Both public and private funding have plummeted as federal policy changes have thrown the biotech sector into an era of uncertainty. Venture capital investment in Massachusetts-based companies dropped more than 17 percent to $2.75 billion in the first half of 2025, compared with the same period in 2024, the lowest level since 2017. The industry group MassBio released its annual temperature check on the state’s biotech industry Tuesday, and the results are grim. Massachusetts is also projected to receive around $463 million less in National Institutes of Health funding this year than it did in 2024, according to MassBio, a trade and lobbying organization for the life sciences industry. “It has been a very challenging year for the industry, but when I look at the report, I know none of the numbers are particularly surprising,” MassBio chief executive Kendalle Burlin O’Connell said. “Disheartening? Yes. Surprising? No.” Biotech has been slammed by both a post-COVID market correction and the slashing of federal funding for the state’s top universities. Advertisement Following Cambridge-based Moderna’s success story in the pandemic, private investors threw money at early-stage startups, many of which hadn’t even started clinical trials. Firms invested $8 billion in Massachusetts biotech companies in 2020 and more than $13 billion in 2021. That investment retracted toward prepandemic norms in recent years, which industry experts expected. “That felt more like a typical sort of market correction within a stable, predictable environment,” said Ken Itrato, a partner in the life sciences group at the law firm Crowell & Moring. “What’s happened now is we have instability and unpredictability.” Advertisement At the annual JP Morgan Healthcare Conference in mid-January, which brings together biotech leaders from around the world, the consensus was largely positive. Murmurs of acquisitions and companies preparing to go public made Burlin O’Connell cautiously optimistic about 2025. But only a few weeks later, the Trump administration began freezing federal research investments at universities that have fueled the Massachusetts biomedical economy. Research labs at Harvard University and across the University of Massachusetts system had to halt their experiments. Postdoctoral researchers saw their contracts shrink, and labs started killing their mice to save money. In April, UMass Chan Medical School laid off or furloughed around 200 employees. Just a couple of weeks ago, Health Secretary Robert F. Kennedy Jr. announced the government would no longer fund research into vaccines using messenger RNA technology seen in the COVID vaccines. That threatens to overwhelm not only vaccine maker Moderna but other biotech firms researching the technology’s use in treating cancers and rare diseases. Investors have balked at entering such an uncertain landscape. So far, only one Massachusetts biotech company, Sionna Therapeutics, has gone public this year. There were six such initial public offerings in 2024. “There’s been a shaking of that foundation. Again, it’s not a destruction of it, but it’s a shaking,” Itrato said. “It’s caused uncertainty, which has caused people to sort of pull back.” The outlook isn’t all doom and gloom. Because Massachusetts has long been established as a biotech hub, the state has fared better than others in weathering the turbulence of the market. Advertisement Massachusetts job totals for research and development fell 1.7 percent from 2023 to 2024. New Jersey and Maryland each lost 6.7 percent of their R&D jobs in the same period. Massachusetts also accounted for 22.5 percent of venture capital funding for the first half of 2025, second only to California, with 45.2 percent. The next closest state, Washington, received only 3.7 percent of the venture capital investment. Drug development is continuing in Massachusetts despite the funding struggles, with the number of drug candidates in the pipeline in July 2025 outpacing the number in July 2024. Even the vacant lab space, which is at nearly 36 percent, according to brokerage firm Newmark, could be beneficial, Burlin O’Connell said. “For so long, we were almost at 100 percent capacity, so companies didn’t even have an option of where to go and how to get there,” she said. “Now we have vacancy, we have space available, and that creates optionality for these companies.” If and when the biotech market will bounce back is unclear. The pressures from the federal government are unlike any put on the industry in recent memory. MassBio is closely watching a potential deal being negotiated between Harvard and the Trump administration, which could bring back some of the lost funding for early-stage research. “NIH funding continues to flow to Massachusetts as the largest recipient per capita,” Burlin O’Connell said. “You can directly correlate those funds and the impact they have had on our ecosystem.” Marin Wolf can be reached at [email protected].

Source: The Boston Globe