Ironwood shares rally after raised to 'Outperform'

Ironwood Pharmaceuticals Inc. shares hit an all-time high Friday following an analyst upgrade on the drug maker's stock.

THE SPARK: Credit Suisse analyst Catherine Arnold upgraded her rating on Ironwood to "Outperform" on the expectation that demand for the company's drug Linzess is on the way up.

THE BIG PICTURE: The Food and Drug Administration approved Linzess in August as a treatment for irritable bowel syndrome with constipation and for chronic constipation. Ironwood's partner Forest Laboratories Inc. began marketing the drug in the U.S. in December. The drug is expected to go on the market in Europe early this year under the name Constella.

THE ANALYSIS: Arnold said that a survey by her firm of roughly 100 physicians suggest great demand for the product and room in the market for growth. The analyst said feedback from Linzess users is generally positive and the majority of the physicians surveyed plan to increase their prescribing in the future.

Despite the fact that the stock price is up 60 percent thus far this year, Arnold advocated buying the shares as its stock has underperformed the biotech index that covers its peers. She also upgraded her target price to $24 from $15.

SHARE ACTION: Shares jumped $1.17, or 6.6 percent, to close at $18.85 after hitting an intraday record of $19.15. Its stock price has been climbing sharply this year after closing 2012 at $11.08.