UPDATE 3-Onyx/Bayer drug Nexavar flunks skin cancer trial

* Trial stopped after drug fails against melanoma

* Bayer, Onyx say will continue work on other uses

* Bayer affirms Nexavar's peak sales potential

* Bayer shares fall 1.2 percent

* Onyx shares slump 16 pct in Frankfurt trading

(Adds byline, Onyx share price)

By Ludwig Burger

FRANKFURT, April 27 (Reuters) - Bayer BAYG.DE and Onyx Pharmaceuticals (ONXX.O) said their Nexavar drug failed to work against skin cancer in a late-stage clinical trial, dashing slim hopes of success for this use.

A Bayer spokesman on Monday reiterated the company's previous outlook for more than 2 billion euros ($2.6 billion) in peak annual sales from the drug, which is already approved for treating liver and kidney cancer by stopping tumour growth.

He said the forecast did not include projected revenue from its use against skin cancer, also called melanoma.

Bayer shares eased 1.2 percent to 38.44 euros by 1225 GMT while the European DJ Stoxx Health Care Index .SXDP advanced 1.6 percent.

Onyx shares fell 16 percent in Franfurt trading (ONXX.F) before the beginning of trade in New York.

"Melanoma is a tough venture to tackle. It is worth trying since there is a high medical need but with low rates of probability for success," DZ Bank analyst Peter Spengler said.

Spengler had previously attributed 25 cents of his fair-value estimate for Bayer of 45 euros to Nexavar's use in the field of skin cancer.

A Phase III study, which compared the pill combined with chemotherapy and chemotherapy alone, was stopped because there was little difference in the results for patients taking the drug and those who were not, the partners said.

Nexavar is one of Bayer's top drug hopefuls along with anti-blood clotting pill Xarelto. It has already proven successful against liver and kidney cancer and Bayer is also pursuing approvals for use against lung and breast tumours, the two most common forms of cancer.

"Onyx and Bayer remain committed to our broad clinical program to investigate the potential of Nexavar in a wide range of cancers," the two companies said in a joint statement. (Editing by Karen Foster and Jon Loades-Carter) ($1=.7604 Euro)