Good day. U.S. biotechnology entrepreneurs are crafting strategies to respond to the emergence of China’s pharmaceutical industry. Some said the U.S. needs to do the same.

Take Absci, which uses generative artificial intelligence to create biological drugs. Absci’s strategy previously included developing fast-followers, or better versions of existing compounds.

But China’s ability to rapidly advance fast-followers has prompted Absci to drop that aspect of its strategy in favor of more novel treatments, said founder and Chief Executive Sean McClain, adding that the company’s technology enables it to create drugs against biological targets that had been thought to be undruggable.

“The whole China paradigm has caused all of us to rethink our strategy,” McClain said.

Another strategy is to focus on the areas where a company has world-leading expertise, such as a drug target that the team understands better than anyone else, said David Li, CEO of biotech startup Meliora Therapeutics.

The U.S. should develop a strategy to strengthen its biotech sector and maintain its lead in the industry, some entrepreneurs said.

“There needs to be some strong action on enhancing or growing America’s biotechnology lead in a concerted way that has a longer-term vision wrapped around it,” said Benjamin Oakes, CEO of biotech startup Scribe Therapeutics.

And now on to the news...

Chinese biotech. U.S. venture capitalists are racing to tap in to China’s growing biotechnology prowess, a shift moving the industry into a more global market for the most promising new drug candidates.

• Several licensing pacts between Western and Chinese drugmakers have marked China’s emergence in biotech, a rise decades in the making. Last week, for instance, Pfizer disclosed a deal, potentially worth more than $6 billion, to secure rights outside of China to a cancer treatment from China’s 3Sbio.
   
• Long known for me-too versions of Western medicines, Chinese biotechs now develop increasingly innovative therapies. Roughly 30% of the drugs large pharmas licensed last year and in 2023 came from Chinese biotechs, up from 12% in each of the previous two years, according to a January report by investment bank Stifel.
   
• Dealmaking is occurring even as the U.S. wages a trade war with China, carrying with it the risk that President Trump could seek to stop the flow of drugs to the U.S. The activity also is leading U.S. investors and startups to reconsider where their advantages lie and how they themselves can capitalize on China’s strengths.

A fast-growing technology known as ambient listening is taking over an onerous but necessary task in healthcare: documenting what happens in the doctor-patient encounter, The Wall Street Journal reports. Already gaining traction for outpatient medical visits, the AI-powered systems are also moving into hospital rooms and emergency departments to capture discussions at the bedside, update medical records, draft care plans and create discharge instructions. Ambient-listening software runs on devices from desktops to mobile phones and tablets, using speech recognition and AI language models to capture and process conversations between a clinician and a patient during a visit.

• The AI, from companies including Microsoft, Ambience Healthcare, Abridge, Onpoint Healthcare Partners and Nabla, can recognize pertinent medical dialogue, distinguish voices and filter out casual chitchat.

OpenAI is undergoing a transformation meant to help it attract more investors and potentially go public. Securing the state approvals it needs to do so is proving complicated, WSJ reports. Delaware’s attorney general is in the process of hiring an investment bank to help it independently value the equity OpenAI’s nonprofit parent will hold in a new for-profit entity, according to people familiar with the matter.

• OpenAI aims to convert its for-profit subsidiary into a public-benefit corporation that would be valued at $300 billion, the valuation in its most recent funding round. The change is a key step in OpenAI’s ambitions to raise more cash and turn profitable.

People

Cancer biotechnology startup Volastra Therapeutics appointed David P. Southwell as chief executive. He was most recently president and CEO of TScan Therapeutics.

Hillstar Bio, which is focused on developing precision immunology therapies for autoimmune diseases, appointed Maude Tessier as chief operating officer. She previously served as chief business officer at Seismic Therapeutic.

GlycoEra, a Switzerland-based startup developing protein degraders for the treatment of autoimmune diseases, landed $130 million in Series B funding led by Novo Holdings.

Salvia BioElectronics, a startup based in the Netherlands that is developing a neuromodulation therapy for people with chronic migraine, closed a $60 million Series B round led by Innovation Industries.

Vivodyne, a San Francisco-based startup using automated robotic platforms and AI to grow and analyze human tissues in an attempt to move away from less-predictive animal models, scored $40 million in Series A funding led by Khosla Ventures.

Hedera Dx, a Switzerland-based startup providing blood-based cancer testing, closed a €15 million Series A round led by Vsquared Ventures.

AssistIQ, a Montreal-based startup using computer vision to help hospitals manage surgical and procedural supply chains, completed an $11.5 million Series A round. Battery Ventures led the investment, with Principal Brandon Gleklen joining the AssistIQ board.

Brooklyn Health, a Brooklyn, N.Y.-based startup aiming to improve how patient outcomes are measured in central nervous system clinical trials, secured $6.5 million in seed financing led by HealthX Ventures.

Kyron.bio, a Paris-based startup aiming to partner with pharmaceutical companies to develop next-generation antibody therapeutics, picked up a €5.5 million investment led by HCVC.

Alba Health, a Stockholm-based child gut health startup, was seeded with a $2.5 million investment led by Unconventional Ventures.

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• Federal cuts ripple through a bioscience hub in rural Montana (KFF Health News)
   
• The fate of Moderna’s next-gen Covid shot looms large after a flurry of policy changes (Endpoints News)
   
• Conservative support builds for IVF guardrails (Axios)

This newsletter was compiled by Brian Gormley, Matthew Strozier and Zachary Cole.

WSJ Pro Venture Capital is a premium service of The Wall Street Journal. We cover venture capital and the global startup ecosystem. Share your tips, comments and questions: vcnews@wsj.com

The Team: Matthew Strozier, Yuliya Chernova, Brian Gormley, Angus Loten and Marc Vartabedian.

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