Please ensure Javascript is enabled for purposes of website accessibility

Why Tonix Pharmaceuticals Holdings Was a Winner on Wednesday

By Eric Volkman – Updated Dec 15, 2021 at 5:07PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

You'd pop the champagne, too, if you were included on a major industry stock index.

What happened

Tonix Pharmaceuticals Holding (TNXP -0.21%), a notable meme stock in the biotech sphere, was a standout even on a good Wednesday for the broader market. The company's shares rocketed more than 9% higher on news of its inclusion in a key industry stock index.

So what

Effective next Monday, Dec. 20, Tonix will be a component stock of the Nasdaq Biotechnology Index. Once every year, this collection of biotech titles gets a "reconstitution" to better represent the sector. While it's quite a big index -- at the moment, it's comprised of 265 companies -- inclusion in the club confers quite a bit of prestige among investors.

Parent and child reaching the finish line in a race.

Image source: Getty Images.

Although the "index effect" of stocks enjoying long-term gains when tapped by a famous index is overstated, it's still quite a positive development for a company. This is particularly applicable to Tonix, which has struggled at times with the development of certain pipeline products.

These include fibromyalgia drug TNX-102 SL, for which Tonix halted enrollment in a phase 3 clinical trial this past July due to lackluster results. We can also add the company's TNX-1800, a key draw for investors, as it's a coronavirus vaccine. However, the development of the jab is lagging well behind that of its peers.

Now what

One aspect of the index effect is the anticipation that at least some of the very many index funds on the market will snap up a new arrival for their portfolios. Thanks to its meme-stock status and coronavirus vaccine development program, Tonix is already on the radar of quite a few institutional investors.

Graduating to the Nasdaq Biotechnology Index should help raise its profile -- and perhaps popularity -- even higher.

Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.