Scientist in the field of molecular biology until recently seemed little different from a group of monks toiling away in scholarly poverty and obscurity.

For the sake of science, graduate students were expected to live on salaries below the poverty line. Those who had received their doctorates were expected to take their first laboratory job at a salary in the $10,000 range while gradutes in law, business and medicine from the best school received two or three times as much.

For compensation, the biologists had their intellectual purity. It was an intellectual sin, they felt, for a biologist of talent to be lured into the crass, backward laboratories of industry.

But, suddenly, in the middle 1970s, the monks of biology emerged from underground, blinking in the sunlight of the real world.

They found themselves suddenly glamorous. Their science had come upon the central mechanism of life, the trigger of living processes which, if it can be mastered, could reshape every endeavor it touches -- agriculture, industrial chemistry, medicine, and a half a dozen fields in science.

Money became easy. The best researchers at leading universities could name their price.

"They actually told me I could name any amount, literally write my own check," said one Harvard scientist who had offers in a steady stream for years until he decided to go to work for a company.

At good universities, the starting price for talented students fresh out of school jumped to the $30,000 range with the prospect of rapid increases. Plus stock. Those with some experience now start at $50,000 plus stock.

"This whole business thing is really fascinating," says Tom Maniatis, a Harvard researcher, "fascinating to see the effect on the minds of all these scientists . . . the worry about whether you should dive into the money pile or whether the pile is" dirtying everybody.

He said that early on there was much criticism of those who were paid for business consulting.

Over the years the sense of academic "purity is something which developed out of necessity . . . since there was no money a sense of saintlihood was required in the situation," he said. "Now it's not required."

The hope has also grown among scientists that joining a company may enable them to contribute something useful to the world, such as a better method of making a medicine, that an academic-researcher couldn't do.

Maniatis is still at Harvard but consults for one of the new gene engineering companies, Genetics Institute in Boston.

The science itself continues moving faster than any of its practitioners thought possible a few years ago. But for business, the invasion of biology has gone all too well. The field is too crowded with new companies, with half the crowd propped up only by their dreams.

The gold rush of companies into the biotechnology business is warning. "If you have to ask whether it's over, then it is," said Scott King, biotechnology analyst at the brokerage firm of F. Eberstadt in New York. "It's the same as the moment when you ask yourself if you are really happy. If you ask, you must be depressed."

The state of the businesses offers a strong contrast to the profound, rapidly advancing science of genetic engineering. Profound science does not necessarily mean profound commerce and profits, and the rush of venture capitalists to clone their money is slowing.

Gabriel Schmergel, president of Genetics Institute says, "I know of about 75 or more companies in the field, out of which one third or one half exist only on paper."

He said those existing on paper often are one or two people working out of an empty building, trying to think of projects and raise money at the same time.

"What I am concerned about is the hype," he says. "What has been exaggerated is the short-term profits. Highly exaggerated. It's exaggerated by people who have a self-interest because they want to issue stock."

In that kind of situation, he adds, "many people will get hurt," -- especially the average investor whoe cannot easily distinguish between the good risks and the very bad ones.Even though several hundred million dollars has been poured into the new business, not a single commercial product has been produced.

Eberstadt's King says there are now more than a hundred companies trying to make products by changing the genes of microorganisms. He believes no more than two dozen will survive.

There are too many companies, and the rights to many of the products they want to make are up for grabs, King says. Though he finds such things as the progress in the study of human immune system fascinating, "in a few years it is going to be the most important thing in all of medicine. I am tremendously excited by it . . . But there is too much competition among these companies already. The way to make money is, don't compete. If there are too many in the field it becomes a price war. You don't make money in a price war."

There may be hundreds of useful, profitable products in 10 or 20 years. But that won't help the hundreds of companies trying to stay alive now.

The millions of dollars from venture capitalists available to new companies has finally begun to dry up.

"A year ago, any deal that was proposed got made," King says. "Now it's much harder. Over the past several months I know of several private stock sales that fell through."

One such failure, a very big one, was, the $50 million deal between E.F. Hutton and a gene engineering outfit called DNA Sciences. It collapsed because enough money couldn't be raised to get the deal going.

Almost all biotechnology stocks are down, according to a biotechnology stock index put out by Dean Witter Reynolds in California. "Since the biotechnology index started in April, it has dropped 35 percent. The Dow Jones in the same time has dropped 14 percent," said Glenn Holderreed of Dean Witter.

The classic story of a biotechnology company is Genentech. In 1976, venutre capitalist Robert Swanson, who has a degree in biology, got interested in the possibility of exploiting gene engineering. He sought out Herbert Boyer, of the University of California at San Francisco, a leading biologist in the field.

Each man put up $500. Their company, Genentech in quick succession over four years announced progress in gene-engineered bacterial human insulin, huma growth hormone, and interferon.

On Oct. 14, 1980, the company went public. Genentech asked $35 per share. Within 20 minutes of the time trading began, the stock price rose to $89 per share, one of the better performances by a new stock in market history. Just before lunch on that day Swanson and Boyer were each worth, on paper, about $82 million.

Though Genentech was not the first to go public, by the end of the first trading day, the company was worth $529 million. The company had accumulated operating losses of three-quarters of a million dollars. It had no products to market. But investors loved it.

From that peak of $89, Genentech slipped, farther and farther, until it dropped past its opening price of $35 and recently hit bottom near $26.

