UPDATE 1-Galapagos enters clinical trials with second drug

* Second Galapagos drug to enter clinical trials

* Eyes peak sales of 500 million euros per year

* Will be on market in 2016 if all stays on schedule

* Shares rise 6 pct

(Adds details, background)

BRUSSELS, June 16 (Reuters) - Biotechnology company Galapagos (GLPG.BR)(GLPG.AS) said on Tuesday it had begun clinical trials for its bone metastasis drug and hoped for peak annual sales of 500 million euros ($691 million). The Belgian bone and joint specialist's new drug GLPG0187 is meant to prevent metastasis, or the spread of cancers, to bone and should be available in 2016 if trials and development stay on track, its chief executive told a conference call.

Galapagos shares rose as much as 6.0 percent to 7.79 euros early on Tuesday. The DJ Stoxx European health care index was 0.6 percent higher.

"The potential for this drug is very broad," CEO Onno van de Stolpe said, adding while Galapagos would likely develop the drug solo through the second phase of human trials, it would likely seek a partner for the drug later on.

"In general an area like this would be of interest to all the big pharma companies -- the oncology market is one of the key areas that pharma invests in," he said.

KBC Securities said in a morning note that the initiation of Phase I studies increased the probability of the drug's success, allowing an increase in price target to 8 euros from 7.70 euros

"Continued positive news flow should support the stock in the coming period, allowing us to maintain a Buy rating," it said.

It noted GLPG0187's real competitors were likely to be Merck & Co's (MRK.N) odanacatib and Amgen's (AMGN.O) denosumab. The current standard is Novartis's (NOVN.VX) Zometa.

Galapagos has already allied itself through drug development deals with several heavy-hitters in the healthcare industry, to include Eli Lilly (LLY.N), GlaxoSmithKline (GSK.L) and Johnson & Johnson's JJ.N Janssen Pharmaceutica.

GLPG0187 is the second Galapagos drug to begin human trials. GLPG0259 for rheumatoid arthritis entered the clinic in March.

Galapagos has forecast 100 million euros in revenue this year, which would be a rise of 25 percent from last year, with 60 million euros captured in milestone payments.

Currently, Van de Stolpe said Galapagos is focusing on its new drug for preventing bone metasases from prostate and breast cancers. For those indications peak sales could reach about 500 million euros per year, he said. (Reporting by Anne Jolis; editing by Philip Blenkinsop and Hans Peters) ($1=.7232 Euro) (Brussels newsxroom: +32 2 287 6810, fax +32 2 230 7710))