The current outlook for Massachusetts biopharma — one of the state’s signature industries — is gloomy after several years of slowing growth, largely due to federal cuts and investor wariness, according to a report released Tuesday from the industry group MassBio.

Industry leaders had hoped for a rebound in funding and investor activity that didn’t materialize in 2024 and the industry continues to contract in 2025, the report said.

The current turbulent environment includes shifting tariffs, funding cuts and major shakeups at two key federal agencies — the Food and Drug Administration and the National Institutes of Health. The industry also is worried about losing ground to China.

“Uncertainty has replaced cautious optimism,” Kendalle Burlin O’Connell, MassBio CEO, said in the 31-page report, “People are out of work, runways are shortening, and patients are still waiting.”

Massachusetts received nearly 10% of all research project grants from the NIH in 2024, but the projections for this year show a dramatic drop ahead. That federal funding declined 1.4% in 2024, but MassBio projects that the state is on track for a drop of almost 13.4% in NIH funding in 2025.

Ken Getz, Executive director of the Center for the Study of Drug Development at Tufts University School of Medicine described the impact of federal funding cuts as profound.

“There’s so much uncertainty in a lot of the major universities that typically conduct a lot of active research that is NIH funded. A lot of small emerging companies rely on small business innovation research grants,” Getz said, “And it also plays a huge part in either forcing talent to leave the state ... or it has faculty and graduate students really scrambling to replace funding that was lost.”

The reduction in federal regulatory personnel at the FDA will also contribute to delays in decisions about new drugs which in turn will create “even more sluggishness and delays” in investment, Getz said.

There’s also been a marked decline in private investment in Massachusetts-based biopharma companies, according to the report, with a roughly 17% drop in venture capital investment in the first half of 2025 compared to the first half of last year.

Investors have less appetite for risk and are focusing venture funding on fewer, larger deals. That drop means “companies are hurting,” the report said.

The loss of funding will deal a hard blow to scientific advancement and the creation of new treatments, and MassBio predicts scientists that lose grants will be “poached” by other countries. The report said the fallout from federal cuts and their impact on the pipeline of drugs in particular should be “a wake-up call and rallying cry for U.S. leadership.”

“The consequences of any reduction in federal funding going to Massachusetts institutions cannot be overstated,” MassBio’s report said.

The group singles out China’s rapidly expanding pipeline for cutting edge drugs — showing that while the United States is still the global leader, China is rapidly gaining ground. Over the last 12 months, China’s total advanced drug pipeline grew more than 26% compared to 4% for the United States and just over 11% for Massachusetts.

The industry woes also continue to ripple through area real estate. Lab vacancy rates in Greater Boston remain high, with a nearly 30% vacancy rate in Cambridge and just over 38% vacancy rate in Boston, according to MassBio’s report.

Despite the current pessimistic picture, Burlin O’Connell said she’s confident the industry will rebound.

“I have full faith that when the dust settles, it is the Commonwealth of Massachusetts that will lead the way back. We’ve done it before. We’re trying like hell to do it again.”