Alzheimer's disease is one of the most devastating neurodegenerative diseases affecting the elderly. Patients with the disease will experience a progressive deterioration of mental function over a period of years. The symptoms generally first appear as mild forgetfulness but increase in severity until the person requires full-time care.

Alzheimer's disease is very common: Approximately 4 million people in the United States are afflicted. Some estimates I've seen show this figure tripling over the next few decades, as our population ages. Alzheimer's disease is so widespread that I'd be surprised if anyone reading this column doesn't know someone who has it.

Because the disease is such a serious, large-scale problem, it has given rise to extensive research in the drug industry. Alzheimer's patients can get treatment from one of four major approved drugs: Forest Labs' (NYSE:FRX) Namenda, Johnson & Johnson's (NYSE:JNJ) Reminyl, Novartis' (NYSE:NVS) Exelon, and Pfizer's (NYSE:PFE) Aricept.

These drugs slow the decline in cognition and mental function, and they sometimes bring about improvements that, unfortunately, are only temporary. They don't halt the progression of the disease, and they are not cures. The limited effectiveness of these drugs makes Alzheimer's an area of significant medical need.

Coming up the pipeline
A number of companies working in this area have some interesting drug programs, but given the complexity of the disease, investing in this field is high-risk.

One glaring sign of the volatility is Axonyx (NASDAQ:AXYX), whose stock plummeted 63% yesterday after the company revealed that its drug Phenserine failed a phase 3 trial. Although the Phenserine program is not officially down for the count, I share Fool colleague Stephen Simpson's pessimism. In situations like this, where the public receives a scarcity of data, I'm always concerned that statements about trends in efficacy are just attempts at damage control and have no real substance. We will have to wait and see whether that's true in this case -- data from an additional Phenserine study on the viability of the drug program will be released next month. The only thing we can be sure of is that the stock will be very volatile in the coming weeks.

Aside from Axonyx's Phenserine, several other compounds in late-stage clinical development bear watching. One drug in an advanced program is Alzhemed, from Canadian biotech company Neurochem (NASDAQ:NRMX). Alzhemed is in an 18-month, double-blind, placebo-controlled study that started in June of last year. The drug is thought to work at the level of the beta-amyloid peptide, which is generally accepted as the cause of Alzheimer's disease. This makes Alzhemed a compound to watch, and I'll be looking forward to seeing the results.

Another drug that just recently went into a phase 3 trial is Flurizan, from Myriad Genetics (NASDAQ:MYGN). The start of the phase 3 study shocked many investors, myself included, because the phase 2 study has not even been completed. The results from the phase 2 study will be out next quarter, and given the commitment to a phase 3 study, it's probably safe to assume that the results will be positive.

Flurizan is an anti-inflammatory drug that has lowered the levels of beta-amyloid in animal studies. If Flurizan can lower the levels of beta-amyloid in Alzheimer's patients, what effect does that have on the symptoms and course of the disease? I'm eager to see how this turns out.

Another major presence in the Alzheimer's field is the collaboration between Elan (NYSE:ELN) and Wyeth (NYSE:WYE). These companies tried to get an Alzheimer's vaccine to work, with hopes of getting the patient's immune system to clear out the beta-amyloid peptide. It was an intriguing approach, but the phase 2 study was halted because the vaccine was causing meningitis-like side effects.

The two companies are back at it, however, with AAB-001, a humanized monoclonal antibody drug that will target beta-amyloid. The idea is that the antibody will attach to beta-amyloid and cause it to clear out of the patient's body without requiring the patient to mount an immune response. The drug is very early in development -- it's still in phase 1 trials -- but I find this innovative approach exciting.

Elan is also working on secretase inhibitors. The two secretase enzymes are believed to be important factors in the production of beta-amyloid, so it is thought that shutting them down could have an impact on the molecular mechanisms of the disease. These drugs are in preclinical studies, but there is concern about significant side effects.

Final analysis
Alzheimer's disease remains an area of significant unmet medical need. The currently marketed drugs shouldn't be dismissed just because they don't cure the disease. They are definitely valuable -- I have heard anecdotal reports of a marked difference in patients when they start these drugs.

That said, there's plenty of room for improvement in the therapeutic armamentarium. Phenserine was anticipated as the next drug set to launch, and its recent stumble is a disappointment. The other remaining compounds in development target Alzheimer's disease by innovative mechanisms, and as a result, they could offer greater benefits than existing therapies do. Investors, however, should remember that there are no certainties and that these remain high-risk investment scenarios.

Instead of investing in small biotechs that have a lot riding on a single Alzheimer's program, the best way to invest in the field is through a diversified company like Elan or Wyeth. Because these companies have large portfolios, their Alzheimer's drugs will not make them sink or swim. Given the difficulties of developing a drug for such a complex disease, that may be the prudent option.

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Motley Fool Rule Breakers biotech analyst Charly Travers owns shares of Myriad Genetics. The Motley Fool has a disclosure policy.