Baxter Intnl. (LSE:BAX)
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Baxter International Inc. (BAX) issued long-range financial goals on Wednesday that continue to target double-digit earnings growth over the next five years while the company ramps up spending in research and development.

Some of that research has gone into developing a vaccine for the H1N1 flu virus, also known swine flu, for which Baxter said it has recently had success increasing production.

The maker of medical products targeting serious conditions such as hemophilia and kidney failure held an all-day investor conference in Chicago on Wednesday to review its financial goals and research efforts. Baxter said it expected to boost sales by about 7% to 8% over the next five years, excluding the impact of foreign currency, while boosting earnings per share by about 11% to 13%.

Baxter officials described this as a "base-case" forecast that the company could exceed if certain key "wild card" development efforts that aren't factored into guidance - such as development of a treatment for Alzheimer's disease - bloom.

"Obviously our aspiration is to grow sales at a faster rate than our base-case plan," Robert M. Davis, Baxter's chief financial officer, said during the conference.

Davis noted that the company's financial goals assume a higher corporate tax rate and the buyback of $750 million to $1 billion in shares each year.

Shares of the Deerfield, Ill., company recently traded up seven cents to $56.03.

The new sales and earnings targets are similar to those announced in early 2007, and Credit Suisse analyst Kristen Stewart said ahead of the conference that earnings growth at the rate Baxter again cited "seems like a reasonable target."

The company's latest long-range forecasts also call for generating annual cash flow of about $4 billion by 2014 and increasing investment in research and development by at least an 8% to 10% compound annual rate.

"We believe we have a balanced outlook and are well-positioned to achieve our results while making appropriate investments to enhance future growth and delivering value to shareholders," Robert L. Parkinson Jr., the company's chairman and chief executive, said in a release.

Among Baxter's business units, the company expects over its long-term plan to grow annual sales in Bioscience - which includes products for treating hemophilia and immune-system disorders - by 7% to 9%.

The company sees sales growth in its medication-delivery business, which includes drug infusion pumps and intravenous access systems used in hospitals, of 7% to 8%. The renal business, which includes products to manage advanced kidney failure, is seen growing by 6% to 8%.

Regarding Baxter's investment in research, some of this will take a long time to pay off. But Parkinson noted the progress Baxter has already made, with 14 late-stage clinical trials underway, compared with just two late-stage studies in 2006.

The company highlighted a number of developments, including a home hemodialysis system for patients with kidney failure. The company is also working on next-generation infusion pumps - Baxter has struggled in this area due to long-running problems with older Colleague-brand pumps that the company is still working to resolve.

Vaccine for the H1N1 virus represents another area of opportunity for the company. It has developed a cell-based vaccine it called Celvapan and has shipped this to four countries, said Joy A. Amundson, president of the Bioscience unit.

She noted that the company has increased its production yield for this vaccine three-fold compared with early production batches. In July the company said it was facing some production challenges.

It also said then that the H1N1 flu vaccine would provide a sales boost this year, but no earnings benefit due to offsetting factors such as the cost of scaling up production. Parkinson added on Wednesday that he increasingly believes this represents a sustainable opportunity for the company.

"I think net net it represents an upside to our base-case, long-range plan," he said.

During his presentation, Parkinson said Baxter is less vulnerable than many medical companies to potential changes in U.S. health-care policy, although he noted there is ambiguity about how this process will evolve. Regarding potential acquisitions, Parkinson said Baxter continues to focus on smaller-scale "bolt-on" deals.

-By Jon Kamp, Dow Jones Newswires; 617-654-6728; jon.kamp@dowjones.com