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Comparing institutional buying trends to a stock’s performance can give some interesting results. When a stock is underperforming but institutional investors are buying the stock, it can either mean that the smart money is wrong and they may soon go with the crowd and start selling, or it can mean that the smart money knows something about these companies that the broader market doesn’t recognize.

We ran a screen on stocks from the biotech sector for those that have fallen at least 20% over the last quarter. We screened these stocks for those seeing 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 think the smart money knows something we don’t? 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 $875.12M. The stock has lost 33.72% over the past quarter. Net institutional shares purchased over the current quarter at 4.3M, which is 25.89% of the company's 16.61M share float. The stock is a short squeeze candidate, with a short float at 8.36% (equivalent to 12.36 days of average volume).

2. NPS Pharmaceuticals, Inc. (NASDAQ:NPSP):
Engages in the development specialty therapeutics for gastrointestinal and endocrine disorders. Market cap of $544.63M. The stock has lost 33.37% over the past quarter. 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 5.35% (equivalent to 5.56 days of average volume). It's been a rough couple of days for the stock, losing 6.22% over the last week.

3. Targacept, Inc. (NASDAQ:TRGT):
Engages in the design, discovery, and development of novel Neuronal Nicotinic Receptors (NNR) Therapeutics for the treatment of diseases and disorders of the central nervous system. Market cap of $529.41M. The stock has lost 26.61% over the past quarter. Net institutional shares purchased over the current quarter at 4.4M, which is 15.29% of the company's 28.77M share float. This is a risky stock that is significantly more volatile than the overall market (beta = 3.19). The stock has lost 28.36% over the last year.

4. Sequenom Inc. (NASDAQ:SQNM): Provides products, services, diagnostic testing, applications, and genetic analysis products that translate the results of genomic science into solutions for biomedical research, translational research, molecular medicine applications, and agricultural and livestock research. Market cap of $550.45M. The stock has lost 24.69% over the past quarter. Net institutional shares purchased over the current quarter at 11.4M, which is 12.72% of the company's 89.65M share float. The stock is a short squeeze candidate, with a short float at 19.1% (equivalent to 12.96 days of average volume). It's been a rough couple of days for the stock, losing 6.25% over the last week.

5. Enzon Pharmaceuticals Inc. (NASDAQ:ENZN): Engages in the research and development of therapeutics for cancer patients with unmet medical needs. Market cap of $374.91M. The stock has lost 24.29% over the past quarter. Net institutional shares purchased over the current quarter at 3.5M, which is 11.74% of the company's 29.81M share float. The stock is a short squeeze candidate, with a short float at 14.54% (equivalent to 17.73 days of average volume). It's been a rough couple of days for the stock, losing 6.89% over the last week.

6. Dendreon Corp. (NASDAQ:DNDN): Engages in the discovery, development, and commercialization of therapeutics to enhance cancer treatment options for patients. Market cap of $1.63B. The stock has lost 71.92% over the past quarter. Net institutional shares purchased over the current quarter at 7.9M, which is 5.71% of the company's 138.42M share float. It's been a rough couple of days for the stock, losing 7.9% over the last week.

7. 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 $368.94M. The stock has lost 38.36% over the past quarter. Net institutional shares purchased over the current quarter at 2.1M, which is 5.42% of the company's 38.71M share float. The stock is a short squeeze candidate, with a short float at 21.94% (equivalent to 40.64 days of average volume). It's been a rough couple of days for the stock, losing 11.72% over the last week.

8. Incyte Corporation (NASDAQ:INCY): Focuses on the discovery and development of proprietary small molecule drugs for hematologic and oncology indications, and inflammatory and autoimmune diseases. Market cap of $1.74B. The stock has lost 24.96% over the past quarter. Net institutional shares purchased over the current quarter at 5.8M, which is 4.65% of the company's 124.76M share float. This is a risky stock that is significantly more volatile than the overall market (beta = 2.42). The stock is a short squeeze candidate, with a short float at 13.17% (equivalent to 10.84 days of average volume). It's been a rough couple of days for the stock, losing 8.43% over the last week.

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

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Source: 8 Underperforming Biotech Stocks Being Bought by the Smart Money