UPDATE 5-Dendreon expects limited initial Provenge supply

* Expects US FDA to act on application by mid-2010

* Analysts caution about possible initial drug shortage

* Sees N.J. Provenge plant at full capacity in H1 2011

* Shares fall 4.85 percent (Recasts first paragraph)

By Ransdell Pierson

NEW YORK, Sept 24 (Reuters) - Dendreon Corp plans in November to seek U.S. approval for its Provenge prostate cancer vaccine and expects regulators to respond by mid-2010, the company said, but analysts cautioned about potential initial shortages of the high-profile product.

Dendreon (DNDN.O) will be able to make enough Provenge to generate potential sales of $60 million to $125 million in the second half of next year, according to manufacturing details provided by the drugmaker at a two-hour meeting on Thursday with industry analysts.

The company said it will steadily ramp up production until full capacity is achieved by late 2011 at plants in New Jersey, Atlanta and Los Angeles, together able to support potential annual sales of $1.2 billion to $2.5 billion.

"The launch could be slow at first due to supply constraints, with demand outweighing supply in the first six months," said Deutsche Bank analyst Robyn Karnauskas. But peak annual U.S. sales of the drug may eventually top $1.8 billion, she added.

Shares of Dendreon, which have soared 10-fold since March, closed down 4.85 percent, amid an almost 1 percent decline for the Nasdaq Biotech Index .NBI.

Some investors may have been disappointed with the 2010 sales prospects and that Dendreon did not announce an overseas marketing partner at the meeting, Karnauskas said. The company plans to sell Provenge by itself in the United States.

Provenge would be the first approved "therapeutic" cancer vaccine. While conventional vaccines prevent diseases, Provenge treats the condition, which is diagnosed in one of every six American men and is the second-leading cause of cancer death among men.

"We'll roll this product out in step-wise fashion," Dendreon Chief Executive Mitchell Gold said in an interview. He declined to provide sales estimates for any period, but cited high hopes for Provenge.

"A whole new era of medicine is about to emerge," he said, with a drug that harnesses the patient's immune system to find cancer cells and destroy them.

The Seattle biotechnology company previously said it would submit an application for Provenge in the fourth quarter.

While many drugmakers are dramatically cutting jobs, Dendreon said it would more than double its current workforce of 290 by the time of its anticipated Provenge launch.

Excitement has been high over Provenge since the release of data in April that showed it prolonged lives of patients about four months. That compares to a two-to-three month survival benefit in separate studies for Sanofi-Aventis' (SASY.PA) Taxotere, the current standard of care.

Dendreon noted on Thursday that Taxotere, a chemotherapy, can cause harsh side effects that were not seen with Provenge -- potentially a big selling point as well as an advantage to patients.

Dendreon said its New Jersey manufacturing plant would be at 25 percent capacity next year and up to full capacity in the first half of 2011 with a capability of producing enough Provenge to generate $500 million to $1 billion in annual sales.

That would be supplemented by manufacturing at sites in Atlanta and Los Angeles, each capable of producing $375 million to $750 million of Provenge annually.

Dendreon said it plans next year to test a therapeutic vaccine called Neuvenge against bladder cancer. It aims to put one new drug into human clinical trials per year.

Shares of Dendreon fell $1.37 at $26.90 on Nasdaq. (Reporting by Ransdell Pierson, Lewis Krauskopf and Bill Berkrot, editing by Dave Zimmerman and Carol Bishopric)