* Alpharadin drug deal could be worth 560 million eur
* Royalties or shared profits would come on top
* Algeta sees peak annual sales of $1.3-1.9 bln for drug
* Algeta shares surge 56 percent, Bayer up 1.4 percent
(Adds details, background, CEO quote, analyst quote)
FRANKFURT, Sept 3 (Reuters) - Shares in Algeta skyrocketed after the Norwegian biotech company clinched an $800 million licensing deal with German drugmaker Bayer for Algeta's main experimental drug.
Algeta expects global peak sales of $1.3-$1.9 billion per year for the cancer drug, dubbed Alpharadin, which clings to cancerous bone cells and destroys them via alpha rays.
The deal is potentially worth 560 million euros ($800 million) to Algeta, including an upfront payment of 42.5 million euros and payments depending on development and commercial milestones, the companies said in statements.
In addition, Algeta would get double-digit royalties on future sales.
The biotech company also has the option in the U.S. market, by far the largest for Alpharadin, to switch from royalties to sharing profits equally with Bayer.
"This agreement enables us to transform from a biotech company into a specialist oncology pharma company," Algeta Chief Executive Andrew Kay told Reuters. "This is a large and very exciting deal."
The shares surged 56 percent to 63 Norwegian crowns ($10.37) as per 0819 GMT.
"This is an extremely positive deal, the size is significant and far larger than what we had expected," DnB NOR Markets analyst Espen Joergensen commented.
Bayer shares gained 1.3 percent to 42.58 euros while the European DJ Stoxx Health Care Index was down 0.4 percent.
Development of Alpharadin, administered via injection, is most advanced targeting bone metastases from prostate cancer that cannot be treated by standard hormone therapy.
For this use, the drug is currently being explored in a Phase III clinical trial called ALSYMPCA.
A Bayer spokeswoman said first results of this study are expected in late 2011.
Future indications could be to combat bone metastases resulting from lung, breast and kidney cancer, CEO Kay said. ($1=6.073 Norwegian Crown) (Reporting by Ludwig Burger in Frankfurt and Ole Petter Skonnord in Oslo; Editing by Jon Loades-Carter)