Good day. Hospitals and health systems increasingly view artificial intelligence as a relief to overworked staff. But they haven’t dropped all caution on the technology.

Hoping to cut costs and workloads, hospitals are using AI tools for a variety of tasks like imaging and radiology, early sepsis detection and medical coding, a recent J.P. Morgan report says.

Despite their interest, however, they see some barriers to adopting AI, according to results of a survey in the report. Their principal concern was the “lack of AI tool maturity.”

Rather than dive in, some healthcare chief technology officers prefer to wait to see what enhancements a vendor later adds, or whether a competitor ultimately proves to have better technology, said Andrew McEvoy, head of healthtech within J.P. Morgan’s Innovation Economy business.

They also are inclined to wait for an overarching package of tools instead of jumping at a narrow offering.

“What they are looking for is vendors who have a full-stack solution across the entire workflow,” McEvoy said. “The integration of that solution is less daunting in that you have one party to work through five or six different use cases.”

And now on to the news...

Healthcare AI. The arrival of OpenAI and Anthropic in healthcare promises to jolt the sector, threatening some startups as it creates opportunity for others.

• Last month, OpenAI introduced ChatGPT Health, a consumer-oriented service that lets patients connect their medical records and wellness apps, and OpenAI for Healthcare, geared to hospitals and other medical organizations.
   
• Also in January, Anthropic unveiled Claude for Healthcare, a set of tools for providers, health insurers and consumers, after having brought out a scientific AI toolbox, Claude for Life Sciences, in October.
   
• The moves coincide with exploding venture investment in healthcare artificial intelligence—last year, those startups secured 54% of digital-health venture funding, up from 37% the prior year, according to Rock Health, an investor in the sector. The rise was spurred by the technology’s potential to ease rote administrative work and, in some cases, improve diagnoses and treatment.

Merck recorded higher revenue in its fourth quarter, but expects earnings growth to slow as it ramps up acquisitions. Revenue rose 5% to $16.4 billion. Analysts surveyed by FactSet forecast revenue of $16.20 billion. Merck said sales were driven by growth in its oncology business, as well as cardiometabolic and respiratory, despite a decline in vaccines. Merck announced several merger deals last year as it braces for Keytruda to lose the protection of its main U.S. patent. The patent expires in 2028, opening the door for lower-cost versions to compete with one of Merck’s biggest revenue drivers.

ElevenLabs secures funding. AI voice startup ElevenLabs has raised $500 million in Series D funding in a round led by Sequoia Capital that values it at $11 billion, the co-founder and chief executive, Mati Staniszewski, said. Andreessen Horowitz and the investment firm Iconiq also participated in the new investment. The investment more than triples its valuation from a year earlier and is a sign of the novel businesses emerging in the AI-powered economy. The startup aims to continue growing into a broader platform for conversational AI, including selling tools to business customers who are using AI-generated voices for customer service, sales and marketing.

Funds

Santé Ventures, an early-stage investor focusing on healthcare and life sciences startups, closed its fifth fund with $330 million in commitments, exceeding its original $300 million target. The firm also promoted Dennis McWilliams and Omar Khalil to managing directors.

People

Alterome Therapeutics, a biopharmaceutical startup developing small molecule-targeted therapies for the treatment of cancer, appointed Leonardo Faoro as chief medical officer. He was most recently CMO at Quanta Therapeutics.

Atropos Health, a startup focusing on real-world evidence generation for the healthcare ecosystem, appointed Sylvia Isler as chief technology officer and Drew Turitz as chief financial officer.

Midi Health, a Palo Alto, Calif.-based women’s telehealth platform, scored $100 million in Series D funding, valuing the company at over $1 billion. Goodwater Capital led the round, which included participation from Foresite Capital, Serena Ventures, GV, Felicis and others.

Chamber, a Washington, D.C.-based startup supporting cardiologists and health plans in managing patients with heart disease under value-based care models, raised $60 million in Series A funding. Frist Cressey Ventures led the round, which saw participation from General Catalyst and several others.

Alaffia Health, a New York-based startup focused on reducing administrative waste across health plan claims operations, landed $55 million in Series B funding. Transformation Capital led the round, with Managing Partner Todd Cozzens joining the company’s board.

Biorce, a Barcelona-based startup specializing in applying AI to the design and execution of clinical trials, closed on about $52 million in Series A funding from investors including DST Global, Norrsken VC and YZR Capital.

Third Arc Bio closed a $52 million Series A extension round. New investor Andreessen Horowitz joined the company’s existing investors in the funding, with General Partner Jorge Conde joining the board.

Lotus Health AI, a San Francisco-based primary care provider, secured $35 million in Series A financing co-led by CRV and Kleiner Perkins.

Pasito, a New York-based AI-native workspace for group health, life and retirement benefits, snagged $21 million in Series A funding. Insight Partners led the investment, which included contributions from Y Combinator and MTech Capital.

Synthpop, a Cambridge, Mass.-based healthcare startup building agentic automation to eliminate administrative bottlenecks in payer, provider and patient operations, grabbed $15 million in Series A funding. Ansa Capital led the round, which saw participation from defy and Peterson Ventures. Marco DeMeireles, managing partner at Ansa, will join the company’s board.

Phylo, a South San Francisco, Calif.-based applied AI research lab for biologists, was seeded with a $13.5 million investment from Andreessen Horowitz and others.

Graici, a Cleveland-based startup that automates Medicaid renewals and redeterminations, nabbed $7.5 million in Series A funding. Santé Ventures led the investment, and Founding Managing Director Joe Cunningham has joined the board.

Expert Intelligence, a Santa Clara, Calif.-based startup building AI systems that automate expert decision-making in regulated laboratory environments, was seeded with a $5.8 million investment. Sierra Ventures led the funding, which included additional support from TSVC and Acorn Pacific Ventures.

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• This Year Drugmakers Cut Prices for Several Widely Used Drugs

• Trump administration officials blocked FDA effort to fast-track review of psychedelic treatment (STAT)
   
• FTC settles with Express Scripts over high insulin prices (New York Times)
   
• GSK walks away from pioneering Wave RNA-editing drug (BioPharma Dive)
   
• NIH grant disruptions slow breast cancer research (KFF Health News)

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

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

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

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