AstraZeneca, the second largest drugs company in UK, has announced it is buying California-based Pearl Therapeutics in a deal worth up to $1.15 billion.
Privately-owned Pearl specializes in drugs used in the treatment of lung disease and asthma.
AstraZeneca said it will pay $560 million initially, then $450 million subject to drug development milestones being reached.
It could also make sales-related payments of up to $140 million in addition.
The acquisition will give AstraZeneca a foothold in the emerging market for a new class of lung treatments known as LABA/LAMA drugs, administered via an inhaler.
These drugs are used in the treatment of chronic obstructive pulmonary disease, which affects about 210 million people worldwide.
Anglo-Swedish AstraZeneca, under its new chief executive Pascal Soriot, who took over in October 2012, has identified respiratory treatments as one of its core businesses.
AstraZeneca has been suffering falling profits and sales as several of its blockbuster drugs, such as the anti-psychotic Seroquel and anti-cholesterol Crestor, have lost their patent protection, allowing cheaper generic drugs to enter the market.
It was also forced to write off $140 million relating to a failed arthritis drug.
AstraZeneca is simplifying its drug development programme, cutting 5,000 jobs by 2016, and is looking to expand through acquisitions instead.