Merck & Co posted a higher-than-expected quarterly profit as one-time tax gains helped offset plunging sales of its former flagship product, Singulair, an asthma drug that began facing cheaper generics in August.

But overall third-quarter sales came in slightly below Wall Street expectations on Friday, as Singulair's decline outpaced already-grim predictions for it.

"There was nothing excellent about the quarter, but nothing scary about it either," said Michael Liss, portfolio manager of American Century Investments, whose mutual funds own Merck shares.

Sales of Singulair tumbled 55% to $602 million. However, a number of Merck's newer products - including treatments for diabetes, hepatitis C and HIV - generated double-digit sales gains that helped cushion Singulair's free fall.

All told, global company revenue fell 4% to $11.49 billion in the quarter, below Wall Street expectations of $11.57 billion.

Liss said the slim decline was acceptable, given the Singulair generics, especially in view of potential new revenue streams from medicines Merck is shepherding through clinical trials.

"They're doing the right things they need to do to position themselves for growth over the next three to five years," Liss said, citing experimental drugs to treat cholesterol, Alzheimer's disease, insomnia, osteoporosis and other diseases.

Merck needs the new drugs to cushion Singulair's swoon, but also to withstand looming generic competition for other important medicines. Its Maxalt migraine drug, with $600 million in annual sales, goes generic in December, followed next year by its Temodar brain cancer medicine, which has near-blockbuster sales of $900 million.

Over the next 18 months, Merck aims to seek six drug approvals, including marketing applications for insomnia treatment suvorexant and osteoporosis treatment odanacatib.

In a conference call with analysts, Merck officials described plans within months to begin a late-stage trial of a new psoriasis drug and mid-stage trials of an Alzheimer's disease treatment - called a beta secretase inhibitor.

The psoriasis drug, called MK-3222, works by blocking a protein called IL-17 linked to inflammation.

"Psoriasis is a great market because of the unmet medical need and if this drug is effective it could easily be a blockbuster product," with annual sales of $1 billion or more, said Morningstar analyst Damien Conover.

Amgen's Enbrel is the best-selling current treatment for psoriasis, with expected 2012 U.S. sales for the skin condition of $1.18 billion, according to Cowen and Co.

Merck, the No. 2 U.S. drugmaker, said it earned $1.73 billion, or 56 cents per share, compared with $1.69 billion, or 55 cents per share, in the year-earlier quarter.

Excluding special items, Merck earned 95 cents per share. Analysts, on average, expected 92 cents.

Jefferies & Co analyst Jeffrey Holford had predicted a tax rate of 26%, but it came in at 20.3%. He called the profit beat "low quality" because it was tax-driven.

"Gross margins were also weaker than expected," Holford said, and noted that Singulair sales were about $75 million below what he had expected.

Merck tightened its full-year profit forecast to between $3.78 and $3.82 per share, from its earlier view of $3.75 to $3.85 per share.