Earnings fell to $1.1 billion, or 50 cents per share, from $1.4 billion, or 62 cents per share, a year earlier.
Merck said the withdrawal of Vioxx meant the loss of $700 million to $750 million in sales in the quarter. The drug was pulled off the market after it doubled the incidence of heart attack and stroke in a large cancer-prevention trial.
The safety of the medicine was first questioned only months after its 1999 launch, when it quadrupled the incidence of heart attacks, compared with an older painkiller, in a trial involving arthritis patients.
Whitehouse Station, N.J.-based Merck said it set aside $604 million in the fourth quarter to pay future legal expenses for Vioxx litigation. It said it had not yet taken any charges for future payouts to former Vioxx users expected to sue the company alleging they were harmed by the pill.
Some industry analysts expect Merck's Vioxx payouts to approach $20 billion, just as rival drugmaker Wyeth has had to pay users of its recalled "fen-phen (search)" diet medicines.
Merck said it aims to restore earnings growth by cutting costs and launching new products. But Wall Street considers few of the company's experimental products in late-stage testing likely to become big sellers.
Merck's global sales rose only slightly in the fourth quarter, to $5.7 billion from $5.6 billion a year earlier.
Revenue from asthma treatment Singulair jumped 44 percent to $731 million, while revenue from the osteoporosis drug Fosamax rose 28 percent to $831 million. Wholesalers cut back purchases of both drugs in the year-earlier fourth quarter, improving the appearance of their performance in the 2004 period.
Hypertension drugs Cozaar and Hyzaar saw quarterly sales grow 11 percent to $764 million. Although sales of cholesterol fighter Zocor (search) rose 8 percent to $1.3 billion, Merck said sales would have fallen 5 percent if not for favorable wholesaler stocking trends.
Merck stood by its 2005 forecast for earnings of $2.42 to $2.52 per share, reflecting as much as a 7 percent decline from 2004. It also stood by its first-quarter profit forecast of 54 cents to 58 cents per share.