Growth slowed for Medtronic’s Santa Rosa-based vascular business in the first quarter, as price competition and reduced health care spending curbed global sales, the company said Tuesday.
“It was a difficult quarter and a challenging environment,” CEO Bill Hawkins told Wall Street analysts. “We were surprised by how the market slowed down.”
Medtronic’s vascular unit had $493 million in revenue for the quarter ended July 30, up 4.7 percent from the same period last year.
But business was down 4.8 percent from the fourth quarter, when the vascular unit posted a record $518 million in sales.
The division makes coronary stents and stent grafts for treating artery disease. Stents are tiny wire mesh tubes implanted in heart patients’ clogged arteries to keep blood flowing.
Minneapolis-based Medtronic has about 840 employees in Santa Rosa. The company on Monday said it will build a $1.2 million solar energy project at its main Fountaingrove campus, generating up to 40 percent of its peak electric demand.
The ground-based installation will be complete next summer.
Companywide, Medtronic reported first quarter revenue of $3.77 billion on Tuesday, down 4 percent from the same period last year.
The decline was due in part to foreign currency impacts and an extra week of sales in last year’s first quarter.
But Medtronic also saw a decline in its two largest business segments, cardiac disease rhythm management and spinal therapy. Hospitals purchased fewer medical devices as patients put off costly procedures, the company said.
Hospitals and insurers also are looking to pay less for medical supplies, driving prices down.
Sales of Medtronic’s next-generation drug-coated stents, which prevent arteries from re-clogging, have been hurt by increased competition, Hawkins said. “We have seen competitors being very aggressive with price around the globe,” Hawkins said.
Still, Medtronic reported $830 million in earnings for the quarter, up 87 percent over the same period a year ago, when the company was feeling the full impact of the recession.
Last year, the company shifted 240 Santa Rosa manufacturing jobs to a lower-cost production facility in Ireland and laid off 60 white-collar employees.
On Tuesday, the company scaled back its revenue and earnings estimates for the rest of 2011 based on the drop in demand, forecasting sales growth of 2 to 5 percent.
Medtronic’s business will rebound in the long term, Hawkins said. “I really believe demand over time will be there as the population ages,” he said.
Medtronic shares fell nearly 11 percent Tuesday, closing at $31.21 on the New York Stock Exchange.