Wall Street's interest in biotech stocks is heating up again as a handful of firms begin delivering long-anticipated products and profits.

However, some biotech experts remain cautious, noting that most of the industry is still in the red and predicting a shakeout as smaller new companies struggle to attract continued financing.

For investors, the choice is now between a few "front-runners" with proven results and hundreds of other new firms with "long-term promise," said Linda I. Miller, an analyst with Paine Webber Inc.

Biotech stock prices increased 18 percent in the first quarter, according to Paine Webber's index of about three dozen of the new firms.

Moreover, stock prices of gene-splicing firms rose 23 percent while prices of firms using monoclonal antibodies climbed 24 percent, Miller said. The average was held back by the biotech supply firms, which saw their stock prices rise 13 percent, she said.

Three front-runners that turned profits last year are Genentech Inc., Centacor Inc. and Hybritech Inc., all of which are selling near their 365-day highs.

The industrywide improvement reflects both general market conditions and the concrete results of a few companies, analysts said.

For example, Genentech reported net income of $2.7 million (19 cents a share) last year on sales of $69.8 million. Its royalties from gene-splicing technology, which is used to produce human insulin, tripled last year. The company's alpha interferon, a cancer treatment, and its synthetic human growth hormone are both awaiting Food and Drug Administration approval.

Analysts said the company's stock received a big boost from several scientific papers, presented at major medical conferences, that reported favorably on a Genentech product that may be used to dissolve blood clots in heart patients.

"There is growing interest" in biotech stocks, said Kathleen Behrens, an analyst with Robertson, Colman & Stephens. "For a while, there were no revenues or earnings to speak of. . . . Now there is a handful of firms selling products, or about to be selling products."

Part of the renewed interest reflects the growing sophistication of biotech investors, who were at first charmed by the promise of the exotic technology and who now demand concrete financial results, Miller said.

It was love at first sight when Genentech went public in 1980, setting a Wall Street record for the fastest rise in price per share -- $35 to $89 in 20 minutes. The next year more than 80 biotech firms were formed, and Cetus Corp. set a Wall Street record for the largest amount of money raised in an initial offering -- $115 million, according to the U.S. Office of Technology Assessment.

About 200 U.S. biotech firms have been formed since the late 1970s, reflecting a capital investment of more than $1.9 billion, according to a Commerce Department report.

The price of biotech stocks peaked in 1983, when "buying was driven by imagination," Miller said. Excited by the vast potential of the technology, "investors couldn't differentiate between one concept and another," she said. "Now they have tangibles, like products, sales, profits and clinical results."

Some analysts are unimpressed with the current results, and doubt that most of the small beginners will attract the financing to survive.

Investors who once "focused on the glamor" now realize that biotech stocks are not worth the time and capital required to develop a product, said Harold Chefitz, of Swergold Chefitz & Sinsabaugh Inc.

"We still don't have evidence that these companies can generate meaningful sales and earnings," Chefitz said. "It's still a 'show-me' type of situation."

Biotech firms require expensive research equipment and highly trained scientists. A pharmaceutical product can take 10 years to get from research concept to market.

Most small biotech firms lack commercial production facilities or marketing expertise and have therefore joined with large corporations to sell their first products.

Biotech Research Laboratories, founded in 1973, hopes to make its first profit this year with sales of its test for antibodies to the virus believed to cause AIDS. E. I. du Pont de Nemours & Co., which has agreed to buy 7 percent of the biotech firm, is marketing the product.

Genex Corp., founded in 1977, chose to carve itself a niche in the specialty chemicals market to bring products to market quicker. But even with sales of $34.8 million, the Rockville company lost $7.4 million last year. The company recently disclosed that it may sell a substantial interest in the firm to a corporate partner in return for a capital infusion.

"It takes too long for the good things to happen," said William G. Prime, an analyst with Equity Research Associates Inc. "And when the good things happen, the big boys get in and get their share."

Some analysts say the small biotech firms will survive because of this ability to establish licensing, marketing and investment partnerships with major firms.

An "invisible shakeout" in the industry already has occurred, Miller said, pointing to the large number of biotech firms that rely on corporate partners.

But she agreed with other analysts that few start-up firms will have the assets to make the transition from research and development to manufacturing and marketing.

"I don't think we've seen the full shakeout yet," Chefitz said. "The marketplace is not going to finance continuing deficits . . . and the inability to refinance is going to force consolidation through bargain price acquisitions."