(FORTUNE Magazine) – Grab those white lab coats and protective goggles; biotech doesn't look like the safest place to be right now. Many companies are trading at less than half their 52-week highs. Only three biotechs have gone public so far this year; last year the industry had 55 IPOs. One can't help but wonder if biotech is going to be the next sector to go up in flames.

Here's the reality: Compared with dot-coms, biotechs should be just fine. Unlike those Internet companies, many biotechs have enough cash on hand to ride out a downturn. "The amount of capital biotech companies raised during the boom of the cycle is an order of magnitude larger than ever before," says David Stone, a partner at Applied Genomic Technology Capital Funds. "The companies' market caps have come down, in some cases as much as 80%, but they still have the cash."

Despite the slowdown, money is pouring in. Biotechs don't rely on IPOs the way Internet companies do; they depend more on venture capital or grants. And while biotech's funding dropped 20% from last year, that's significantly less than the 56% decline in total venture funding.

That's not to say there won't be some uneasiness. "Companies with market caps of $25 million or lower are vulnerable, as well as those that didn't finance sufficiently," said Steven Burrill, CEO of biotech VC firm Burrill & Co. That means that we could see a shakeout among the many genomics firms that popped up last year. Also at risk are companies, such as Aclara Biosciences, that sell tools to discover potential drugs; now that pharmaceuticals developers have a backlog of products, they'll be needing fewer of those devices.

Fizzling biotechs probably won't declare bankruptcy but will try to bury debt in mergers or sell off their intellectual property. That could mean consolidation within the industry, as big companies snap up smaller firms at bargain prices. An early example: This May, Vertex Pharmaceuticals acquired Aurora Biosciences. Big names like Celera, Human Genome Sciences, and Millennium Pharmaceuticals are also well positioned to make alliances and acquisitions.

The market will probably never see an explosion of new products sparked by the mapping of the genome; the scientific process is too slow, and FDA approvals are too rigorous. But there's good news for investors: The closer drugs come to market, the less business valuations are based on hysteria. It's hard to deny the value in a cure for cancer.