In a true test of investors' renewed risk tolerance, biotech IPOs are back.

More than half of the deals scheduled for debut in October -- 10 out of 18 -- are biotechs, coming on the heels of a significant run-up in the sector. Since the beginning of the year, the Nasdaq Biotechnology Index (NBI) is up 50%. It is nearly 70% above its low last October.

Despite a few starts and stops in the market recently, some think the biotech streak can go further. And the issuers are counting on it.

"Our outlook is positive for the end of the year and for 2004," said Jennifer Chao, a biotech analyst at RBC Capital Markets. According to Chao, the timing is right for new issues.

Whether or not investors agree is unclear. Having learned their lesson after the bursting of the 1999-2001 stock market bubble, buyers are still treading cautiously -- if they are doing anything at all. And biotech stocks have traditionally been among the market's most volatile.

Genentech

(DNA)

and

Millennium Pharmaceuticals

(MLNM)

are two examples within the sector of high-beta stocks whose shares rise and fall more dramatically than the rest of the market. While the upside can be significant in good times, it may be a risk that battle-worn IPO investors are unwilling to take.

Recently, they have shown little appetite for

RedEnvelope

(REDE)

or

AMIS Holdings

(AMIS)

, two companies that have not turned a profit in their latest reporting periods. After a week and a half of trading, RedEnvelope is flat at its issue price, while AMIS Holdings is trading below it.

Similarly, none of the biotechs slated to go public is making money. "Their drugs are still in the middle of clinical development," said Chao. "People are buying into an opportunity."

That opportunity is the hope that somewhere within their pipeline is the next Rituxan or Epogen. And indeed, many of the companies planning to issue stock have what are believed to be promising treatments in the lab.

Genitope

has an immunotherapy product for cancer in phase III clinical trials.

Myogen

is working on a chronic-heart-failure drug.

Still, the investments being made in drug development are speculative, at best. Consider

Nitromed

, one of the IPOs on tap for October. Its BiDil drug, also for heart failure, is in clinical trials. But the company doesn't anticipate that it will be salable until at least 2006 -- if ever.

As with growth stories, biotech can be an attractive investment opportunity for those who can stomach the risk. "Some of these deals will do well," said Richard Peterson, an analyst Thomson Financial. "Others will be a mistake."