Merck & Co reported higher-than-expected quarterly earnings, helped by trimming its research spending and strong sales of its drugs for diabetes, asthma and rheumatoid arthritis.

The second-largest U.S. drugmaker, whose shares were 0.3 percent higher, also slightly raised the lower end of its 2011 earnings forecast.

Overall, we are pleased with today's results, particularly coming off a difficult fourth quarter when the company withdrew its long-term guidance, JP Morgan analyst Chris Schott said.

Merck in February yanked its 2009 to 2013 profit forecast, rather than chop research spending to meet its longtime goal of high-single-digit annual growth over the period.

However, the company did cut $350 million in expenses during the first quarter, including $107 million from research and development.

On Friday, Merck trimmed its full-year R&D forecast to between $8 billion and $8.4 billion, from its earlier view of $8.1 billion to $8.5 billion.

That still keeps Merck among the top of the pack when it comes to industry spending on drug development.

It doesn't matter whether it's $8.4 billion or $8.5 billion. The bottom line is that its a very big number and shows how committed Merck is to research and to developing its own medicines, said Peter Jankovskis, co-chief investment officer of OakBrook Investments LLC.

Earlier this year, larger rival Pfizer Inc
slashed its R&D budget to deliver on profit forecasts. It remains to be seen whether big R&D cuts make sense long term for Pfizer and other companies desperate for new medicines as their key drugs lose patent protection.

Merck earned $1.04 billion, or 34 cents per share. That compared with $299 million, or 9 cents per share, a year earlier, when it took a number of big charges and a tax expense related to U.S. healthcare reform.

Excluding special items, Merck earned 92 cents per share. Analysts on average expected 84 cents, according to Thomson Reuters I/B/E/S.

Merck is looking quite strong said Jankovskis, who added that surging sales of newer diabetes drugs Januvia and Janumet bode well for Merck.

They're growing faster than expected and the high rate of diabetes onset in the United States will help them as time goes on, Jankovskis said.

Global company sales of $11.58 billion topped the analysts' average forecast of $11.37 billion.

Januvia sales jumped 45 percent to $739 million, while Janumet -- which pairs Januvia with diabetes treatment metformin --soared 52 percent to $305 million.

Sales of Merck's biggest product, asthma treatment Singulair, jumped 14 percent to $1.33 billion, helped by strong sales in emerging markets and Japan. But the pill's importance to Merck will fade in coming months, when it faces generic competition in the United States.

Sales of arthritis treatment Remicade rose 12 percent to $753 million. Merck acquired it and a newer arthritis drug, Simponi, through its purchase in late 2009 of rival drugmaker Schering-Plough.

Schering-Plough's longtime partner Johnson & Johnson had challenged Merck's right to continue selling the two arthritis drugs. But under a deal reached earlier this month with J&J, Merck retains rights to sell them in Europe and other territories that represent 70 percent of the $2.8 billion in annual sales that had been in dispute.

The company expects earnings this year of $3.66 to $3.76 per share, excluding special items -- nudging up by 2 cents the lower end of its earlier estimate. That would reflect profit growth of 7 percent to 10 percent from 2010.

(Reporting by Ransdell Pierson; Editing by Lisa Von Ahn, Derek Caney, Dave Zimmerman)