Wyeth (WYE) posted flat first-quarter earnings Wednesday that exceeded Wall Street expectations, as lower expenses offset sagging sales weighed down by generic competition and the stronger U.S. dollar.

The Madison, N.J., drug maker agreed in January to be acquired by rival Pfizer Inc. (PFE) in a cash-and-stock deal recently valued at more than $60 billion. Some big drug makers see mega-mergers as a way to survive a host of industry challenges, including generic competition and difficulty in developing new drugs. Pfizer, which is facing a 2011 loss of U.S. market exclusivity for its blockbuster cholesterol drug Lipitor, is buying Wyeth to gain access to its biotechnology assets, vaccines and consumer health-care products.

Wyeth Senior Vice President Joseph Mahady told analysts on a conference call the first-quarter results were achieved "against the backdrop of new generic challenges in a very tough economic environment."

Wyeth, which makes Advil pain relievers, said net income edged up slightly to $1.2 billion, with per-share earnings flat at 89 cents.

The latest quarter included restructuring and merger charges totaling 6 cents a share. Excluding items in both quarters, earnings rose by one cent to 95 cents a share, ahead of the mean estimate of analysts surveyed by Thomson Reuters of 88 cents a share.

Revenue fell 6% to $5.4 billion on unfavorable currency-exchange rates. Excluding the currency impact, revenue would have risen 2%.

Like other drug makers grappling with generic competition and other pressures on revenue, Wyeth has cut costs significantly over the past year, including layoffs that helped reduce its work force by about 6% last year.

Wyeth's top-selling drug, the Effexor antidepressant, posted a 20% sales decline to $819 million due to generic competition.

Childhood vaccine Prevnar had sales of $755 million, up 7%.

Enbrel, a treatment for rheumatoid arthritis and other conditions, had sales outside the U.S. and Canada of $627 million, up 3% - a pace weighed down heavily by foreign-exchange rates. Wyeth has exclusive rights for the drug outside the U.S. and Canada, and co-promotes with Amgen Inc. (AMGN) in the U.S. and Canada. Wyeth's share of revenue within these countries declined 26% to $240 million. This is in line with a recent slowdown in this product category, which also includes Johnson & Johnson's (JNJ) Remicade and Abbott Laboratories' (ABT) Humira.

Credit Suisse analyst Catherine Arnold said the sales gains for Prevnar and Enbrel were the most important factors in the quarter.

"Some investors were apprehensive about Enbrel and Prevnar revenues heading into the quarter, and today's results should be met with some relief," Arnold said in a research note. She noted that Pfizer's stock performance after reporting results Tuesday - a 2.4% gain to $13.39 - "may have been somewhat muted by anticipation of [Wyeth's] 1Q09 results, and these results may be modestly encouraging to [Pfizer] investors."

Wyeth's first-quarter gross margin rose to 75.6% from 73.8% on the stronger dollar.

Wyeth shares closed Tuesday at $42.25.

-By Peter Loftus, Dow Jones Newswires; 215-656-8289; peter.loftus@dowjones.com

(Mike Barris contributed to this story.)