Why Collegium Pharmaceutical Rose Nearly 10% on Tuesday

What happened

At times, the reason or reasons behind a stock’s rise are obscure or mysterious. But that certainly wasn’t the case with Collegium Pharmaceutical (NASDAQ:COLL) on Tuesday, which shot 9.8% higher thanks to a development that should dramatically raise its profile.

So what

Collegium, a biotech that has enjoyed success with its pain relief medication Xtampza ER, is about to become a component of the S&P stock index family.

Late Monday, S&P Dow Jones Indices — the operator of the famous suite of indexes — announced a change in its benchmark S&P 500 index.

A woman looking at a giant screen filled with indexes and graphs

Image source: Getty Images.

S&P 500 index component TechnipFMC is getting the boot and being replaced by Monolithic Power Systems. The latter is currently in the S&P MidCap 400 index, so its slot there will be filled by Iridium Communications.

Iridium is now on the S&P SmallCap 600 index, thus a replacement is needed for its position; Collegium is that replacement. The move is slated to take effect this Friday, Feb. 12.

Now what

Inclusion on a notable stock index, particularly one with the characters “S&P” in front of it and particularly for a less-known business like Collegium, instantly raises its visibility. It also, crucially, attracts the many index funds that prowl S&P lineups for their portfolios.

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Naturally, greater prominence and attention doesn’t necessarily mean an endless stock price lift — Collegium still has to deliver for shareholders. But this is an extremely positive development for a company that has performed well lately.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

View more information: https://www.fool.com/investing/2021/02/09/why-collegium-pharmaceutical-triumphed-on-tuesday/

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