Shares of drug maker Merck & Co Inc. (NYSE: MRK) are trading down 3.0% in early day trading after the company stated its 2007 profit forecast, which fell short of analysts' expectations. The company also forecast an earnings increase in 2008 due to strong sales of its HPV vaccine Gardasil and diabetes treatment Januvia.

Merck announced it expects earnings between $3.08 and $3.14 a share for 2007, while analysts, on average, predicted earnings of $3.15 a share. Including items, the company predicted its earnings will fall in a range between $1.45 to $1.51 per share.

Looking ahead to 2008, the company now anticipates its profit will rise to a range of $3.28 to $3.38 a share helped by increased sales of its products. Including a $100 million restructuring charge and an AstraZeneca partnership gain, the company forecast earnings between $3.96 to $4.06 a share in 2008. But the target offered by Merck for 2008 also missed analysts' predictions for earnings of $3.39 a share.

Merck also announced it would continue its initial cost-cutting program announced back in 2005. According to Richard Clark, Merck's chairman, president and chief executive officer, the plan is designed to cut 7,000 jobs by the end of 2008 to save $4.5 billion to $5 billion that could improved the company's gross margin. The costs related to this plan are expected to be about $700 million in 2007 and $100 million in 2008.

Eliza Popescu is a financial writer for the online investment advisory service Investor's Observer.