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Why Collegium Pharmaceutical Shares Are Sinking Today

By Keith Speights - Updated Feb 10, 2020 at 4:20PM

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Investors aren't happy about the drugmaker's proposed senior convertible note offering.

What happened

Shares of Collegium Pharmaceutical (COLL -2.86%) were sinking 13.6% as of 3:24 p.m. EST on Monday. The decline came after the drugmaker announced a $125 million proposed offering of senior convertible notes.

So what

The bad news with Collegium's proposed offering is that it means that dilution in the value of its existing shares is on the way. The notes that the company plans to offer allow holders to convert them to shares that Collegium will have to issue.

Businessman looking at red line going down with another declining chart in the background

Image source: Getty Images.

The good news with the drugmaker's move is that it will raise additional cash needed to help fund the purchase of the U.S. rights for Assertio Therapeutics' Nucynta franchise. Collegium announced on Feb. 6 that it had entered into an agreement with Assertio to buy the U.S. rights to its painkiller franchise for $375 million. 

Now what

Acquiring Nucynta should significantly boost Collegium's revenue. The company projects the franchise will rake in between $170 million and $180 million this year. That's more than the sales of between $150 million and $160 million that Collegium's own pain drug Xtampza ER is expecting in 2020.

Pharmaceutical stocks that rely on sales of opioid drugs, though, have proved to be highly volatile in light of the ongoing opioid epidemic in the U.S. Collegium is making a bet in buying Nucynta that these headwinds won't be too bad in the future.

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Collegium Pharmaceutical, Inc. Stock Quote
Collegium Pharmaceutical, Inc.
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