Igene Biotechnology Inc. isn't exactly on the cutting edge of the biotech industry. The six-year-old Columbia company has never spliced a gene, and unlike many of its competitors in the biotech industry, it isn't working on a cure for AIDS.

In the midst of the one of the hottest fields of American technology, Igene stands out only for putting the most conventional of biotech techniques to the most mundane of ends: It turns trash into cash.

Igene is using biotechnology to convert crab shells into pesticides and food flavorings and to transform cheese whey into food supplements. At the moment, those are money-losing propositions -- but industry analysts believe the company has a bright future.

"When we started, we were looking for a competitive advantage," said Dr. Robert Milch, a former Johns Hopkins Hospital neurosurgeon who is Igene's chairman and president. "We realized we could get it on the feedstock side if we could find something inexpensive, abundant and renewable. That led us to agricultural and marine wastes."

Igene is refitting a chemical plant in Baltimore to process crab shells from Chesapeake Bay, using a chemical process to modify the 10 million to 15 million pounds a year of shells thrown out by the bay's fish-processing houses. The results are ClandoSan, a pesticide, and Sepramine, a powdered crab flavor.

Then there's cheese whey, the unwanted byproduct of cheese-making that amounts to some 25 billion pounds in the United States every year and creates an expensive disposal burden for manufacturers. Igene has facilities inside cheese factories around the nation that chemically modify the components of whey and use sophisticated fermentation techniques to turn it into calcium and mineral supplements, food additives and a series of all-natural preservatives and flavors.

It's not a glamorous product line, but it's one that gives Igene a tremendous advantage over many other start-ups in the biotech industry.

The more than 100 small biotech firms around the country that are doing pioneering work in drug development, for example, have between them no more than a half-dozen products that have been approved by the Food and Drug Administration. The rest face several years in the regulatory-approval process, huge research and development costs and a long haul to profitability.

Not Igene. Because the company is making basic food and chemical additives from common natural products, it has been able to skip the formal FDA approval process and simply have its product certified as "generally recognized as safe" under federal law. That cuts the approval time for new products from a matter of years to a matter of months.

The company already has four products on the market based on whey, and is awaiting approval from the Environmental Protection Agency to market ClandoSan. Other products are farther down the road.

"The problem with most biotech firms is that they are long on promise but haven't actually delivered anything yet," said John Crossman, an analyst with the Crossman Thaddeus Corp., a Chicago brokerage. "Igene is not one of those companies."

Milch founded Igene in 1981 along with William Hall, now the firm's vice president. Both have scientific backgrounds, but their partnership started at Loyola University business school in Baltimore, where Milch was teaching and Hall was studying for an MBA.

Their decision to get into crab shells and whey was strictly business: They identified them as ingredients that could be obtained cheaply, modified easily, and marketed widely.

"Bob's a neurosurgeon and I'm a PhD. in infectious diseases," Hall said. "I didn't even know what whey was until I started doing this."

Following what they describe as an "obsessively product-oriented" approach and Milch's conviction that that the field of biotechnology was nothing more that the "practical application of molecular biology to make money," the two set up the company and perfected their processes. They company has patented a number of innovative twists on traditional chemical engineering and microbiological techniques.

The first few years weren't easy: It took Milch and Hall 18 months to persuade major dairies to help them produce the company's key whey-based product, Macramin, even though it has the same nutritional qualities as dry milk at about half the price and has been endorsed by the American Institute of Baking for use in a wide variety of baked goods.

"It was difficult to overcome that initial base of prejudice," Hall said of the dairies. "The idea we were up against was that we couldn't possibly teach them anything about the dairy business because we had never been inside a dairy."

The firm also made what Milch admits was a error in pursuing joint venture arrangements to manufacture its products instead of raising the capital itself to open production facilities.

Five of those arrangements have fallen through in the past year. The most serious was Igene's deal with a New York firm, All-American Cheese Co., to produce Macromin and Minralac, the company's calcium substitute.

All-American went bankrupt last May, staggering Igene's finances. The small company reported a $780,076 loss in the quarter ended Sept. 30, more than double the $361,989 loss in the same period a year ago.

"We weren't brave enough in the beginning to bet our limited funds on building our own plant," Milch said. "Had we done that, we could have saved ourselves $5 or $6 million. We had this technology in 1983, and should have been on the market then. But instead we've screwed around for four years."

Igene has replaced All-American with a Kentucky dairy, but Milch said he's learned his lesson. The firm is planning to build a $5 million plant in New York, with financial help from the state, to produce Macromin and Minralac. Milch says he hopes eventually to expand the site to include manufacturing facilities for all the firm's whey products.

By doing its own manufacturering, Milch said, Igene can raise its profit margins from the current 5 percent to 30 percent. The planned New York plant -- in combination with the Baltimore crab shell fertilizer plant, which the firm expects to be operational early next year -- has some analysts excited about Igene's prospects.

"There's a lot of money behind the company," Crossman said.

Igene was lucky enough to complete a 600,000-share public offering on Oct. 14, less than a week before the stock market crashed, and it has cash and temporary investment reserves in excess of $6 million.

"They're poised to go from a development-stage company to the commercial stage," said Crossman, who predicts revenue for the company of $5 million to $10 million next year.

And Thomas Taylor, who follows biotech companies for Chesapeake Securities Research Corp., in Towson, Md., said, "If they're not making money by the end of next year, I'd be terribly disappointed."

Igene's long-term goals, however, remain modest. Each of the company's products is aimed at specialty niche markets of between $10 million and $15 million. Milch said he already has turned down a proposal to provide Macromin to a major bakery company, because that meant turning Igene into a high-volume, low-cost commodity producer.

Such a transformation doesn't square with Milch's vision of how Igene should grow. He's negotiating instead with a consumer products company to sell Macromin for use in angel food cake mix, a high value-added niche.

"We don't want to get into the commodity business," Milch said. "The minute we do that, we're dead in the water, because we're competing against giants. Our business is high-priced, low-volume products. We don't want to get into predatory pricing games."

Similarly, the company is aiming low with its marketing plans for ClandoSan, the crab-based pesticide that has proven to be highly effective "As Sen. Dirksen used to say, a million here, a million there, pretty soon it adds up to real money." -- Igene president Robert Milch in combating a form of roundworm blight that costs American agriculture $3 billion a year. Rather than target the highly competitive markets for wheat or soybean pesticides, Milch said, the company plans to market Clandosan for speciality uses such as home agriculture and lawn maintenance, where profits margins are much higher.

On the horizon are a number of other speciality food products developed from waste vegetable meals and sugar, including Levasan, an additive that the company claims can do everything from putting a permanent head on beer to thickening soups and ice cream. Igene also is developing a special yeast to be used as food in salmon farming.

"If we go for a $2 billion business, we're going to lose our tails," Milch said. "But if we can keep adding $10 or $15 million market niches we'll do all right.

"As Sen. {Everett} Dirksen used to say, a million here, a million there, pretty soon it adds up to real money."