Pharmaceutical giant AstraZeneca is investing £75m ($139m) in UK firm Cambridge Antibody Technology (CAT).
The two firms are to work together on anti-inflammatory drugs
The move will see the two companies work together on developing the next generation of anti-inflammatory drugs.
The announcement came as CAT, which specialises in developing drugs from anti-bodies, unveiled a drop in losses.
In the 12 months to 30 September, it made a pre-tax loss of £38m, compared to £42m for the year before. Revenues were up by 82% to £15.9m from £8.7m.
The study into anti-inflammatory drugs will initially last for five years.
Anglo-Swedish AstraZeneca is buying 10.2 million shares in CAT at 734p each, giving it an estimated 19.9% stake in CAT.
The deal is a major boost for CAT, as earlier this month it announced the failure of its biggest new drug hope.
On Monday it is also going to court with US partner Abbott over royalties to its one marketed drug.