ABOUT A YEAR AGO, James Smith's life changed. "At age 46," he says, "something like Alzheimer's disease wasn't even on my radar screen."

Smith was an information-technology director for a big financial firm near Minneapolis, a globetrotting "tech weenie." But he started forgetting things, losing his sense of time. He could no longer multitask.

More recently, following the Alzheimer's diagnosis, Smith has noticed his personality changing. Flashes of anger come and go, for no reason. And his awareness is slipping: He'll think he's having a good day, only to find out he's forgotten something really important.

The disease forced him to retire on disability last summer, just after his twin daughters entered Northwestern University. Smith's wife Juanita doesn't have a job with health insurance. His corporate health-insurance coverage will run out in about a year. It's too late for them to get long-term-care
insurance, so they'll have to spend down to the poverty level when he finally needs full-time care.

James and Juanita watched her grandmother die of Alzheimer's complications, so they know what's ahead. "Neither of us has any illusions about where this goes," he says. "It's 100% fatal."

But those odds may soon improve for Alzheimer's sufferers like Smith. Large drug companies such as Wyeth have progressed to the point where they're conducting human studies for numerous treatments that stem the underlying biological causes of Alzheimer's disease.

Smaller firms like Myriad Genetics and Neurochem are actually in their final phase of testing drugs aimed at Alzheimer's causes. Smith is desperate to participate in one of those clinical studies, but the test designs exclude people under the age of 50.

So Smith is in a race against time -- the most advanced experimental drug candidates are still a couple of years from Food & Drug Administration consideration. But when Alzheimer's drugs arrive, they will do much good for the estimated 440,000 Americans that develop the disease each year.

More than 5 million suffer from Alzheimer's in the U.S., according to the latest estimates from the Alzheimer's Association, and perhaps 24 million suffer worldwide.

Smith's disease had an unusually early onset, given that Alzheimer's risk increases with age: 1% of those in their early '60s have it, while more than one-third of those older than 85 have it. With the cohort of 78 million baby boomers that began turning 60 last year, the prediction is that 16 million Americans will have Alzheimer's by mid-century. The worldwide number by then would be 80 million.

Without successful treatments, Alzheimer's will become a crushing economic burden for the country, and not just for families like the Smiths. Patientcare already costs Medicare $91 billion a year, plus another $21 billion for Medicaid programs. That makes it the country's third most costly illness, after heart disease and cancer.

"I'll be 60 this year," says Wyeth chief executive Robert Essner. "And there are no really effective treatments out there...This will be a huge health-care problem for my generation."

Essner's company (ticker: WYE) has made a broad investment in Alzheimer's research, bringing 11 drugs into clinical human testing. Its lead compound is a genetically engineered antibody developed with the Irish firm Elan (ADR ticker: ELN) that actually clears away the toxic protein that clots Alzheimer's patients' brains. Other Wyeth compounds inhibit the formation of those Alzheimer's clumps.

Wyeth's experimental drugs certainly could fail, but it wouldn't cost investors much to find out. The Madison, N.J.-based company has one of the cheapest big drug stocks, trading at about 14.5-times this year's consensus earnings estimate, at the recent share price of 50.

Yet its business is improving. Wyeth has gotten its arms around the expensive litigation surrounding its pfen-fen diet drugs, so currently successful products like the anti-arthritic Enbrel and Prevnar, a strep vaccine, should start lifting cash flow and profits.

It is also one of only a handful of drug firms that might be attractive merger partners for giants like Novartis (NVS) or Pfizer (PFE). So Wyeth shares could rise into the 60s -- and that's without considering that its Alzheimer's program could yield some of the most important new drugs in our lifetimes.

Other companies with large Alzheimer's bets include Eli Lilly (LLY) and Pfizer, as well as the Salt Lake City-based genetic- testing pioneer Myriad (MYGN) and tiny Neurochem (NRMX) of Laval, Quebec.

JUST OVER 100 YEARS AGO, the Bavarian psychiatrist Alois Alzheimer described autopsies of dementia patients' brains, where he found nerves caked with sticky plaque and filled with tangled fibers. In the last 20 years, scientists have gained much understanding of the biology underlying these features of what is known as Alzheimer's disease, the cause of at least half of all dementia. After losing memory and language skills, patients become unable to care for themselves and die bedridden -- sometimes as long as 20 years after diagnosis, but typically after about eight years.

Drugs to combat Alzheimer's have been slow to arrive, with many failed efforts. The five medications approved since 1993 only treat the symptom of weak memory -- offering a moderate boost that lasts for less than two years.

Pfizer's Aricept and Novartis' Exelon prevent the breakdown of the neurotransmitter acetylcholine that's part of the mechanism of memory (as does Cognex, which Pfizer no longer actively markets). Johnson & Johnson's Razadyne works similarly, but also makes the so-called nicotinic receptors produce more acetylcholine. Namenda, from Forest Labs (FRX), prevents another neurotransmitter called glutamate from overexciting memory receptors of nerve cells.

Smith has taken Aricept for a year, and is adding Namenda. Aricept helped him regain a lot of his mental clarity. "It's like the difference between driving during the day...and driving at night," he says. "Within the space of my mental headlight, with Aricept, I can do pretty well."

But none of these approved drugs has been shown to actually change the downward course of Alzheimer's. The search for drugs that can slow the disease has focused largely on the source of the plaque first reported by Alois Alzheimer. The plaque consists of a misfolded variant of a common cellular substance known as amyloid. This rogue version is called amyloid-beta42 -- or A-beta42 -- and it tends to clump together inside nerve cells, interfering with nerve function and eventually killing brain cells.

Researchers have been able to reproduce features of human Alzheimer's in the laboratory cell cultures and mouse experiments that precede clinical studies in humans. "There has been a lot of preclinical evidence that amyloid deposition is upstream of the other effects of the disease," said Harvard Medical School neurologist Dennis Selkoe, in a recent conference call with clients of CIBC World Markets. (end of part 1)