Link:...

Link:
http://money.cnn.com/news/newsfeeds/articles/reuters/MTFH58590_2009-04-29_20-11-51_N29436289.htmANALYSIS-As Dendreon shares soar, suitors may take aim

April 29, 2009: 04:11 PM ET

* Dendreon shares double after prostate cancer drug data
* Lack of partners make Dendreon desirable target

* Analyst sees "significant premium"


By Bill Berkrot

NEW YORK (Reuters) - With approval of its groundbreaking cancer vaccine now looking like a slam dunk, Dendreon Corp has become a hot property likely to draw intense interest from the big drugmakers and biotechnology companies.

Dendreon on Tuesday unveiled data showing its experimental immunotherapy Provenge significantly extended survival in late-stage prostate cancer patients with no major side effects, and the biotechnology company plans to seek U.S. approval for the product in the fourth quarter.

The data made believers out of former skeptics following years of failure by other cancer vaccines. Shares of the heavily shorted stock more than doubled to an all-time high of $27.40 on Wednesday, before closing up $11.13 or 94.24 percent at $22.94 on Nasdaq.

A Dendreon research note from Rodman & Renshaw that raised the price target on the company's shares to $35 was headlined: "Home Run For Prostate Cancer Patients."

A little over two weeks ago, there were two "sell" ratings and five "hold" ratings among the seven analysts who follow Dendreon, with one analyst maintaining a $1 price target. There are now five with "buy" or "outperform" and two "holds."

The data also puts Dendreon squarely in the crosshairs of companies desperate for new medicines to shore up the bottom line in the face of declining sales, generic competition and disappointing in-house drug development.

"If you look at a product like Provenge that could be on the market by mid next year, that's a product that could be instantly accretive to earnings," said Joe Pantginis, an analyst for Merriman Curhan Ford & Co who earlier Wednesday put out a note headlined: "Data In, Debate Over; We See Provenge Being Approved."

Dendreon owns full worldwide Provenge rights and has said it plans to retain U.S. rights and seek a partner for sales outside the United States. But an outright acquisition of the company is always a possibility at the right price, and the likely level of interest could produce some head-turning bids.

"It could garner a significant premium because you're not only selling the efficacy, but the safety profile alone is extremely favorable," Pantginis said.

Sven Borho, a portfolio manager for OrbiMed Advisors which holds about two million Dendreon shares, sees bidders for the company coming from all directions.

"The data is better than I could have expected. It is absolutely flawless. This is a major breakthrough," Borho said. "This trial puts all doubt to rest."

That Dendreon got to this point without signing any partnership deals on Provenge makes it especially appealing.

"There are very, very few unencumbered assets out there. That by definition makes them an acquisition target," Borho said.

"Everybody's interested in oncology. Everybody's interested in an unencumbered asset. There's almost no company out there which doesn't want to get a true breakthrough product in oncology," Borho said.

Pantginis mentioned French drugmaker Sanofi-Aventis as a potential Dendreon acquirer. Sanofi recently discontinued several drugs in development and sells the prostate cancer chemotherapy drug Taxotere that could face serious competition from Provenge.

"Patients will want to take this automatically before even going to Taxotere, which means there's also significant potential for off-label use" of Provenge in earlier stage cancer patients, Pantginis said.

Dendreon has yet to discuss the price for Provenge, but estimates have ranged to $50,000 to $80,000.

"When one considers the cost of Taxotere plus its required supportive care drugs, a Provenge price tag of about $80,000 would be at parity, be more effective, and be less toxic," said Jonathan Aschoff, an analyst with Brean Murray Carret & Co.

Dendreon's market value is now about $2.3 billion following a bizarre trading day Tuesday in which its share price plunged 45 percent in a two-minute span prior to release of the data, only to more than double once trading resumed after hours.

A takeover price would likely be well north of the current market value.

Borho noted that Japanese drugmaker Takeda Pharmaceutical Co paid $8.8 billion for Millennium Pharmaceuticals to gain the cancer drug Velcade and Eli Lilly and Co paid $6.5 billion for ImClone Systems, which makes the cancer drug Erbitux, and both of those drugs already had marketing partners.

"Provenge has market potential significantly bigger than Erbitux and Velcade's potential," Borho said. "It will be a bigger drug." (Reporting by Bill Berkrot; Editing by Richard Chang)