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Cholesterol functionalized polyethylene glycol with terminal aizde group (Cholesterol-PEG-N3), is a lipophilic lipid PEG conjugate with good water solubility. Cholesterol-PEG derivatives can be used to make targeted liposome to improve circulation time for encapsulated drugs. They may also be used for non-viral transfection reagents. The formed nanoparticles can be modified by ligands containing alkyne group by click chemistry.