CORRECTED - UPDATE 1-Bayer starts Phase III study of lung drug riociguat

* Starts final phase of testing

* Sees market launch in 2012

* Sees peak annual sales of 500 mln-1 bln euros

(Corrects spelling of Gilead's drug Letairis)

FRANKFURT, Feb 9 (Reuters) - Bayer AG BAYG.DE has entered phase III of testing its experimental pulmonary-hypertension drug riociguat after the pill showed promise in an earlier trial, the company said on Monday.

The German drugmaker has begun testing the drug against two types of the pulmonary-hypertension disease, CTEPH and PAH, in the third and last stage of testing normally required for regulatory approval.

The company expects to launch the drug in 2012 and hopes to generate between 500 million euros ($645.5 million) and 1 billion euros in peak annual sales.

Bayer is trying to gather further evidence that the pill helps improve the ability to endure physical exercise in patients suffering from the life-threatening lung disease.

Pulmonary hypertension, which affects more than 2.5 million people worldwide, is a form of high blood pressure in the lungs causing shortness of breath, dizziness and fainting, among other symptoms.