Two months ago, we totted up the score on clinical trial outcomes and concluded that, despite the widespread perception of an industry failing dismally, the actual hit rate for biotech products was within the expected range for drug development.

Extending that analysis for the full 1994 year reinforces that conclusion. Yet the markets truly have punished the sector, with the BioCentury 100 down 29 percent for the year, on top of an 18 percent hosing in 1993. The drug-development biotechs with market caps below $500 million lost a total of $6.7 billion, or 37 percent, in total valuation. As our annual stock round up in BioCentury Part III shows, only the top-tier group managed to hold its value in 1994.

The conventional wisdom continues to be, to put it bluntly, that the sector stinks. A recent Reuter dispatch encapsulated that view, concluding that "biotechnology's sad song is expected to drone on into 1995."

As Morgan Stanley analyst Eric Hecht put it, "It was a horrible year."In his universe of 130 stocks, there were only 13 winners. The story was the same in the 225 stocks followed by BioCentury, with only 30 gainers.

Even when companies met their milestones, it often wasn't reflected in their stock prices, according to Piper Jaffray analyst Barbara Hoffman. She pointed to SangStat Medical Corp. (SANG) as an example of a company that had good fundamental performance, but which fell 34 percent over the year.

So what's wrong with this picture?

We tend to think of ourselves as fairly curmudgeonly, and we certainly haven't hesitated to knock what we see as frequently sloppy or perfunctory Phase II clinical work. But when we survey the clinical record over the past year, we just don't see an industry that has failed across the board.