The drugmaker reports that profits reached $1.68 billion, or 77 cents, compared with $1.5 billion, or 69 cents, a year ago. Excluding special items, Merck earned 82 cents, exceeding Wall Street estimates of 72 cents. Worldwide sales were $6.1 billion for the quarter, up 6 percent, thanks to vaccines, particularly Gardasil, which generated $358 million in revenue.

Research and development expenses were $1 billion, a 12 percent drop from a year earlier. Marketing and administrative expenses were $2.1 billion, including an additional $210 million reserve for future legal costs for Vioxx litigation (the expense reserve now totals $810 million). Excluding the legal cost, marketing and administrative expenses increased 8 percent from the second quarter of 2006. However, R&D expense is expected to grow this year in the mid single-digit levels, while marketing costs should increase up to 2 percent.

Merck now anticipates earnings for the year at $3.00 to $3.10, excluding restructuring charges related to site closures and job cuts. The drugmaker expects reported full-year EPS of $2.80 to $2.95. You can read the full financial report here.