Good day. The initial public offering of Generate Biomedicines on Friday will be yet another market referendum on the efficacy of biotech and artificial intelligence in drug discovery.

Founded by Flagship Pioneering in 2018, Generate plans to raise up to $425 million. A successful offering would be another boost to a biotech market that was starved of IPOs last year, largely by tariffs and regulatory uncertainty. In 2025, just 11 venture-backed biotechs went public in the U.S., halving from 22 the prior year, according to PitchBook Data.

But biotech IPOs have been returning this year, with hale debuts from Eikon Therapeutics, Veradermics and Aktis Oncology, among others. Still, the recovery is nascent and each offering reflects not only on the company, but on the biotech market overall, said Greg Yap, a partner with Menlo Ventures.

“The success of each IPO in early 2026 will impact the choices of other companies to go public,” he added.

Investors have long hoped AI would accelerate the discovery of new medicines, but so far the hype has outpaced clinical results. Generate, which uses its AI platform to uncover novel protein drugs, could help prove the technology's merits in biotech.

“We see this as a harbinger for how the market is going to look at these platform biotechs generally,” said John Beadle, co-founder and managing partner of Aegis Ventures.

Generate's lead drug is in late-stage, Phase 3 clinical trials as a potential treatment for severe asthma. The same drug is also in Phase 1 trials for use in alleviating chronic obstructive pulmonary disease, while the company has other, earlier-stage programs in development.

That deep pipeline bodes well for Generate’s future as a public company, said Dr. Jonathan Gertler, chief executive of Back Bay Life Science Advisors, a consulting and investment-banking firm partnered with investment bank DNB Carnegie.

“That signals to investors that, even in the event of a sideways turn, you have subsequent value on which to rely,” he added.

And now on to the news...

Biotech M&A. GSK struck a $950 million deal to buy Canada’s 35Pharma, a biopharmaceutical company developing cardiopulmonary treatments, as the U.K. drugmaker seeks to bolster its exposure to diseases linked to obesity.

• The acquisition builds on recent dealmaking activity at GSK, as recently appointed Chief Executive Luke Miels moves to replenish the company’s drug pipeline.
   
• 35Pharma’s lead drug candidate is at an early stage of development for treating different types of pulmonary hypertension, and its underlying mechanism offers potential for metabolic benefits including fat loss, the companies said Wednesday.
   
• GSK has so far steered clear of the obesity drug market—a fast-growing, but increasingly crowded segment of the pharmaceutical industry—even as some rivals like Britain’s AstraZeneca and Switzerland’s Roche Holding have sought to enter it.

Gilead Sciences has agreed to buy the rest of development partner Arcellx in a deal that values the biotechnology company at about $7.8 billion at closing. Gilead on Monday said it will pay an initial $115 a share in cash for the 88.5% of Arcellx it doesn’t already own, a 79% premium to Friday’s closing price of $64.11 for the Redwood City, Calif., company. Arcellx investors will also receive non-transferable contingent value rights worth an additional $5 a share based on future sales of Arcellx’s lead pipeline candidate anitocabtagene autoleucel, or anito-cel, an investigational CAR T-cell therapy for patients with the blood cancer multiple myeloma. 

Novo Nordisk struck a licensing deal valued at up to $2.1 billion to gain access to oral drug-delivery technologies developed by U.S. startup Vivtex, as the Danish drugmaker moves to deepen its pipeline of next-generation obesity medicines. The company behind blockbuster obesity and diabetes drugs Wegovy and Ozempic recently launched a pill version of its popular weight-loss medicine and is working to line up more drug candidates to expand its portfolio. Novo Nordisk is seeking to defend its position in a fast-growing, but hotly contested market. Novo Nordisk and Vivtex said Wednesday that their collaboration aims to develop next-generation biologic medicines for obesity, diabetes and associated diseases in oral formulations.

Joshua Kushner’s firm Thrive Capital recently invested in OpenAI at a valuation of $285 billion, about a third of the price the artificial intelligence company is seeking in an ongoing financing round, according to people familiar with the situation. The deal, totaling at least $1 billion and completed in December, was negotiated as part of an investment early last year that allowed Thrive to put capital into OpenAI at a preferential price over a period of time. Due to its trade, Thrive’s just-closed growth fund is already in the money, the people said. Skyrocketing valuations by some AI companies have helped fuel paper returns for their venture investors.  A Thrive representative declined to comment.

Correction: U.S. startups of all stripes landed more than 1,000 seed-funding deals between October and December, according to DataTribe. Wednesday's newsletter incorrectly said cyber startups worldwide landed more than 1,000 seed-funding deals in the period.

Exits

Precision oncology company Guardant Health acquired diagnostics startup MetaSight for about $60 million in cash upfront, and up to $90 million in additional payments tied to future commercial performance and regulatory approvals.

Slate Medicines, a Raleigh, N.C.-based startup developing therapeutics for headache disorders, closed a $130 million Series A round co-led by RA Capital Management, Forbion and Foresite Capital. RA Capital’s Andrew Levin, Forbion’s Tim Lohoff and Foresite Capital’s Cindy Xiong will join the company’s board.

BreezeBio, a South San Francisco, Calif.-based startup developing genetic medicines, completed a $60 million Series B round led by Yuanta Investment and DSC Investment.

Alveus Therapeutics, a Philadelphia-based developer of obesity therapies, held the second closing of its Series A round with the addition of $37 million from investors including Jeito Capital. The company raised the initial $160 million Series A tranche last month.

Turbine, a Budapest-headquartered virtual biology startup, secured $25 million in Series B funding led by Interactive Venture Partners.

Third Way Health, a Los Angeles-based AI-enabled services partner for healthcare organizations, nabbed $15 million in Series A funding from Health Velocity Capital.

Coral Care, a New York-based platform providing speech, occupational and physical therapists for in-home pediatric care, snagged $13 million in Series A funding. Haymaker Ventures led the round, which included participation from FCA Venture Partners and Peterson Ventures.

MedScout, a startup providing AI agents to medical sales teams, landed a $10 million growth round led by Fulcrum Equity Partners.

Baba, a New York-based patient advocacy platform supporting older adults and caregivers, emerged from stealth with more than $6.5 million in seed funding led by General Catalyst.

Burst, a New York-based healthcare payments platform that helps retailers and wellness brands unlock untapped FSA and HSA spending, has raised a total of $3 million in funding, including a $2.1 million seed round led by Pear.

• Trump’s Surgeon-General Nominee Defends MAHA Vaccine Policies 
   
• Novo Nordisk to Cut U.S. List Prices for Ozempic, Wegovy by Up to 50%
   
• Merck Revamps Pharmaceutical Unit, Creating Separate Cancer Business
   
• Why We Know When to Stop Scratching That Itch
   
• Novo Nordisk, United Laboratories Say New Obesity Drug Helps Patients Lose Weight in Trial

• Measles cases are rising. Other vaccine-preventable infections could be next. (MIT Technology Review) 
   
• 15 states sue HHS over revisions to vaccine schedule (New York Times)
   
• Alkermes’ Richard Pops to step down after three-decade run as CEO (BioPharma Dive)
   
• Dual wielding in I&I: a pivotal year ahead (Life Sci VC)

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

Share your tips, comments and questions: vcnews@wsj.com

The team: Matthew Strozier, Yuliya Chernova, and Brian Gormley.

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