Along Interstate 270 from Rockville to Gaithersburg lies the scientific equivalent of a Wild West boom town. In the labs of more than 150 cutting-edge biotechnology companies, scientists probe the frontiers of technology, splicing genes in a frenzied hunt for gold-nugget drugs that will make their fortunes.

But the boom town more closely resembles a movie set than Dodge City. Behind the companies' facades, in their product lines, revenue and profit, there's not much there. Compared with its gunslinging cousins in San Francisco and Boston, Maryland's biotechnology industry is a distant third.

Recently there has been a new optimism about the future of biotechnology. A number of drugs and vaccines that have been under development for a decade are nearing approval, and many more are making their way through Food and Drug Administration clinical trials. Within the next few years, analysts expect approval of a dozen new drugs, dramatically increasing the number of profitable biotechnology companies.

Amid all the predictions for success, Maryland companies are conspicuously absent.

Although most of the Maryland biotechnology companies focus on pharmaceutical research, no companies in the region are close to producing a major drug or vaccine. None are represented among companies with drugs already approved or among those with drugs in the last stages of FDA clinical trials.

Of Maryland's 150 biotechnology companies, only Biotech Research Laboratories Inc. and Life Technologies Inc. make a profit. Most of the local companies are long on promise and short on profits.

Even nationally, the biotechnology industry is short on success stories. Only a few companies, such as San Francisco's Genentech Inc. and Los Angeles-based Amgen, have developed the profitable drugs that Wall Street and venture capital firms expected. And since 1982, the FDA has approved only about a dozen genetically engineered drugs.

The major cause for stunted growth in Maryland's biotech industry, experts said, is the dominant influence of the Bethesda-based National Institutes of Health (NIH).

Other factors include the early lack of venture capital, the hesitancy some years ago of local universities to commit resources to technology-transfer arrangements and the late start that Maryland biotech companies got relative to companies in California and Boston.

The NIH, which distributes hundreds of millions of dollars in research and development contracts each year, influences virtually every move of local biotech companies, from their decision to locate here to the type of research they conduct and their rate of growth.

"All the {local} companies are NIH apples falling from the NIH tree," said Selig Solomon, director of the Maryland Office of Technology Development.

Because of the NIH, Maryland's first biotech firms got a very different start from firms in San Francisco and Boston.

"Companies in Boston and San Francisco are more product-oriented. That gives them more press, makes them more likely to get outside capital," said Ed Bartko, a partner with the accounting firm Coopers and Lybrand in the District and treasurer of the Association of Biotechnology Companies, a trade organization.

"Government contractors aren't a sexy type of company," Bartko said. "They don't have a product in place. When investment bankers come in to look, all they see is a government contractor."

The focus on meeting the needs of the NIH also cuts into the time for developing marketable products, experts said.

"A lot of the older firms basically operate under contract to NIH, doing testing and diagnostic work," said Walter Plosila, president of the Montgomery County High Technology Council.

Biotech Research Laboratories was one of the few local companies to evade the NIH contracting dilemma. Founded in 1973 as a government contract research firm, the company in 1981 began to gradually apply its technology to developing commercial products.

"We were somewhat different from companies in other areas that generated initial resources from public funding," said Thomas M. Li, Biotech's chairman. "Even at the time of commercializing our products, we already had a good grass-roots business on hand. We were more profit-motivated."

Biotech, which last month merged with Cambridge BioScience Corp. of Worcester, Mass., and moved its corporate headquarters to Worcester from Rockville, reached profitability by developing and manufacturing screening and confirmation tests for the HIV virus that causes AIDS. Ortho Diagnostics, a division of Johnson & Johnson, marketed the tests to blood banks and clinical labs.

"Demand and acceptance of one's product is certainly key to one's growth," Li said.

A 1986 law marked a turning point for Maryland's biotech industry that one day may permit other companies to join them. That year Congress passed the Technology Transfer Act, which allows companies to collaborate with NIH researchers on projects before the research results become public, and receive licensing rights for any technology developed during the research.

The act allowed smaller local biotech firms to engage in the kind of pure research and development effort usually seen in West Coast companies that had attracted loads of venture capital.

Reid Adler, head of the NIH Office of Technology Transfer, estimated that NIH has signed about 140 research agreements and filed about 300 patent applications a year, compared with 20 patents a year before the act took effect.

The program, Adler said, has been a boon to small biotech companies. "For small companies it's really an excellent way to leverage research budgets. The ability to link up on an important project is a way to double a company's research capacity," he said.

Research is costly, and while a handful of Maryland's biotech firms are publicly held, almost no national biotechnology analysts follow them, compounding the difficulty in attracting desperately needed capital from investors.

"There really isn't one company in that region that I follow, and it certainly isn't that I wouldn't make the trip out of town," said Linda Miller, a biotechnology analyst with PaineWebber Inc. in Boston.

Maryland has a long way to go before it becomes "the biotechnology analog of Silicon Valley," which is how the Maryland Department of Economic and Employment Development describes the region.

"This region is where California was in the 1950s and '60s," said Charles Newhall, general partner of New Enterprise Associates, a Baltimore-based venture capital firm. "There has been some success in this region but by no means the magnitude of success that there has been in San Francisco and Boston."

