rise to a range of $2.9 billion to $3.2 billion, up from a predicted $2.5 billion to $2.7 billion. Sales of the hypertension drug franchise, Cozaar/Hyzaar, should rise to $2.9 billion to $3.2 billion next year from $2.6 billion to $2.8 billion this year.

Merck also said it expects to submit three vaccines for Food and Drug Administration approval in the second half of 2005: one for rotavirus, one for a virus associated with cervical cancer, and one for pain associated with shingles.

Later this month, the company expects an application to be submitted to the FDA for muraglitazar, a diabetes drug, for which Merck this year became a marketing and development partner with

Bristol-Myers Squibb.

(BMY) - Get Report

.