Why Ariad Pharmaceuticals Inc. Shares Surged

While Fools should generally take the opinion of Wall Street with a grain of salt, it's not a bad idea to take a closer look at particularly stock-shaking upgrades and downgrades -- just in case their reasoning behind the call makes sense.

What: Shares of Ariad Pharmaceuticals  climbed 6% today after Stifel upgraded the biotechnology company from "hold" to "buy."

So what: Along with the upgrade, analyst Joel Sendek planted a price target on the stock of $7.00, representing about 60% worth of upside to yesterday's close. Ariad shares plummeted 65% in early October after the Food and Drug Administration halted all new trials of its leukemia treatment Iclusig, but physician enthusiasm over the drug at the American Society of Hematology's annual meeting suggests to Stifel that the problem is temporary.

Now what: According to Stifel, Ariad's risk/reward trade-off is particularly attractive at this point.

"Our discussions with physicians as ASH were universally positive regarding the risk/benefit for Iclusig and indicating continuing demand for the drug as a 3rd line agent for CML," noted Stifel. "We forecast resumption of commercial distribution in the US in 2Q14 with a black box warning label indicating increased risk of CV events, in line with the November EMA recommendation of risk factor assessment before treatment and monitoring during treatment."

So while Ariad is still too speculative for conservative investors, Iclusig's seemingly improved prospects, coupled with the stock's still-beaten down price (off more than 80% from its 52-week highs), make it an intriguing opportunity for biotech-savvy Fools.

A top stock to usher in the New Year
The market stormed out to huge gains across 2013, leaving investors on the sidelines burned. However, opportunistic investors can still find huge winners. The Motley Fool's chief investment officer has just hand-picked one such opportunity in our new report: "The Motley Fool's Top Stock for 2014." To find out which stock it is and read our in-depth report, simply click here. It's free!

The article Why Ariad Pharmaceuticals Inc. Shares Surged originally appeared on Fool.com.

Fool contributor Brian Pacampara has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Copyright © 1995 - 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

Read Full Story