If found guilty, the world's biggest maker of cancer medicines could be fined up to 5 percent of annual EU turnover which totaled 12.8 billion francs ($13.8 billion) in 2011, or 640 million francs.

It was first time the London-based European Medicines Agency (EMA) has launched such proceedings since legislation came into force five years ago.

"The agency will report the outcome of its investigation to the European Commission who may impose fines or periodic penalty payments ... if it finds that Roche has committed an infringement of its obligations," the EMA said on Tuesday.

The issue of drug-safety reporting by Roche was first highlighted by the agency in June after a routine inspection by British investigators found it had failed to fully assess up to 80,000 cases of possible adverse drug reactions.

There were some 15,000 deaths among the reports, which may have been due to natural disease progression but may have been connected to the drugs.

That led to an immediate probe into public health implications. The latest investigation is into the separate matter of whether Roche complied with its legal obligations. The two inquiries will run side by side, an EMA spokeswoman said.

The issue relates to medicines from across the Roche product range that were part of a financial reimbursement system designed to help U.S. patients who could not afford to pay for Roche's drugs without outside assistance.

Roche said it was cooperating with health authorities, adding that, to date, no impact on the safety profiles of any of its products had been found.

NO INDICATION

The EMA also said all Roche's medicines remained authorized without changes to the treatment advice for patients and doctors, since there was no indication of "a negative impact on the benefit-risk balance" of the drugs.

The agency's investigation affects 19 Roche drugs that have been centrally authorized by the EMA - including blockbuster cancer treatments like Herceptin and Avastin and its popular flu drug Tamiflu - as well as some medicines that were approved by national authorities.

Roche said it was going through all the cases to check which incidents should have been classified as possible adverse reactions, adding that some may already have been submitted to regulatory authorities through different channels, including by doctors looking after patients.

A company spokesman said it was premature to speculate on the outcome of the EMA investigation and the possibility of a fine, but he noted that Roche had provisions for various risks.

Roche stock was 2.1 percent lower by 1400 GMT, underperforming a 1.4 percent decline in the European drugs sector.

Adverse drug reporting is designed to catch potential problems with medicines by setting a requirement for notification when a patient dies or suffers a medical setback - even if this may be due to their underlying disease.

The EMA - the equivalent of the U.S. Food and Drug Administration - routinely carries out so-called pharmacovigilance inspections to make sure drug companies are reporting incidents properly.

(Editing by Kate Kelland and David Holmes)

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