Swiss drugs giant Novartis has bought a 20% stake in struggling rival Roche.

Novartis paid 4.83bn Swiss francs ($2.79bn) for a share in its smaller competitor, which is also based in Switzerland.

Both companies are insisting that the deal is not a prelude to a full merger.

Roche has struggled recently to boost business in its flagship pharmaceuticals division.

'Quality research'

The company said last week it was looking to cut costs in the unit, which has been affected by disappointing sales and a series of setbacks in new product development.

Roche said it would continue its established strategic and operational direction and denied the deal would lead to a full-blown merger between the two companies.

Roche chairman Franz Humer said, "We have a change here in one of the shareholders. Apart from that nothing changes for us."

He called the Novartis purchase a long-term financial investment in Roche.

Mr Humer said Roche would cooperate with Novartis where this made sense, but would treat its rival turned shareholder as it does other potential partner companies in the drugs industry.

No merger

The question of a full-blown merger was "not even in the air", he added.

Novartis bought its stake in Roche from financier Martin Ebner's BZ Gruppe Holding.

Commenting on the deal, Novartis chairman and chief executive Dr Daniel Vasella said, "This is a long-term financial investment, which is also strategic in nature."

Novartis' chief financial officer Raymund Breu said one reason the company bought a stake in Roche was to prevent competitors from doing so.

He said Roche was currently experiencing slow growth in its pharmaceuticals division, but "it is a quality research outfit" with good potential.