In California, the blossoming of Silicon Valley prepared the region for the biotech revolution.

Joint ventures between universities and computer firm paved the way for cooperation between academic research labs, private entrepreneurs and venture capitalists that formed such companies as Genentech Inc. and Cetus Corp. In New England, the Massachusetts Institute of Technology followed a similar course.

"Stanford and MIT really spurred local industry development. They are very aggressive and have been historically for decades. They certainly do not discourage the flow of technology from their labs into the local start-up companies," said Reed Prior, chief executive of Gaithersburg-based Genex Inc.

In contrast, the University of Maryland, Johns Hopkins University and other area universities were less than accommodating toward joint ventures, though recently Hopkins has taken steps toward helping firms turn scientific research into marketable products.

"Ten years ago there was a standoffish attitude" on the part of the area's universities to technology transfers, said Michael Hooker, president of the University of Maryland Baltimore County. "There's been a sea change in the {academic} culture over the last decade."

That explanation certainly rings true for many of Maryland's small start-ups.

Since 1988, more than 30 new companies have sprung up in the region, according to the state's Department of Economic and Employment Development.

Youth alone does not explain the plight of Maryland's biotech industry, where some companies, such as Genex, have been around for more than a decade and have failed to live up to expectations.

Founded in the late 1970s at the same time as Genentech, Genex was the only Maryland company to attract massive Wall Street financing. The company has posted losses for the past several years and still is recovering from a series of business setbacks in the mid-1980s, including a failed joint venture and resulting lawsuits.

"The other three companies chose to develop pharmaceuticals, and Genex decided to develop industrial products to short-circuit FDA approvals," said Prior, who joined Genex in April. Prior said Genex management found out it had taken a wrong turn.

"Industrial products may take longer and cost more money than drugs," Prior said. "As a general strategy right now, the company concentrates on medical areas."

Such misadventures have made venture capitalists wary, experts said. "For Genentech and a handful of other companies with no biotech industry before them, the public market was willing to give them hundreds of millions of dollars. Now there's a lot of places for the capital to go," said Bruns Grayson, managing partner of ABS Ventures in Baltimore.

Grayson and Newhall, who serves as president of the Greater Baltimore Venture Capital Group, said there is plenty of venture capital here and around the nation to support biotech start-ups. The problem, they said, lies with executive talent.

"There's a lack of experienced managers," Newhall said. "Companies in Boston and San Francisco had lots of experienced managers who had profit-and-loss experience. We have excellent science in this region but we lack managers."

But, Newhall added, "I have great enthusiasm for the future of this area of biotech. The business accomplishments in this region will ultimately catch up with the scientific resources."

Maryland Loses Home-Grown Firm in Merger With Boston Company

The brass and chrome ballroom of the Sheraton Potomac Inn seemed an odd place for a funeral.

In that setting, Maryland lost one of its only profitable, home-grown biotechnology companies: Biotech Research Laboratories Inc. On Sept. 5 in a somber meeting at the Rockville hotel, the company's shareholders formally and without dissent approved Biotech's merger with Cambridge BioScience Inc., based in Worcester, Mass.

"Biotech Research Labs has become a part of me," Thomas M. Li, the company's chairman for the past 17 years, told shareholders.

Li's voice broke on the last word. He paused, taking a sip of water to gather himself. "It has been a most gratifying experience for me," Li finally said.

Under the exchange of Cambridge BioScience shares for Biotech Research stock, Cambridge BioScience will be the surviving company.

Though Cambridge will maintain laboratories in Rockville, the corporate headquarters will be in Worcester. The deal offered little, if any, premium to Biotech Research shareholders.

Announcement of the merger earlier this year stunned Maryland's biotech community. Regarded as a solid and established firm, Biotech was one of the region's two profitable biotech firms.

Local executives wondered why Biotech agreed to merge with a Boston company that not only has posted losses for the past three years but also was viewed skeptically after its highly touted AIDS test sold poorly on the market.

Cambridge will attempt to develop its own sales force to market its products, a risky venture for a company with no experience in that field. Biotech, like most biotechnology companies, relied on larger pharmaceutical companies to market its products.

Li, however, said the two companies were a perfect match.

"Cambridge has a very similar focus to ours," said Li, noting that both companies develop AIDS tests.

"We have reached a point where unless we expend substantial {research and development funds}, we could not get to the marketplace in time for a second-generation product line. By merging with Cambridge, who has already spent a lot of time and money in the new product area, we could short-circuit the development cycle," Li said.

David Smith of Alex. Brown & Sons Inc. in Baltimore, who helped arrange the merger, said Cambridge survived because of "the relative size of the company's balance sheet" and its large cash supply.

However, Smith said there were other factors involved. "Most of our {Biotech's} management team is retiring," he said.

Sources also said that Li's health problems affected his decision to sell the company.

Industry experts view the Biotech merger as the first in a series that will eventually hit the region as biotechnology firms consolidate.

"There is a consolidation going on," said Ed Bartko, a partner with the accounting firm Coopers and Lybrand in the District and treasurer of the Association of Biotechnology Companies. "We're going to see more of that across the country."