Merck said second-quarter net income slipped 5.3 percent from a year ago as higher costs for research and development and a $21 million restructuring expense affected earnings.

Merck, the world's third-largest drugmaker, said net income for the quarter was $1.77 billion, or 79 cents a share, compared with $1.87 billion, or 83 cents a share, a year ago. Excluding operations from Medco Health Solutions Inc., which Merck spun off last summer, income from continuing operations declined 1 percent.

"I think investors have pretty high expectations for stock performance, and so, when pharmaceutical companies just meet those expectations, the stocks are not really getting rewarded," said Elizabeth Bernstein, an analyst at Morningstar Inc.

Shares of Merck, a component of the Dow Jones industrial average, closed down 24 cents yesterday at $44.59.

Wyeth, of Madison, N.J., which employs 4,700 in the Philadelphia area, said its second-quarter profit fell 4.3 percent because of a $290 million gain last year from selling the rights to seven of its less-important drugs and consumer products.

But that decline was less than analysts surveyed by Thomson First Call had forecast, and Wyeth's stock traded higher on the news.

Wyeth shares closed at $34.70, up 44 cents.

Wyeth said net revenue for the second quarter rose 12.7 percent to $4.2 billion from $3.7 billion in the same period a year ago. Sales of Wyeth's five fastest-growing drugs - the antidepressant Effexor, arthritis treatment Enbrel, ulcer medicine Protonix, antibiotic Zosyn, and transplant drug Rapamune - increased 35 percent.

Net income for the quarter was $827.3 million, or 62 cents a share, compared with $864.4 million, or 65 cents a share, for the second quarter of 2003. Analysts surveyed by Thomson First Call had forecast earnings of 59 cents a share.

The company said it continued to expect full-year 2004 earnings per share of $2.60 to $2.70. Chief financial officer Kenneth Martin vowed "patience and perseverance" in Wyeth's defending itself in litigation from former users of the diet-drug combination, known as fen-phen, that was pulled from the market in 1997. Wyeth manufactured Pondimin - one of the two drugs that made up fen-phen - and Redux, also a weight-loss drug.

Wyeth has set aside $16.6 billion in charges to cover potential lawsuits, including $3.75 billion in a national settlement reached in 2000.

Company officials said yesterday that 53,000 former users had opted out of the settlement and filed lawsuits against Wyeth.

"We do not expect to have to litigate, or settle, all the filed cases. We believe many of the claims are medically deficient," Martin told analysts on a conference call.

For now, the company will not increase its diet-drug reserve, which stands at $3.3 billion. "We cannot estimate how many additional reserves may be required," he said. "It could be significant."

"The thing is not going to resolve itself in the near term, in the next couple of months," Martin said. "I expect the other side would love us to roll over and put money on the table. That's not where we are right now."

Wyeth officials said there were fen-phen cases on trial, including one that began in Philadelphia Common Pleas Court this week.

Pharmaceutical sales were led by Effexor, Enbrel and Protonix, for gastrointestinal reflux disease. Sales of Effexor, Wyeth's top-selling drug, were up 31 percent, reaching $832 million during the second quarter.

"I thought Wyeth had a pretty strong top line," excluding a 2 percent impact of foreign currency on sales, Bernstein, the Morningstar analyst, said, referring to its revenue.

She said net income for six months was difficult to compare with the previous year because Wyeth had sold $860 million of Amgen stock in 2003. "Even excluding that gain, net income was only up about 6 percent," she said.

Merck is based in Whitehouse Station, N.J., and it employs 12,500 in the Philadelphia area. The drugmaker said quarterly sales were $6.02 billion, up 9 percent from $5.53 billion a year ago.

Merck said its higher research and development expenses in the quarter included $120 million for licensing and research collaborations with Bristol-Myers Squibb Co. and Vertex Pharmaceuticals Inc.

Merck said it expected third-quarter earnings of 80 cents to 84 cents a share, and it reaffirmed its projected full-year earnings guidance of between $3.11 and $3.17 a share.

The company said it was on track to eliminate 4,400 positions, or 7 percent of its workforce worldwide, by the end of the year. About 4,000 positions had been eliminated by June 30. Merck would not disclose how many employees have lost their jobs in the Philadelphia area.

Prescription sales of Merck's top-selling drug, cholesterol-reducing Zocor, were up only 3 percent, while sales of Pfizer's rival Lipitor, the world's best-selling medicine, were up 11 percent in the quarter.

Pfizer posted a profit of $2.86 billion, or 38 cents a share, in the second quarter, compared with a loss of $3.59 billion, or 48 cents a share, for the second quarter of 2003. That loss was attributable to its acquisition of Pharmacia.

Yesterday, Schering-Plough reported its fourth straight quarterly loss: $65 million, or 4 cents a share, compared with a profit of $182 million, or 12 cents a share, for the second quarter of 2003.

Merck and Schering-Plough are awaiting U.S. approval, possibly this week, on a new cholesterol pill that combines Zocor and a new medicine Zetia in one tablet.