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Analysts follow the buying trends of institutional investors such as hedge fund managers and mutual fund managers (a.k.a. the “smart money”) because these investors have greater access to sophisticated research than most investors. When a company sees increased buying from institutions, it’s a signal to take a second look.

We ran a screen on technically oversold stocks from the biotech industry, with RSI(14) below 40. We screened these stocks for those that have seen significant net institutional buying over the current quarter.

Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the top six stocks mentioned below. Analyst ratings sourced from Zacks Investment Research.

We also created a price-weighted index of the stocks mentioned below, and monitored the performance of the list relative to the S&P 500 index over the last month. To access a complete analysis of this list's recent performance, click here.

Do you agree with the smart money on these stocks? Use this list as a starting-off point for your own analysis.

List sorted by net institutional purchases as a percent of share float.

1. Amyris Biotechnologies Inc. (NASDAQ:AMRS): An integrated renewable products company, offers renewable compounds for a variety of markets. Market cap of $831.95M. RSI(14) at 34.90. Net institutional shares purchased over the current quarter at 4.3M, which is 25.79% of the company's 16.67M share float. The stock is a short squeeze candidate, with a short float at 7.49% (equivalent to 12.09 days of average volume). It's been a rough couple of days for the stock, losing 6.19% over the last week.

2. NPS Pharmaceuticals, Inc. (NASDAQ:NPSP): Engages in the development specialty therapeutics for gastrointestinal and endocrine disorders. Market cap of $575.61M. RSI(14) at 33.60. Net institutional shares purchased over the current quarter at 20.3M, which is 23.69% of the company's 85.70M share float. The stock is a short squeeze candidate, with a short float at 5.27% (equivalent to 5.57 days of average volume). It's been a rough couple of days for the stock, losing 6.3% over the last week.

3. Insmed Incorporated (NASDAQ:INSM): Focuses on the development of inhaled pharmaceuticals for the site-specific treatment of serious lung diseases. Market cap of $102.80M. RSI(14) at 37.43. Net institutional shares purchased over the current quarter at 2.9M, which is 14.92% of the company's 19.44M share float. It's been a rough couple of days for the stock, losing 8.2% over the last week. The stock has had a good month, gaining 11.89%.

4. Spectrum Pharmaceuticals, Inc. (NASDAQ:SPPI): A commercial-stage biotechnology company, primarily focuses on oncology and hematology. Market cap of $432.52M. RSI(14) at 38.11. Net institutional shares purchased over the current quarter at 4.9M, which is 10.48% of the company's 46.74M share float. The stock is a short squeeze candidate, with a short float at 18.08% (equivalent to 6.29 days of average volume). The stock has gained 107.4% over the last year.

5. Amicus Therapeutics, Inc. (NASDAQ:FOLD): Focuses on the discovery, development, and commercialization of orally-administered, small molecule drugs for the treatment of various human genetic diseases. Market cap of $131.13M. RSI(14) at 33.0. Net institutional shares purchased over the current quarter at 946.3K, which is 10.46% of the company's 9.05M share float. It's been a rough couple of days for the stock, losing 11.03% over the last week.

6. Pacific Biosciences of California, Inc. (NASDAQ:PACB): Develops, manufactures, and markets an integrated platform for genetic analysis. Market cap of $309.48M. RSI(14) at 36.12. Net institutional shares purchased over the current quarter at 3.4M, which is 10.18% of the company's 33.39M share float. The stock is a short squeeze candidate, with a short float at 8.32% (equivalent to 9.43 days of average volume). It's been a rough couple of days for the stock, losing 11.02% over the last week.

7. 3SBio Inc. (NASDAQ:SSRX): Engages in the research, development, manufacture, and distribution of pharmaceutical products in the People's Republic of China. Market cap of $284.10M. RSI(14) at 38.65. Net institutional shares purchased over the current quarter at 1.0M, which is 7.80% of the company's 12.82M share float. The stock is currently stuck in a downtrend, trading 5.27% below its SMA20, 15.97% below its SMA50, and 20.03% below its SMA200. The stock has lost 4.34% over the last year.

8. Cadence Pharmaceuticals Inc. (CADX): Focuses on in-licensing, developing, and commercializing product candidates principally for use in the hospital setting in the United States and Canada. Market cap of $402.02M. RSI(14) at 39.92. Net institutional shares purchased over the current quarter at 2.5M, which is 6.46% of the company's 38.71M share float. The stock is a short squeeze candidate, with a short float at 23.97% (equivalent to 43. days of average volume). The stock has lost 22.83% over the last year.

9. Codexis, Inc. (NASDAQ:CDXS): Develops proprietary biocatalysts for pharmaceuticals and biofuels markets. Market cap of $183.90M. RSI(14) at 31.23. Net institutional shares purchased over the current quarter at 1.3M, which is 6.21% of the company's 20.92M share float. The stock is a short squeeze candidate, with a short float at 5.82% (equivalent to 6.75 days of average volume). It's been a rough couple of days for the stock, losing 16.34% over the last week.

10. Sunesis Pharmaceuticals Inc. (NASDAQ:SNSS): Focuses on the development and commercialization of oncology therapeutics for the treatment of solid and hematologic cancers. Market cap of $63.53M. RSI(14) at 34.19. Net institutional shares purchased over the current quarter at 1.5M, which is 5.74% of the company's 26.15M share float. This is a risky stock that is significantly more volatile than the overall market (beta = 2.06). It's been a rough couple of days for the stock, losing 9.33% over the last week.

11. Dendreon Corp. (NASDAQ:DNDN): Engages in the discovery, development, and commercialization of therapeutics to enhance cancer treatment options for patients. Market cap of $1.70B. RSI(14) at 30.07. Net institutional shares purchased over the current quarter at 7.9M, which is 5.70% of the company's 138.48M share float. The stock has had a good month, gaining 15.04%.

12. Affymax, Inc. (OTCPK:AFFY): Engages in the development of drugs for the treatment of serious and life-threatening conditions. Market cap of $157.13M. RSI(14) at 34.61. Net institutional shares purchased over the current quarter at 1.7M, which is 5.54% of the company's 30.67M share float. The stock has lost 30.72% over the last year.

*Institutional data sourced from Fidelity, all other data sourced from Finviz.

Source: 12 Oversold Biotech Stocks Being Bought Up By Smart Money