Biodefense firm PharmAthene, Inc. (AMEX: PIP) shares have surged nearly 32 percent from Friday’s closing price after it was announced last week that investment-research firm WBB Securities upgraded its stock rating for PharmAthene to Strong Buy.

The rating upgrade was granted after the NYSE Amex LLC (NYSE Amex) stated last week that the Company made a reasonable demonstration of its ability to regain compliance with the NYSE Amex listing requirements and granted PharmAthene an extension until January 26, 2012 to demonstrate its compliance.

Contributing to the surging share prices, the United States government announced plans last week to spend up to $2.8 billion to strengthen its defenses against biological warfare. Anticipating a lucrative government contract to supply smallpox antiviral drugs, biodefense drugmaker SIGA Technologies, Inc. (Nasdaq: SIGA), is currently being sued by PharmAthene for terminating a merger agreement in October 2006. The trial, expected to begin January 2011, has analysts predicting a favorable outcome for PharmAthene, which would likely mean the company would be awarded a percentage of SIGA’s government contract. Roth Capital Partners analyst Joseph Pantginis said the contract has positive implications to PharmAthene that can now identify the exact measure of potential damages.

TheStreet.com’s James Altucher recently wrote that on the basis of this contract alone, Pharmathene would potentially make up to a billion dollars in cash earnings. “On this one catalyst I think PIP is potentially a $7 – $12 stock,” he stated in an article on October 15, 2010.

Another positive for PharmAthene is Valortim, the Company’s developmental stage anthrax vaccine which PharmAthene is positioning as a potential alternative to the existing vaccine EBS, that is administered to military personnel and individuals who work in high-risk environments. Anthrax is considered the Department of Defense’s No. 1 biological threat.

The US is required to have a stockpile of 75 million doses of vaccine. Right now, the only approved supplier of doses of vaccine is EBS, which has a long-approved first-generation vaccine that requires 5 doses over 18 months and costs $120 per dose.

According to Chief Executive Office, Eric Richman, PharmAthene’s second-generation vaccine requires 3 doses over 60 days and costs about $45 a dose. Government funding commitments exceeding $27 million have been awarded to-date for the advanced development of Valortim.