Following a 15 per cent increase in R&D spending during 2006, Baxter has announced plans for further increases of at least 12 per cent every year for the next five years.
During the company's latest investor relations meeting in Chicago, Robert Parkinson, CEO of Baxter, said that since he had joined the company in 2004, it had undergone a series of R&D productivity improvements and that the company had now "earned the right to spend more on R&D." The company plans to increase R&D spending at a greater rate than growth over the next five years.
Baxter's R&D expenditure for 2006 was $614m, which is just under 6 per cent of their total sales.
This is still markedly less than their competitors in the pharmaceutical sector, for instance GlaxoSmithKline spent in the region of 14 per cent of sales on R&D in 2005.
"Our increased investment and focus in research and development is beginning to drive benefit and value for patients around the world, as well as for our shareholders," said Parkinson.
The planned increases would see spending move to over $1bn, a figure the company predicts will equate to 7.5 per cent of sales.
Baxter currently focuses its R&D on: regenerative medicine, stem cell therapy and hard and soft tissue repair products; cell based vaccines; biotherapeutic treatments for Alzheimer's and other neurological diseases; and medication delivery products with special antimicrobial coatings to reduce bloodstream infections However, Baxter does not solely rely solely on drug products but also on the medical device area.
Therefore, the effect of generic competition is far less of a factor than many of its competitors.
"Our diversified healthcare business model, with unique technologies and capabilities across the spectrum of biotechnology, medical devices and specialty pharmaceuticals, combined with our focus on medically necessary products and strong global brand, gives us confidence in and excitement about our future," continued Parkinson.