Genetic-engineering companies were the hottest thing on Wall Street a couple of years ago. In a celebrated instance, the stock of one pioneering company, Genentech Inc., soared from $35 to $89 within minutes after it first became available to the public.

But Wall Street since has found out what the scientists knew all along--that commercial benefits from the new drugs, chemicals, industrial processes and plant and animal strains created by biotechnology are many years away.

Much of the gleam is off genetic-engineering companies and a shakeout is taking place that is common to new industries. Genentech's stock has dropped below the offering price, Southern Biotech Inc. filed for protection under bankruptcy laws last week and the languishing stock market has curtailed the number of new stock offerings in all industries.

Into that atmosphere comes Molecular Genetics Inc., which plans to offer 450,000 shares of stock today in the first new public offering of stock in a biotechnology company since February.

"While we had a positive reaction to the company, this is not a very good market for a new offering," said Hamilton E. James, senior vice president of Donaldson Lufkin & Jenrette Securities Corp., the investment banking firm that is co-managing the offer.

"It's a lousy market for going public. They've got a lot of guts to do it," said Jonathan H. Ziegler, an analyst with Sutro & Co., a San Francisco securities firm. "Anything that's as intangible as this, anything that's as pie in the sky, is going to have a real tough go of it."

"It's unfortunate, perhaps, that this has to come out at this particular time," said Edward Lanphier, director of biotechnology research at International Resource Development, a Connecticut research firm.

Lanphier said the financial community must take some of the blame for the diminished appeal of biotechnology companies. "Wall Street did not understand the technologies, the scale-up problems of manufacturing the technologies, and the regulatory clearance problems," he said. Many of the companies did not attempt to change the impression that genetic engineering would produce products--and profits--right away, he added.

Just how tough the market is these days can be seen by the decision, announced earlier this week, to cut back the number of Molecular Genetics shares being offered from 1 million. James said the reduction was the result of poor market conditions in general rather than the state of the biotechnology business or the outlook for the company.

"I don't think the company had much to do with it," he said. "I think it's the general market environment."

Molecular Genetics' stock has been priced at $9 a share for its initial offering. The Minneapolis-based company plans to use the proceeds of the stock for research and development, working capital, operating costs and general corporate purposes, according to Franklin Pass, the company's president.

Most of the initial activity among new genetic-engineering firms has centered on interferon, a potential antiviral and cancer-treatment substance, and on human insulin and growth hormone. Molecular Genetics, however, is developing animal health-care products, new plant strains and other products primarily for agricultural applications that will not have to go through the years of regulatory scrutiny given to new drugs for human use.

For that reason, Lanphier gives the company high marks. "Molecular Genetics offers a real pure play in terms of application of biotechnologies into the agricultural sector," he said.