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Uncertainty Creates Opportunities for Digital-Health Startups
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By Brian Gormley, WSJ Pro
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Good day. Digital-health startups can capitalize on uncertain times to make big leaps if they are willing to take risks on creative business models and strategies, according to an analysis by Rock Health.
The conventional playbook of raising rounds of venture capital until a company is acquired or goes public isn’t always the best approach for startups innovating in areas such as healthcare artificial intelligence or virtual care. Long sales cycles in healthcare, for example, complicate efforts to scale startup businesses.
One growth strategy is for startups to merge with each other. Of the 46 mergers and acquisitions Rock Health tracked in the first quarter, 67% involved digital-health startups acquiring each other, up from 53% across 2024.
The trend of startup mergers will likely continue, said Sari Kaganoff, Rock Health’s chief commercial officer, adding that such deals enable acquirers to diversify without long product-development times.
One challenge is that many leapfrogging strategies are new in digital health and there may be limited data to draw upon, Kaganoff said. Companies need to gather enough information to be confident in their approach while still being willing to take a leap of faith, she said.
“High risk can be high reward,” she added.
And now on to the news...
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Biotechnology startups can collaborate with large pharmaceutical companies to fill the gaps in their funding as capital markets tighten. PHOTO: CARLA GOTTGENS/BLOOMBERG NEWS
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Closer ties. Turbulence in the capital markets is driving biotechnology startups and venture capitalists to consider strategies such as forming closer ties to large pharmaceutical companies.
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With optimism budding early this year, biotechs raised $6.3 billion in venture capital in the first quarter, a faster pace than in 2024, when these companies collected $23.6 billion for the full year, according to investment bank William Blair. Biotechs raised $5.4 billion in the first quarter of 2024.
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President Trump’s shifting tariffs have caused stock market gyrations, postponing the hoped-for revival of initial public offerings, and cuts at the Food and Drug Administration have stoked uncertainty about how the agency will evaluate new drugs.
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A lack of clarity on the financial and regulatory fronts is prompting venture investors to align with drugmakers likely to acquire or partner with their companies and sharpen their focus on the commercial potential of startups’ drugs. Alignment with pharmaceutical companies takes on added importance when financial markets are uncertain, observers said.
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$6.3 Billion
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The amount of venture capital biotechnology startups raised in the first quarter, according to William Blair.
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China’s Biotech Advances Threaten U.S., Warns Congressional Report
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China is moving fast to dominate biotechnology, and the U.S. risks falling behind permanently unless it takes action over the next three years, a congressional commission said, The Wall Street Journal reports. Congress should invest at least $15 billion to support biotech research over the next five years and take other steps to bolster manufacturing in the U.S., while barring companies from working with Chinese biotech suppliers, the National Security Commission on Emerging Biotechnology said in a report Tuesday. To achieve its goals, the federal government and U.S.-based researchers will also need to work with allies and partners around the world. “China is quickly ascending to biotechnology
dominance, having made biotechnology a strategic priority for 20 years,” the commission said. Without prompt action, the U.S. risks “falling behind, a setback from which we may never recover.”
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The Hottest Pre-IPO Stock? An AI Robotics Startup With Bold Claims
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In February, a little-known startup promising to build futuristic robots set out to raise new cash at a nearly $40 billion valuation. The pitch: Figure AI would put more than 200,000 robots across assembly lines and homes by 2029—solving an engineering challenge that has eluded hardware developers for decades, WSJ reports. It has a long way to go. Figure had no revenue last year and just a few dozen robots in production, according to documents shared with investors in recent weeks. The documents show Figure has signed BMW as its first commercial customer and predict it will generate $9 billion in revenue by 2029.
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People
Angelini Ventures, an Italy-based investor focusing on biotech and digital health, appointed Regina Hodits as managing director. Prior to joining the firm, she was managing partner at Wellington Partners.
Unlearn, a startup helping pharma and biotech companies design and optimize clinical trials, appointed Krates Ng as its chief technology officer. He was previously CTO at ProducePay.
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Merida Biosciences, a Cambridge, Mass.-based developer of precision therapeutics for autoimmune-driven diseases, launched with $121 million in Series A funding led by investors including Bain Capital Life Sciences and Third Rock Ventures.
Solu Therapeutics, a Boston-based startup developing therapies to eliminate disease-driving cells in cancer, immunology and other therapeutic areas, closed a $41 million Series A round from investors including Longwood Fund.
Rondah AI, a New York-headquartered AI platform for dental service organizations, picked up $1.8 million in pre-seed funding co-led by 2048 Ventures and Twelve Below.
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WeightWatchers’ chief executive and chief financial officer both left the company in the past year. PHOTO: RICHARD DREW/ASSOCIATED PRESS
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