Baxter International Inc. will increase spending on research and development this year, for the first time since 2003, Chief Executive Robert Parkinson told shareholders Tuesday.The Deerfield-based medical products giant will “increase R&D spending at a rate faster than sales growth,” Parkinson told shareholders at the company’s annual meeting, held at the Chicago Cultural Center.With Baxter projecting 2005 sales growth of 2 percent to 4 percent (not including the impact of foreign exchange), R&D spending should come close to 2003 spending levels using Parkinson’s formula.Investing in research and development is considered key to the future of any drug and medical device maker, given pressure on Wall Street to develop blockbuster medical treatments. A company-wide restructuring led to cuts in Baxter’s R&D spending last year, lowering it to $517 million from $553 million in 2003.Baxter executives said the company is benefiting from a major retrenchment that began last year and is therefore able to spend money on drug and device development.On Tuesday Baxter said it has eliminated about 70 percent of the 4,000 jobs targeted for cuts, with the remainder to be pared by the end of the year.One shareholder questioned why Baxter was cutting jobs at the same time it was contributing $100 million to the company’s pension fund in the first quarter of this year after another $100 million last year. Baxter’s current total pension liability is about $1 billion and is underfunded, by one accounting measure. Other shareholders said they were upset that the company has not raised its dividend in several years, or returned to a quarterly payment system that was ended five years ago to save money.Parkinson, who became Baxter’s CEO last year, said funding the pension had a higher priority, calling it “sacred,” and that the company’s cash flow demands for myriad projects would not allow for an increase in the dividend this year or a return to quarterly payments."We have to balance a lot of things,” he told shareholders.
