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10 Most Shorted Stocks in Biotech

BOSTON ( TheStreet) -- Short-sellers are piling into biotech stocks like Savient Pharmaceuticals (SVNT - Get Report) and Avanir Pharmaceuticals (AVNR) emboldened by a sour economy and the challenge of selling new drugs in an uncertain environment of health care reform and high drug prices.

Betting against new drug launches has become a popular and profitable short-selling strategy -- more so than shorting pending Food and Drug Administration approval decisions or clinical trial results.

The five largest short positions in biotech today all revolve around stocks undertaking new drug launches. And among these five "drug launch" stocks, the shorts have a near-perfect record of beating out their rival investors on the long side of the trade.

Several factors have made launching new drugs increasingly difficult: A weak economy has forced many people to defer medical care. For those patients who do seek out medical care, paying for high-priced medicines has become more challenging. And insurers are putting more obstacles in front of patients who do seek reimbursement for new drugs.

The following pages detail the 10 biotech and drug stocks with the largest short positions at the end of the third quarter, according to Bloomberg data. You may not agree with the short thesis, especially if you own these stocks, but it's always important to know what the bears are thinking.

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