For investors who missed out on Sequenom (SQNM) , there are plenty of biotech IPOs waiting in the wings.

The long-ignored sector has recently joined the hottest areas of the stock market, along with business-to-business, e-commerce and Internet infrastructure. Led by Sequenom, a German-American genomics company that is up 527% since its Feb. 1 IPO, more than two dozen biotech companies are planning this year to test the waters of the public markets. And there will likely be more filings in coming months.

Still, for all the enthusiasm generated by the eye-popping returns of the last six months, biotech investing has traditionally been a boom-and-bust affair. Accordingly, analysts say, investors should bear in mind that investing in biotech often means banking on the hard-to-gauge success of regulatory filings or drug-and-device trials, and therefore carries significant risks.

Something New

Investors' infatuation with technology and the supposedly infallible long-term prospects of New Economy stocks are feeding the biotech craze, analysts suggest. "We're done with the portals, and we're getting done with e-commerce," says IPO analyst Tom Taulli with

internet.com

. "Now it's time to see something new like biotech."

And investors suggest the time is ripe for a change in the fortunes of traditionally hit-or-miss biotech firms. Stu Weisbrod, a hedge fund manager for the

Merlin Biomed Group

, says: "There's a lot of money in high tech that's coming into biotech." Weisbrod is keeping his eye on

Aclara BioSciences

, a $135 million deal backed by

Deutsche Banc Alex. Brown

, and

Exelixis

, a $100 million

Goldman Sachs

deal. Aclara makes "lab on a chip" products, which it markets to genomics and pharmaceutical companies, and Exelixis develops genomic research technologies.

Certainly the last year-plus been a fine time to be in the biotech stocks. The

American Stock Exchange Biotech

index rose 3.3% Monday to a new high, putting it up 100% on the year, following a 110% gain for 1999. That's serious appreciation for any index, particularly one that moved little during the previous seven years following the bust of 1992.

Swinging for the Fences

But investors are banking on the idea that biotech firms will cash in on their massive potential, while the present generally shows little revenue and fewer profits. Sound familiar? What's more, there's a regulatory angle to the biotech craze that chills some observers.

"These companies are actually producing and there appears to be validity to biotech, but you're at the whim of the

FDA

," says Taulli. "If a drug doesn't work, a lot of times these companies rely on one or two shots at the fence, and if they miss it, it can mean the end of the company."

But Weisbrod is optimistic. "The industry is maturing and we're seeing a lot of companies turn the corner to profitability, based on real products," says Weisbrod. "The market is now open, and we'll see some great companies come out."

"We'll also see some bad companies come out," Weisbrod continues. "The market over the long term usually differentiates pretty well."

Herewith, a chart highlighting biotech and pharmaceutical deals in the coming months: