VENTURE capitalists pumped a record US$9.1 billion into privately held United States biotechnology and medical device companies last year, in hopes of making discoveries they can sell to larger drug makers.

Biotechnology and medical device companies raised 20 percent more cash in the US last year than in 2006, according to a report by accounting firm PricewaterhouseCoopers and the National Venture Capital Association.

According to Bloomberg News, more than 4,000 biotechnology companies manipulate genes and cells to develop drugs for diseases including cancer and arthritis.

Older drug makers that have long relied on chemistry to develop products have paid for alliances with biotechnology companies, aiming to develop drugs to replace products with expiring patents.

New York-based Pfizer Inc, the world's biggest drug maker, is bracing to lose US$13 billion in annual sales when generic copies of its top-selling cholesterol pill, Lipitor, enter the market as early as 2010.

"A grim prognosis for Big Pharma is actually music to our ears," said Sherrill Neff, founding partner of Quaker Bioventures, a Philadelphia-based venture fund with US$600 million under management.

"We are in the early stages of a deepening symbiosis between venture-backed biotechnology companies and large pharma."

Venture capitalists invested US$29.4 billion in 3,813 companies across all industries, the most since 2001, according to the report.

About 31 percent of the cash went to biotechnology and medical devices, a record share of venture investment.

Software investment rose 2.7 percent to US$5.3 billion, while Internet companies raised US$4.6 billion, a 12-percent increase, the report said.

Neff said investors continue to funnel money into biotechnology because it has innovative science and long-term patents that large drug makers need.