8 Drug-Related Stocks Being Chased by the Smart Money

Moody's, Wall Street's preeminent credit rating agency, recently released its forecast for the pharmaceutical industry. Unfortunately, the outlook for the next couple of years isn't terribly encouraging. With a host of major patent expirations on the horizon for 2011 and 2012 (including household names like Lipitor and Zyprexa), expect to see a slew of cheap generics flood the market -- and the effect on profit margins could be epic.

Big pharma companies will need to be armed with a host of late-stage pipelines to offset the impact -- and by and large, development just isn't where it needs to be.

And the drugs in the home stretch of development will still have to contend with administrative obstacles, of which there are many. Just look at how difficult the FDA makes it for new products to hit the U.S. marketplace -- and we're not the only country with fussy regulators.

What's more, with Europe's debt crisis wreaking havoc on the global economy, look for increasingly severe austerity measures in health care -- and drug spending is likely to be a prime target.

Moody's expects to see a good deal of debt-financed consolidation in the industry -- meaning that companies will issue debt in order to buy up stock in other pharmaceutical companies. But according to Moody's analyst Marie Fischer-Sabatie, it's going to take more than that to neutralize the negatives.

In her estimation, it will be companies with "robust" pipelines and "diversified players," with enough heterogeneity to diffuse risk, that will emerge from lean times no worse for the wear.

So which stocks are worth investing in? It's tough to say right now, but institutional investors' trades may offer up some clues. (Click here to access free, interactive tools to analyze these ideas.)

Here's a list of eight biotech or pharma stocks being chased by the smart money.

Institutional data sourced from Reuters. The list has been sorted by change in institutional ownership over the past three months.

Interactive Chart: Press Play to see how the market caps have changed for all the stocks mentioned above.

Kapitall's Eben Esterhuizen and Alicia Sellitti do not own shares of any companies mentioned.