UPDATE 2-Dendreon's Provenge cuts death risk, but analysts wary

(Recasts; adds analysts' comments, background, share movement)

By Vidya L. Nathan

BANGALORE, Oct 6 (Reuters) - An independent data monitoring committee found Dendreon Corp's (DNDN.O) experimental prostate cancer drug, Provenge, reduced the risk of death by 20 percent compared with a dummy drug in a late-stage trial, but analysts remained skeptical about the drug's ability to gain regulatory approval.

Provenge, which has been facing regulatory hurdles for years, had earlier failed to show that it slowed the progress of advanced prostate cancer in two key trials.

Shares of the company almost doubled in value to $10.00, before falling back to trade up $1.65 at $6.85 Monday afternoon on Nasdaq.

"We believe much of today's share price move is due to short covering," Banc of America Securities analyst Will Ho said. "Considering the totality of the data available, we are skeptical of a positive outcome of the final analysis," Ho wrote in a note to clients.

Dendreon said it would expect the late-stage trial, named IMPACT, to be successful if the final analysis of data shows Provenge cut the risk of death by 22 percent. The independent data monitoring committee's finding that Provenge reduced the risk of death by 20 percent was based on an interim analysis of data from the IMPACT trial.

Final data from the trial is expected in the middle of 2009.

The data monitoring committee observed no safety concerns related to Provenge, and recommended that the study continue to its final analysis, Dendreon said in a statement on Monday.

"We believe there are too many unknowns that prevent us from expecting success at final analysis next year," Brean, Murray Carret & Co analyst Jonathan Aschoff said.

In May last year, U.S. health regulators issued an "approvable letter" for Provenge and asked for additional data. The IMPACT study was in response to the regulators' request for survival data that would support the approval of Provenge. (Editing by Amitha Rajan, Pratish Narayanan)