Dendreon shares rise on takeover speculation: analysts

LOS ANGELES (Reuters) - Shares of Dendreon Corp (DNDN.O) rose nearly 12 percent on Monday amid renewed speculation that the company, which is developing a vaccine treatment for prostate cancer, is a takeover target, analysts said.

The biotechnology company, based in Seattle, is expected to resubmit its application for regulatory approval of the drug, called Provenge, in the fourth quarter of this year.

"There is a rumor today on message boards of a $40 bid from a European company," said Joe Pantginis, an analyst at Merriman Curhan Ford.

The stock was up $2.75 at $26.60 on the Nasdaq in early afternoon. Options were also active.

"Today the stock saw a morning spike. Heavy call buying accompanied the stock move triggered by takeover speculation," said Frederic Ruffy, option strategist at Web information site WhatsTrading.com.

Dendreon has said it is not interested in being acquired, and that it intends to keep North American rights to Provenge, but is seeking a partner to market the drug elsewhere.

"Nothing has changed from my thesis -- they are seeking to secure an ex-U.S. partner," said Pantginis.

He said the stock is likely to trade higher on news of a partnership, as well as positive sentiment surrounding the company's upcoming analysts' day in New York on September 24.

Pantginis estimated a 30 percent chance that Dendreon would be acquired. "If offered the right price, they (Dendreon management and board) might sell," he said.

During the first half of the session, about 43,000 calls and 5,819 puts traded in the name, double the combined average daily turnover, according to option analytics firm Trade Alert.

The stock's average option implied volatility -- a barometer of anxiety -- rose to 83 percent from 61 percent late on Friday. "This suggests that the options are priced for a relatively big move with a bias on the upside," said Ruffy.

Unlike traditional vaccines, which prevent infection, Provenge is a therapeutic vaccine -- meaning it treats disease. Both classes of vaccines work by harnessing the immune system.

The U.S. Food and Drug Administration in 2007 asked for additional clinical data on Provenge. The company announced in April that the vaccine was shown to be safe and effective in a late-stage trial.

Citigroup has estimated that Provenge, if approved, would have annual sales of $909 million by 2014.

Dendreon's pipeline includes other experimental drugs to treat cancers of the breast, ovaries and colon.

(Reporting by Deena Beasley, additional reporting by Doris Frankel and Matthew Lewis)