Biotechnology Companies Raise Record Venture Capital in 2007

Venture capitalists pumped a record $9.1 billion into privately held U.S. biotechnology and medical device companies last year, in hopes of making discoveries they can sell to larger drugmakers.

Biotechnology and medical device companies raised 20 percent more cash in the U.S. last year than in 2006, according to a report by accounting firm PricewaterhouseCoopers and the National Venture Capital Association. More than 4,000 biotechnology companies manipulate genes and cells to develop drugs for diseases including cancer, and arthritis.

Older drugmakers 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 drugmaker, is bracing to lose $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 $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 a total of $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, according to the report. Software investment rose 2.7 percent to $5.3 billion, while Internet companies raised $4.6 billion, a 12 percent increase, according to the report.

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