Merck & Co. (MRK) announced plans to slash 7,200 positions while reporting a 28% decline in third-quarter earnings that managed to top Wall Street’s expectations.

The drug giant also backed its 2008 earnings forecast and reassessed its outlook through 2010. 

Merck earned $1.09 billion, or 51 cents per share, down from $1.53 billion, or 70 cents a share, in the year-ago period. Excluding one-time items, Merck earned 80 cents per share, up from 75 cents a year ago. 

The pharmaceutical company’s sales slid by 2% to $5.9 billion in the third quarter.

Analysts polled by Thomson Reuters were expecting Merck to post third-quarter earnings of 79 cents per share on $5.97 billion in sales.

"Merck's third quarter results show continued strong growth in a number of our recently launched products and the efficiencies we have realized throughout the business," CEO Richard T. Clark said in a statement.

Merck’s results were hurt by a 15% drop in third-quarter sales of its Vytorin and Zetia drugs to $1.1 billion. Sales of cervical-cancer drug Gardasil declined by 4% while asthma and allergy drug Singulair saw a 1% rise in sales.

Looking ahead, Merck reaffirmed its earlier forecast for 2008 earnings in the range of $3.45 to $3.55 per share. Excluding one-time items, Merck sees full-year earnings in the range of $3.28 to $3.32 per share.

Analysts had been forecasting 2008 earnings of $3.28 per share.

However, Merck also reassessed its forecast through 2010.

“Our current sales trends for key products, compounded by known industry and emerging economic factors, have led us to reassess the environment in which we expect to be operating between now and 2010," said Clark.

Merck said it sees non-GAAP revenues having a compound annual growth rate of 2% to 4% from 2005 to 2010. It also said it sees earnings per share growing in the double-digits and adjusted-earnings increasing in the mid-to-high single-digits over that span.

Merck released the next steps of its global restructuring program by saying it plans to cut 6,800 active employees and 400 vacancies. The drug giant had approximately 56,700 employees at the end of September.

The company said 40% of the job cuts will occur domestically and that it will cut about 25% of senior and mid-level executives.

These job cuts are on top of the 10,400 positions eliminated in a 2005 restructuring program that was completed last month.

The restructuring program is expected to be completed by the end of 2011 with pretax costs of approximately $1.6 billion to $2 billion.

Merck also said it will shut three basic research sites in Tsbukuba, Japan; Pomezia, Italy; and Seattle by the end of 2009.