Swiss-based Roche said it was cutting production of influenza drug Tamiflu, seen as one of the best defences against a possible bird flu pandemic, because supply now exceeds demand.
The pharmaceutical group said it had increased capacity to more than 400 million treatments a year and that supply now significantly outstrips orders with signs of slowing sales to governments wanting to prepare for any outbreak.
The cutback would not affect Roche's expectations for sales of Tamiflu for stockpiling, at between 800 million Swiss francs ($665 million) to 1.2 billion francs ($1 billion) in 2007, said William Burns, head of the company's pharmaceuticals unit.
"Our guidance for the year is unchanged," Burns told reporters. "This is not a new signal on the sales outlook for Tamiflu."
Roche said the expansion of capacity meant it could now satisfy "significant additional orders" from governments and companies for Tamiflu.
Roche certificates, its most widely traded form of equity, were 0.5% lower at 232.30 francs in late trading.
The World Health Organization (WHO) and some countries have been stockpiling the drug in case the H5N1 bird flu strain, now mainly affecting poultry, mutates and begins to spread quickly among humans.
Roche will maintain its stock of intermediates and active pharmaceutical ingredients, so it would be ready to gear up to full production capacity if needed.
Sales to governments in the first quarter were slower than in the previous three months and Eugene Tierney, head of specialist sales at Roche's drugs unit, said that was the first indication of a tail off in government orders and demand.
The Basel-based company has so far received orders from governments amounting to about 215 million treatments.