Genex Corp. of Rockville, one of the leading companies in the emerging biotechnology industry, said yesterday it had lost its biggest source of revenue -- its contract to produce ingredients for G. D. Searle & Co.'s popular sweetener, aspartame.

Searle Food Industries Inc., which markets aspartame under the name NutraSweet, will let the current contract expire Oct. 31, Genex Chairman J. Leslie Glick said at the annual shareholders meeting yesterday.

The loss of the Searle business is a severe setback to Genex, which is often listed as one of the five most promising biotechnology companies and is noted for pioneering the industrial applications of genetic engineering techniques. Its sales to Searle in 1984 accounted for $20.2 million of Genex's product sales of $20.6 million, and 58 percent of the company's total revenue of $34.8 million.

The cutoff comes after Genex invested heavily in a manufacturing plant to produce the aspartame ingredient, L-phenylalanine, and at a time when the Rockville biotechnology company is seeking an infusion of capital.

Both companies declined to comment on why the contract will not be extended, but Genex said it hoped to develop other products to offset the loss.

Searle's decision "is not a life-threatening blow," said Genex spokeswoman Shellie Roth. "Phenylalanine was never meant to be our only product, it was meant to be the first of many products."

Genex's only other commercial product is its enzyme-based drain cleaner, Proto, which produced "negligible" sales last year, the company said. Other revenue is derived from research services and investments.

Genex was one of the first new biotech companies to make the transition from conducting research to manufacturing a product, and believes it generated more product sales in 1984 than any other publicly held biotech company formed during the last 10 years.

Genex saw both its revenue and losses swell last year as the success of its aspartame ingredient was more than offset by the costs of starting up a commercial manufacturing plant in Paducah, Ky. Revenue tripled compared with the prior year, but losses increased to $7.4 million in 1984 from $5.4 million in 1983, largely reflecting $6 million in start-up costs for the Kentucky plant.

In December, the company, which has 264 employes, eliminated 54 research and administrative positions because of its "declining cash position." In April, Genex executives said the company was hoping to raise cash by selling a minority interest to a corporate partner.

Glick noted that, without Searle, which holds U.S and foreign patents on aspartame, there is little market for Genex's primary product. "There appears to be only a limited market for such sales at the present time. . . . It is doubtful that this market will be large enough, for at least the next year or two, to make feasible the continuing production of L-phenylalanine in Genex's Paducah production facility."

Genex told its shareholders that its investment in the Paducah plant was made "in response to representations by Searle that, although Searle was expanding its own production of L-phenylalanine, it would continue to rely on Genex as a major supplier if Genex demonstrated the ability to manufacture high-quality L-phenylalanine reliably and economically."

Glick said Genex is "exploring various options available to us" for the Paducah plant. One industry observer said Genex options include using the facility to manufacture another product with high profit margins; renting out the plant to other producers, or being acquired.

Glick said the company's 1985 operating loss would be smaller than last year's, but the net loss will be greater.

Genex also plans to finish the present year in a cash position "comparable to 1984," Glick said.

"We'll be losing money, but we will not be out of money," Roth said.

Genex stock fell $2.625 yesterday,