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A major source of funding for Massachusetts life science companies dropped sharply in 2022, but still exceeds pre-pandemic investment levels.
Industry group MassBIO said Bay State life science companies received $8.7 billion in venture capital funding in 2022, down 36 percent from 2021 but still the second-highest level in history.
“The trendlines are pointing toward investors looking more cautiously and over a longer time horizon,” said Kendalle Burlin O’Connell, CEO of MassBio.
Venture capital investment is spreading to a broader group of communities, reflecting the expansion of life science development throughout Greater Boston and central Massachusetts in recent years.
Companies in Cambridge received 49 percent of all VC funding, down from 58 percent the previous year. Boston’s recent lab development boom contributed to an increase in VC funding to companies in the city, which received 23 percent of the statewide share, up from 17 percent. Waltham, Watertown and Bedford rounded out the top five communities.
But layoffs and declining investment in the biotech industry is starting to affect the timing and viability of future lab projects. That’s prompted Greater Boston life science companies to list a total of 1.5 million square feet of sublease space as of Dec. 31, according to a recent CBRE report.
“We’re going to see developments slowing,” Burlin O’Connell said. “Projects are definitely being put on hold. Office-to-lab conversions are over. The pipeline will be smaller. But demand for lab space will generally remain high in Massachusetts.”
During 2022, 246 Massachusetts companies received 273 venture capital deals averaging $35.3 million.
As the Healey-Driscoll administration begins, MassBIO is keeping a close eye on the potential renewal of the state’s Life Science Initiative, Burlin O’Connell said. The current five-year spending plan, which totaled over $600 million, expires this year. A successor plan should address issues including workforce housing, child care and transportation, Burlin O’Connell said.
