* Sees EPS up 11-13 pct, sales up 7-8 pct
* To boost R&D spending 8-10 pct a year
* H1N1 vaccine yields improving
* Shares close 0.3 pct higher
(Adds company, analyst comments, byline)
By Debra Sherman
CHICAGO, Sept 16 (Reuters) - Medical products maker Baxter International Inc (BAX.N) said on Wednesday it expects to increase annual profits 11 percent to 13 percent on average over the next five years, even as it boosts investment into research.
The maker of blood therapy, kidney dialysis products and vaccines expects to increase sales about 7 percent to 8 percent annually over five years, excluding foreign currency effects, while increasing investment in research and development at an average annual rate of at least 8 percent to 10 percent.
Baxter offered its long-range projection as it holds its investor conference in Chicago.
"The psychology is better than it was two years ago (when Baxter held its last investor meeting). The question everyone is asking now is how conservative are they being here," said analyst Timothy Nelson of FAF Advisors, who attended the meeting.
Chief Executive Robert Parkinson characterized the long- term outlook as "balanced," saying it is possible healthcare reform in the United States might impact Baxter's businesses in unexpected ways.
He told the conference of about 200 investment analysts that the company's growth strategy is based on optimizing its existing portfolio -- "the most underappreciated" growth driver -- as well as expanding geographically, making investments in R&D, which is at a record, and business development.
He said the subject of business development, including acquisition opportunities, is a standard item on board meeting agendas.
Parkinson told analysts to expect a pick-up in small deals, but repeated management's long-standing position a large deal is not in Baxter's future.
"The notion of a mega-deal is clearly not in our plans," he said.
As for smaller deals, Parkinson said they were still "pricey."
"Particularly in areas where we compete," he said. "We're not going to do deals for the sake of doing deals."
The company has started 14 late-stage clinical trials over the past year, which include pandemic and seasonal flu vaccines.
Joy Amundson, president of Baxter's Bioscience unit which makes vaccines, said yields of its "swine flu," or H1N1 vaccine, have improved three-fold and the company is shipping to vaccines weekly.
Vaccine makers have been struggling with yields, creating concerns of a shortfall of the H1N1 vaccine.
The new H1N1 strain of flu, declared a pandemic on June 11, could eventually infect 2 billion people, according to World Health Organization (WHO) estimates.
Novartis said last week a single dose of its swine flu vaccine might protect against the virus, raising hopes that potentially tight supplies could go further when mass immunization starts.
A Baxter spokeswoman said it still was not known whether the Baxter product could give protection with a single dose.
She said it was also unclear whether or not Baxter would be able to fulfill its vaccine orders. But reports it would not be able to meet its commitments were premature, she said.
It depends on yields, she said, and they are improving.
Baxter shares closed 17 cents higher $56.12 in New York Stock Exchange trading. (Reporting by Debra Sherman in Chicago and Lewis Krauskopf in New York; editing by Dave Zimmerman and Andre Grenon)