Fierce cost-cutting at Merck & Co helped the USA’s third-largest drugmaker to a modest 2% increase in fourth-quarter net income, although revenues were flat as generic competition to cholesterol-lowerer Zocor started to bite.

Net income came in at $1.1 billion, a little ahead of forecasts, on sales of $5.77 billion, helped by a 12% hike in revenues from asthma drug Singulair (montelukast) to $819 million, as well as a contribution from Vytorin (simvastatin and ezetimibe). Sales of the latter product and Zetia (ezetimibe), sold by Merck and Schering-Plough, reached $748 million in the quarter, with Zetia bringing in $391 million and Vytorin $355 million.

Zocor (simvastatin) - Merck’s top-selling product - slumped 18% to $1.1 billion. The company expects to lose $2 billion from its 2006 top line as a result of generic competition to this product.

Merck is in the midst of a cost-cutting effort aimed at saving up to $5 billion over the next four years and help it ride out the loss in Zocor revenue, as well as the after-effects of the withdrawal of painkiller Vioxx (rofecoxib) in 2004 after it was linked to cardiovascular side effects, both in lost sales and litigation costs. The restructuring includes the elimination of 7,000 jobs, and the company said that, as of the end of 2005, it had cut 1,100 positions.

Merck’s blood pressure treatment range, headed by Cozaar (losartan) and Hyzaar (losartan and hydrochlorothiazide), advanced 2% to $782 million in the fourth quarter, although the osteoporosis drug Fosamax (alendronate) declined 5% to $789 million, with the launch of a new formulation (Fosamax Plus D/Fosavance) failing to offset the impact of generic competition in some markets, including the UK, Germany and Canada.

Other Merck drugs and vaccines generated combined revenues of $1.6 billion for the quarter, a rise of 4%.

For the year, sales decreased 4% to $22 billion, including a fall of 7% related to the Vioxx withdrawal but offset by revenue growth in all other products of 3%.

Merck also noted that the number of lawsuits filed against it in connection with Vioxx has risen to about 9,650, and it has set aside an additional $295 million in the quarter to cover legal defence costs, hiking the total fighting fund to around $970 million so far.

Earlier in the week the company said it has won the fourth Vioxx lawsuit to come to court, bringing its tally to date to two wins, a loss and a mistrial.