Shares of Hospira Inc. lost 7 percent of their value after the company said fourth-quarter profits fell nearly 40 percent, as the maker of drugs and devices works to improve product quality in the wake of regulatory issues.

Hospira had lower-than-anticipated fourth quarter sales because it has been unable to deliver products to customers fast enough due largely to “quality enhancement initiatives.”

The news triggered a major sell-off of Hospira’s stock. Its price fell $3.90 a share, or 7 percent, to $51.15 in trading this morning on the New York Stock Exchange.

Among its issues, Hospira has been working with regulators from the Food and Drug Administration to improve quality at generic injectable drug-making plants in North Carolina that have been the subject of FDA investigations. Though Hospira executives say progress is being made at such plants, it has slowed manufacturing and subsequent delivery of products.

In addition, Hospira has had issues with some of its suppliers that provide the company with active pharmaceutical ingredients used to make company drugs, such as generic cancer treatments.

“We are not happy with this and intently focused on driving forward,” Hospira chairman and chief executive officer Christopher Begley told Wall Street analysts during a 90-minute conference call this morning.

Hospira reported net income of $60.6 million, or 36 cents a share in the quarter ended Dec. 31. That compares to $96.7 million, or 58 cents in the fourth quarter of 2009.

Revenues dropped 6 percent to $992 million, missing Wall Street’s expectations.

Quality also continues to be hit by regulatory issues. Hospira has been unable to sell certain anesthetics because of ongoing quality control issues at a plant in North Carolina and has a hold on sales of its Symbiq drug delivery pump due to a faulty alarm found in some of the devices.

Begley said the company is making progress with regulators from the FDA on a number of fronts, but the return of the Symbiq pump and clearance of plants in North Carolina are uncertain.

Despite the myriad quality issues, Begley said the company’s efforts to meet a “higher benchmark” will help Hospira long-term.

“We see light at the end of the tunnel,” Begley said.

Begley announced his retirement from Hospira last year, and will take on the role as an executive chairman later on in 2011. He said Hospira’s board has narrowed its choice for his successor following a recent “second round of interviews.”

Begley said he expects his successor to be named by the end of March.