What many investors did not realize is that biotechnology companies will take five to 10 years to show the certain signs of success of failure. In other industries first profit is expected in less than three years.

The list of products tha tbiotechnology companies hope to produce is long. Among medical products there are four groups:

* Hormones such as human growth hormone and insulin, as well as ones like the endorphins that relieve pain, and vasopressin which is believed to enhance or restore memory.

* The molecules of the human immune system that can be shaped to immobilize virtually any chemical substance, including renin to reduce blood pressure; to flush out of the system digitalis, barbiturates, and other poisons, plus a variety of dangerous impurities in drug annd chemical products.

* Vaccines against hepatitis, malaria, venereal disease, and a variety of agricultural diseases such as foot-and-mouth.

* Enzymes, natural chemical catalysts that make possible a great variety of critical chemical changes, such as turning sugars into alcohol, and separating valuable metals from rock.

In agriculture, one of the genes recently isolated and cloned makes a substance to prevent plants from drying out in drought. Amino acies that are used in large amounts in animal feed may be made more cheaply through bioengineering. The most talked about, but far off, advance is one that would make plants self-fertilizing, giving them the ability to make their own nitrogen sources, as some bean plants do, rather than having to depend on the easily depleted nitrogen from the soil.

The list is endless. "There are exciting products that are going to be made, more than anyone is imagining now," says Jim Karel of Dean Witter. "There will be just amazing things. But as investments they are just not good bets yet. If I were advising an investor, I'd say wait. And watch."

The reason companies in this business need a long lead time to get going is that production depends on the whims of bacteria. Bugs that are easy to handle in the laboratory, and easy to coax into huge production of valuable chemicals, become little terrors when asked to grow in great metal tanks instead of test tubes.

The whole basis of commercial applications is the fact that living things are essentially machines whose cells make and use a large number of chemicals. Genes direct the manufacture of the chemicals.

Now that scientists can readily manipulate genes, they can get microbes to make a great number of useful chemicals by implanting the gene that makes them in the microbes. If the DNA is spliced in properly, with all the necessary production signals, the microbe will believe the DNA is its own, and will make whatever it directs. Further, if researchers put in not one but several copies of the "produce" signals and as many as 100 copies of the gene, soon the microbes will be making practically nothing but the desired chemical.

Vats full of these little microbial factories can make gallon quantities of chemicals that previously were only made by the drop, or not at all.

The trouble is not with the gene engineering end of the science. The trouble for businesses is the same kind of troubles faced by any industry that depends on growing micro-organisms in huge quantities.

Because the little animals are devoting all their energy to making a foreign substance, they cannot defend themselves against natural hazards such as temperature change and contamination in the tanks. If only a few microbes of the wild type are present among the billions, or get into the tanks naturally, a researcher can come in one morning and find his tank of carefully engineered bacteria dead at the hands of a horde of wild bacteria who have quickly taken over.

One British company, ICI, spent 12 years trying to get its big fermenting vat working properly, and wrote in a report of the struggle; "The number of individual manual operations of valves, instruments, and pumps can, even for th pilot plant, run to many hundreds. Failure to observe the precise sequence can lead to . . . failure by contamination within a few days."

One other drawback in the gene business boom: scientists fear that big money -- with all its attendant scheming and secrecy -- is contaminating the universities.

Science depends on openness and sharing information between researchers. But all admit that secrecy has grown because of commercial competitiveness. At a party in Cambridge, Mass., not long ago, an MIT biologist linked to one cmpany knew of a breakthrough by his company, and several Harvard researchers quizzed him about the work.

"I can't, said the MIT man. "You know I can't say anything."

Even at scientific meetings, when the results are being reported openly, there are times that authors have refused to disclose their methods.

In California, lawsuits, the sure sign of anticipated profit, are now being filed over who owns what ideas and what new microbes. The result, for scientists, has been bitter feelings. Locks have been installed on doors and refrigerators where none were even thought of before.

Donald Kennedy, president of Stanford University, has tried unsuccessfully to get biologists to meet in a national conference and discuss the danger to academic research that comes from the industry. He says that there are several ways university work might be damaged:

* "Scientists who once shared prepublication information . . . without hesitation, are now much more reluctant to do so," he said. Open communication between researchers, a foundation of science, has been damaged.There are links between work in the university lab that should be open and work companies hope to keep secret.

* There may be "diffusion away from the kind of intellectual center the university represents," Kennedy said. The companies are drawing away some of the best students, and the best senior scientist at least part of the time. Also, in order to gain much-needed cash, universities are accepting contracts to do work on company projects. They are accpeting large donations in return for exclusive licensing rights to any work that comes out of the university labs.

Kennedy and others now worry that the whole direction of biological research will switch from basic work to commercial work.

* Finally, a conflict of interest appears with the rise of the busninesses. "When a professor says in an interview that his discovery will possibly lead to a cure for a disease, people will ask, 'I wonder what company he is tied up with?'" Kennedy said.

The university biology department is one place that people might turn to for information and the opinions of scholars without having to worry about the corporate conflict of interest that taints a scholar's opinion. That may no longer be true.

Nobelist Walter Gilbert, a professor at Harvard and a director at the Swiss-based company Biogen, says it is true that there will be many such difficulties. But only at the beginning, until interests of the academics and the companies, like oil and water, naturally separate again.

In a few years, most of the companies will have died of natural causes. The academics will try to regain the dreams. If no permanent damage has been done, the monks and merchants once again will -- be going their separate ways.