Massachusetts biotechs are helping prop up the weak market for new stocks.
Health care companies, mostly in biotech, have accounted for 56 percent of US initial public offerings this year, according to Renaissance Capital. Almost half of all biotech IPOs have been by Massachusetts companies, data from Nasdaq show.
The trend continued this week, as Selecta Biosciences Inc. of Watertown raised $70 million and began trading on Wednesday.
The IPO market overall has cooled dramatically. Thirty-nine companies have gone public this year, down 55 percent from the same period in 2015, Renaissance Capital says. Health care companies accounted for 22 of the deals.
“Biotechs have had an easier time getting out” as public companies, said Bob McCooey, senior vice president at Nasdaq, the stock exchange that lists most newly public companies. “There’s a predisposition by investors to invest in an area that can do some good for humanity at large. In this sector, you have the social good and the economic good joined at the hip.”
But Selecta’s IPO raised questions about the market’s strength. The Watertown company priced its shares at $14 each, the low end of its specified range, and the stock edged up 0.6 percent in its opening session after trading up more than 5 percent earlier in the day.
The benchmark Nasdaq Biotechnology Index is down about 35 percent since its peak last July.
A half dozen Massachusetts biotechs — Editas Medicine Inc., Intellia Therapeutics Inc. and Proteostasis Inc., all of Cambridge, along with Spring Bank Pharmaceuticals Inc. of Milford, Syndax Pharmaceuticals Inc. of Waltham, and now Selecta — have gone public so far this year, accounting for 46 percent of all biotech IPOs since Jan. 1, according to Nasdaq data. At this time last year, five Massachusetts biotechs had gone public.
Selecta, an eight-year-old company, has drawn attention through its high-profile scientific founders, including MIT institute professor Bob Langer and Harvard Medical School professors Omid Farokhzad and Ulrich von Andria. It is backed by venture capital heavyweights Polaris Partners of Boston and Flagship Ventures of Cambridge, and is collaborating with French drug giant Sanofi SA and the Bill & Melinda Gates Foundation.
The company has developed a nanoparticle technology that it hopes can lead to the production of customized vaccines and make biotech drugs safer by neutralizing unwanted immune responses.
Its lead drug candidate treats a form of gout, which causes burning joint pain, and it is also working on gene therapies that replace defective genes with healthy ones.
Selecta, whose stock symbol is SELB, sold 5 million shares of common stock at $14 a share before underwriting discounts and commissions. Its underwriters were given a 30-day option to buy up to 750,000 additional shares at the same price. Managing the IPO were UBS Investment Bank and Stifel Financial Corp., along with Canaccord Genuity and Needham & Co.
Following the lead of other biotechs that have gone public this year, Selecta indicated in regulatory filings that unspecified existing investors were expected to buy about $40 million of the shares, nearly 60 percent.
Such “inside club deals” suggest companies aren’t confident about demand from new investors, some market watchers said.
“Specialist investors never left the IPO market,” Les Funtleyder, health care portfolio manager at E Squared Asset Management in New York, said at a Wednesday biotech investing forum sponsored by Bloomberg LP. “Generalists are the ones who are doing the panicking. You need the generalist investor, you need the retail investor” to buy into IPOs.